The Evolution of Payment Models for Oncology Practices

Last week, the Association of Community Cancer Centers (ACCC) held their National Oncology Conference in Portland, OR, from October 21 to October 23. The meeting featured many valuable practice-centric presentations that provided insights into the changing environment for delivery of healthcare services in oncology. One theme running through several presentations was the evolution of how health care providers are being reimbursed for the delivery of services, as well as the challenge of preparing for these changes in the absence of clarity regarding the precise requirements and timelines for implementation of new payment models.

Alternative payment models for reimbursement of oncology care continue to gain traction. Although these new models vary in scope and focus, their evolution can be characterized as a movement away from a fee-for-service model towards quality- or value-based models. Examples include the proposed CMS Oncology Care Model, bundled payment models, treatment pathway programs, and other versions of shared risk models.

The rate of change varies significantly by region, with payers in some areas still fully supporting traditional fee-for-service payments while the majority of patients in other areas may already be covered under alternative payment models. But the prevailing wisdom is that health care providers in all regions should be engaged in planning and implementing processes that will be needed to compete under new payment models.

One major requirement for a practice to effectively manage its program under value- or quality-based reimbursement models is to have strong data analytical services in place. Negotiation of terms in risk-based contracts and participation in other value-based models require that baseline performance is well understood. The practice must have definitive, granular understanding of their costs, clinical outcomes, compliance with pathways, and other program elements that impact the value equation. Availability of these data can provide the necessary tools to drive efficiency in practice operations, but they are challenging to acquire. Obtaining accurate data and building useful models is a complex undertaking and cannot be accomplished overnight. Even with the help of sophisticated consultants and off-the-shelf solutions, implementation takes time and investment. To prepare for competition under new payment models, this investment must be made long before the initiatives drive revenue. Therefore, a major challenge associated with proactively preparing for the evolving requirements is how to shoulder the expense of building an increasingly robust IT infrastructure—customized software solutions, programmers, and analysts—without the forecasts for resulting revenue. The certainty that existing payment models are becoming obsolete is matched with equal uncertainty as to what the future will hold.

Astute management will be essential as oncology practices navigate this transition. This increasing focus on management may be a factor driving the continued consolidation of providers into larger health care systems. Development of innovative approaches to support practice needs in value-based care models are also likely to emerge.