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Insurers Push Back Against Growing Cost Of Cancer Treatments

WebMD News from Kaiser Health News

By Julie Appleby

Fri, Jun 06 2014

Some cancer patients and their insurers are seeing their bills for chemotherapy jump sharply, reflecting increased drug prices and hospitals’ push to buy oncologists’ practices and then bill at higher rates.

Patients say, “‘I’ve been treated with Herceptin for breast cancer for several years and it was always $5,000 for the drug and suddenly it’s $16,000 -- and I was in the same room with the same doctor same nurse and the same length of time’,” said Dr. Donald Fischer, chief medical officer for Highmark, the largest health plan in Pennsylvania.

The manufacturer of Herceptin charges approximately $5,100 per month for the drug. But like other insurers, Highmark found that when hospital systems bought doctors’ practices, chemotherapy costs rose because physicians’ offices were then deemed “hospital outpatient centers” and could charge more for overhead.

Now insurers are pushing back. In what may be the first move of its kind, Highmark in April stopped paying higher fees for chemotherapy drugs given to patients whose doctors work for hospitals, instead paying the same price they would have had the doctor remained independent.

The move is being watched closely by insurers around the country, and “some will probably follow suit,” said Kathryn Fitch, a healthcare management consultant at Milliman, whose 2013 study documented chemotherapy costs in hospital outpatient settings ran as much as 53 percent higher than in doctors’ offices.

“The pendulum has swung toward hospitals buying up physician practices to get better revenue,” Fitch said. 

Other insurers are trying different ways to hold down costs. WellPoint, one of the nation’s largest insurers, will soon begin paying oncologists a bonus of $350 a month per patient for sticking with specific, less-costly, chemotherapy regimens.  Florida Blue has partnered with some doctor practices to create cancer-specific “accountable care organizations” that reward doctors if the new organizations save money while hitting quality targets.  

And UnitedHealthcare, the biggest insurer by market share, is expanding a pilot project that uses flat, or “bundled,” payments for the treatment of certain cancers – which include the cost of drugs.

Targeting Cancer Treatment

Changing the way cancer care is paid for is a top priority for insurers and employers, with treatments costing the U.S. more than $127 billion each year. That is projected to grow 27 percent from 2010 to 2020 as the population ages, said epidemiologist Robin Yabroff at the National Cancer Institute.

Meanwhile, the average monthly cost of a brand-name cancer drug has doubled to $10,000 in the past decade, according to a May report from the IMS Institute for Healthcare Informatics.

That’s important because the traditional way to pay for cancer drugs given in a doctor’s office is to reimburse the physician for the average sales price of the drug, plus an added percentage to cover overhead and a de facto profit margin. In Medicare, for instance, the added percentage is 6 percent.

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