News, Analysis, Trends, Management Innovations for
Clinical Laboratories and Pathology Groups

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News, Analysis, Trends, Management Innovations for
Clinical Laboratories and Pathology Groups

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If bundled payment becomes more common in treatment of cancer, then anatomic pathologists need a strategy to demonstrate their clinical value to physicians and payers

MD Anderson Cancer Center and UnitedHealthcare (NYSE: UNH) announced a bundled payment agreement for the treatment of certain types of cancer. This development has implications for anatomic pathologist who provide cancer testing services to hospitals throughout the United States.

The new three-year pilot at MD Anderson’s Head and Neck Center in Houston, Texas, is the first use of a bundled payment model in a large, comprehensive cancer center. Officials say it is expected to lower costs while improving the quality of patient care and outcomes. As many as 150 patients with head and neck cancer who are enrolled in employer-sponsored UnitedHealthcare (UHC) plans will participate in the pilot.

“For the last five years, MD Anderson and its Institute for Cancer Care Innovation have been looking at how to best approach a single price for treating cancers. It is a complex question because cancer is a complex disease and each patient unique,” stated Thomas W. Feeley, M.D., Head of Anesthesiology and Critical Care, and Head of the Institute, in an MD Anderson news release. “Bundled pricing is something that patients and care providers want, and this is our first opportunity to better understand how we can manage costs without sacrificing quality care and patient outcomes.”

Thomas W. Feeley, M.D

Thomas W. Feeley, M.D., is Head of Anesthesiology and Critical Care at the University of Texas MD Anderson Cancer Center. In commenting on the new MD Anderson and UnitedHealthcare pilot program that shifts from fee-for-service to value-based care for patients with head and neck cancers, he stated, “Bundled payments is something that patients and care providers want.” Pathologists providing cancer testing services at other hospitals will want to watch whether UnitedHealthcare decides to extend this bundled payment approach to cancer care at other hospitals in the United States. (Photo copyright MD Anderson)


Single Fee Payment Models Affect Medical Laboratory Billing Practices

Under the bundled payment model, Houston-based MD Anderson will be reimbursed with a single fee for a “defined episode of care.” This will include surgery, chemosurgery, imaging scans, clinical laboratory tests, and anatomic pathology services. MD Anderson and UnitedHealthcare have developed eight pre-priced treatment regimens with an associated payment model. Each payment arrangement follows research-based clinical practices and protocols that the center has created and refined over several decades.

“The goal was to eliminate the wasteful or non-value-added care and reward physicians for doing that work,” noted Lee Newcomer, M.D., MHA, Vice President for Oncology at UnitedHealthcare, in a Wall Street Journal (WSJ) article.

Bundled Payment Model for Cancer Care Already Proven in UHC Pilot Program

UnitedHealthcare’s effort to expand the bundled payment model for cancer care was expected. The insurer’s smaller pilot program began in 2010 at five participating medical oncology groups. The program lowered medical costs for breast, colon, and lung cancer treatment by 34% while reportedly increasing the quality of care.

The details of that study were published July 8, 2014, in the Journal of Oncology Practice. The report, “Changing Physician Incentives for Affordable, Quality Cancer Care: Results of an Episode Payment Model,” demonstrated the potential effectiveness of new approaches to the current fee-for-service payment model for cancer therapy.

“Our partnership with MD Anderson Cancer Center marks an important step toward expanded bundled care payment models and away from the traditional fee-for-service payments for oncology care. Our recently completed pilot shows that these creative new cancer care payment models can reduce healthcare costs while improving patient outcomes,” Newcomer said in the MD Anderson statement.

Pathology Groups on Notice: Other Health Insurers Plan to Follow UHC’s Example

Evidence that supports the bundled payment concept is accumulating. Bundled payment has already proven to work well for orthopedic surgery procedures such as hip and knee replacement surgeries and for outpatient procedures like anterior cruciate ligament reconstructions and rotator cuff repairs.

UnitedHealthcare says that the proportion of payments to providers that now involve value-based reimbursement has nearly tripled since 2011 to $36 billion. The health insurer predicts it may reach $65 billion by the end of 2018.

Clinical laboratory managers and pathologists should expect other health insurers to follow UnitedHealthcare’s lead as value replaces volume in payment models for many different types of care.

There will be “more condition-based [payment] bundles as opposed to procedure-based ones,” predicted Francois de Brante, Executive Director of the Health Care Incentives Improvement Institute, in a Modern Healthcare article. “You look at where payers spend their money, and it’s in far longer timeframe episodes,” like those involving chronic conditions.

Francois de Brantes

Francois de Brantes, Executive Director of the Health Care Incentives Improvement Institute, predicts that “condition-based bundles” will increasingly replace “procedure-based” repayment models for most medical providers and clinical laboratories, as payers aim to rein in healthcare costs and improve patient outcomes. (Photo copyright LinkedIn)

HHS Outlines Payment Plans That Will Affect Pathology Groups and Clinical Laboratories

The shift to a VBR model also is being spurred on by the U.S. Department of Health and Human Services (HHS). In a recent announcement, HHS outlined its new goals and timelines for transitioning Medicare payments away from fee-for-service. Such a change ultimately will impact how clinical laboratories and pathology groups get paid for tests, screenings, and other work.

HHS stated Medicare’s goal is to tie 30% of traditional fee-for-service payments to value-based payment models by the end of 2016, and 50% by the end of 2018. In addition, HHS set a goal of tying 85% of all traditional Medicare payments to quality or value by 2016! This jumps to 90% by 2018. Medicare officials expect to accomplish this through initiatives such as the Hospital Value-based Purchasing and Hospital Readmissions Reduction programs.

Given all the developments described above, every clinical laboratory organization and pathology group should be asking this question during strategic planning sessions: “How long will it be before bundled reimbursement and budgeted payments arrive in our community and payment by fee-for-service declines?” As the example of MD Anderson demonstrates, prominent providers are already willing to sign bundled payment agreements with major health insurance companies.

—Andrea Downing Peck

Related Information:

MD Anderson, UnitedHealthcare Launch New Cancer Care Payment Model

United Healthcare Tests a Flat Rate for Cancer Treatment

United Healthcare, MD Anderson Deal May Spur More Bundled Payments in Cancer

Changing Physician Incentives for Affordable, Quality Cancer Care: Results of an Episode Payment Model

Pros and Cons of Bundled Payments Participation

Pathologists and Clinical Lab Executives Take Note: Medicare Has New Goals and Deadlines for Transitioning from Fee-For-Service Healthcare Models to Value-Based Reimbursement