The Lynx Group

An Accountable Payment Model a “Win-Win-Win” Solution to Value-Based Care

October 2015, Vol 6, No 9

Washington, DC—The Triple Aim of better patient care, lower spending by payers, and the maintenance of financially viable practices and hospitals is achievable with condition-based payment models in oncology, said Harold D. Miller, MS, President and Chief Executive Officer, Center for Healthcare Quality and Payment Reform, at the Fifth Annual Conference of the Association for Value-Based Cancer Care.

“There is a $3-trillion battle going on, which is actually the fight of the century, which ends up being between doctors and hospitals and Medicare and health plans,” said Mr Miller. “In fact, one of the problems is that everything that we do in healthcare tends to be framed as a win-lose kind of thing.”

For example, to control the cost of Medicare, Congress has chosen to reduce fees to providers rather than to cut services to seniors. To keep budget neutrality, an increase in pay to one entity would mean an offsetting reduction in pay to another. Many private payers are following this same unfortunate path, Mr Miller said.

A better approach than “win-lose” is to redesign care to reduce spending without harming quality, while redesigning payment to make good care financially viable for providers, which Mr Miller termed a “win-win-win.”

Problems with Fee-for-Service

“The problem, fundamentally, is the fee-for-service system,” Mr Miller said. “We actually do not pay in fee for service for a lot of the things that would be helpful.”

The lack of flexibility in the current fee-for-service system creates significant barriers to high-value care, said Mr Miller. Fee for service does not provide payment for phone calls or e-mails with patients, for coordinating care among providers, or for nonphysician support services to help patients with self-management, and does not provide flexibility to shift resources across silos. In fact, it penalizes for practice quality and efficiency by reducing revenue if patients do not make frequent office visits, for performing fewer tests and procedures, and if complications are prevented instead of treated, and provides no revenue at all if patients stay healthy.

Most of the payment reform to date has incorporated small bonuses or penalties within the fee-for-service system.

In the Centers for Medicare & Medicaid Services’ value-based payment modifier, bonuses are only paid to physicians who provide above-average quality care if penalties are assessed on other physicians for below-average quality care. To maintain a neutral budget, the bonus size depends on the size of the penalties.

“Under this system, why would high-performing physicians want to help underperforming physicians to improve?” Mr Miller asked.

The law that repealed the Medicare sustainable growth rate formula creates 2 alternatives for physician payment, including a merit-based incentive payment system and alternative payment models.

Unfortunately, all the alternative payment models are built on a fee-for-service framework, with a per-member per-month payment added and shared savings. The problem is that shared savings are not immediately or permanently available (Table).


Payment structures built on fee for service and shared savings are another “win-lose” approach for payers and providers, because the savings come from reductions in a hospital’s revenue while new services that add value incur increased costs (eg, new costs to reduce the rate of hospitalizations).

An Accountable Payment Model

Instead of trying to bandage a broken system, Mr Miller proposed a completely different payment structure that he calls an “accountable payment model” (Figure). An accountable payment model involves 4 key characteristics:

  1. Flexibility to deliver the services patients need
  2. Accountability for costs the provider can control
  3. Accountability for quality the provider can control
  4. Adequate payment for high-quality care

The first step in developing this type of payment model is to identify opportunities to improve care and to reduce cost. Following the “Choosing Wisely” campaign is an opportunity to do so.

The second step is identifying barriers in the current payment system, such as little flexibility to spend money on preventive care or patient education.

The third step is designing payment systems that create “win-win-win” solutions. Examples include condition-based payments for stable angina and heart failure (cardiology), epilepsy (neurology), and the total cost of delivery in low-risk pregnancy (obstetrics/gynecology).

In medical oncology, an analysis of total spending shows that only approximately 10% of spending per patient with cancer who receives chemotherapy goes to core oncology practice services, 50% of the spending goes to drugs, approximately 10% is for laboratory tests, approximately 10% is for “other” (including radiation, surgery, and other procedures), and approximately 10% goes toward spending for emergency department visits and hospital admissions.

Large savings can be realized, without harming patients, by reducing the rates of emergency department visits and hospital admissions for chemotherapy-related complications. One oncology medical home project used clinical nurse triage management and enhanced access to care to reduce the total emergency department use and total hospital admissions by >50%.

Avoiding unnecessarily expensive drugs can also yield significant savings, Mr Miller said.

Chemotherapy spending for Medicare beneficiaries ranged from $11,059 per patient for oncology practices in the lowest-spending quartile to $18,044 per patient for practices in the highest-spending quartile, a range of $6985. More than 33% ($3600) of the variation stemmed from variation in the use of only 2 drugs, pegfilgrastim (Neulasta) and bevacizu­mab (Avastin).

Improving end-of-life care can also produce savings. One study showed that commercially insured patients with cancer incurred an average of $74,212 in cancer-related expenses in the 6 months before death, and $25,260 was spent in the final month of life.

Barriers to Reduced Spending

“The barriers are that we do not pay for the services that would actually help achieve some of those things,” such as counseling, nursing services, and financial planning, said Mr Miller.

“The profit on the drugs ends up paying for all the services that are desirable,” he said. “In fact, it is a pretty big number. There would literally be no money to pay the doctors at all if you did not have the margins on the drugs. There is something wrong with that.”

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