Medicare Compliance & Reimbursement

New model could save CMS billions of dollars in wasted cancer drug payments.

The newly launched Oncology Care Model (OCM) is yet another value-based payment model that will impact Medicare. But just how much the model will affect Medicare costs and payments remains to be seen — although the possible savings are astronomical.

The OCM is part of the U.S. Department of Health and Human Services’ (HHS’) overall goal of transitioning from a fee-for-service (FFS) to a value-based reimbursement paradigm. In January 2015, HHS announced goals of linking 30 percent of traditional Medicare payments to quality-based reimbursement by the end of 2016 through Accountable Care Organizations (ACOs) and bundled payments, and then 50 percent by the end of 2018.

Further goals include linking 85 percent of all traditional Medicare payments to quality or value by 2016 (and 90 percent by 2018) through other programs like the Hospital Value-Based Purchasing and Hospital Readmission Reduction Programs. Here are some statistics that hint at the OCM’s potential impact on cancer treatment costs and Medicare costs overall:

HHS projects that in 2016, there will be more than 1.6 million new cases of cancer diagnosed and an estimated 600,000 people in the United States will die of cancer. 

Cancer care accounts for a huge portion of Medicare expenses. About 77 percent of all cancers are diagnosed in people 55 years of age and older. And according to the Centers for Medicare & Medicaid Services (CMS), most of those diagnosed are over 65 years of age and are Medicare beneficiaries.

Based on the U.S. aging population’s growth, medical expenditures for cancer in 2020 will reach at least $158 billion — a 27-percent increase from 2010, according to projections by the National Institutes of Health (NIH).

Waste from cancer drugs costs Medicare and private insurers billions of dollars each year.

The per-patient cost of chemotherapy drugs is increasing at a much higher rate than other cost components of actively treated cancer patients, driven largely by biologics, according to the Community Oncology Alliance (COA).

Another factor for projected increased cancer care costs is a significant shift in the site of chemotherapy infusion delivery from less-expensive physician office settings to more-expensive hospital outpatient settings.