Unitedhealth says it will test lump sum payments for some cancer care, reports earnings

Oct 21 2010

Health insurer UnitedHealth said Tuesday that it will test a new way payment method for cancer doctors. The program pays doctors a lump sum payment for providing care during an entire course of care for the disease instead of how it's done now — with a fee for each service a doctor provides.

Kaiser Health News: "Payment for chemotherapy has been particularly controversial. That's because some doctors, including oncologists, buy drugs at wholesale prices, dispensing them by injection or infusion to patients in their offices. Then they charge insurers higher, retail prices." A report from the Government Accountability Office reports that Medicare reimbursed doctors $532 million more a year in 2000 than what the doctors paid for the medicines. That was changed in 2005, when Medicare started paying doctors the average sales price for the drugs plus 6 percent to administer them.

"United takes a different approach. Its program, now underway with five oncology practices in five states, pays physicians a lump sum for each patient's total course of chemotherapy for breast, lung and colon cancer. The payment is based on regimens drawn up by the doctors themselves, plus a case management fee" (Appleby, 10/20).

The New York Times: "The new fee is meant to encourage doctors to follow standard treatments rather than opting too often for individualized and unproven courses of therapy, which can include the most expensive drug combinations. By proposing a different type of payment structure, companies hope to lower doctors' dependence on a system that generates substantial sums for cancer specialists who routinely favor top-of-the line treatments." Cancer care in the U.S. costs $100 billion a year, with the average per patient cost sometimes more than $100,000 a year (Abelson, 10/19).

The Wall Street Journal: The old way of paying doctors for such care, called fee-for-service, "gives doctors an incentive to provide more — but not necessarily better — care, which can drive up drug usage and other costs. To start addressing the problem, the new federal health law calls for Medicare pilot programs that pay doctors based on the quality rather than the quantity of their services." Cancer care costs are rising 15 percent to 18 percent a year, The Journal reports. "UnitedHealth estimates that drugs account for 65 percent of an oncologist's income. In particular, the insurer says, there is concern that toward the end of a cancer patient's life, doctors continue giving drugs as a way to keep being paid for the patient's care" (Johnson, 10/20).

Bloomberg: "How much the program may hurt doctor' earnings isn't clear. While the system is designed not to crimp physicians' revenue in the first year, it may eventually pay doctors less than they would have made by choosing more-profitable drugs, [UnitedHealth Senior Vice President for Oncology Lee] Newcomer said. Bruce Gould, a doctor at Northwest Georgia Oncology Centers, the Marietta practice in the pilot program, said he's willing to take that chance because doctors see the U.S. health care system as unsustainable, and are concerned that government and private payers may impose bigger cuts if oncologists don't find their own solutions. The pilot project will help counter a 'skewed reimbursement system' that pays oncologists more for drugs than for office visits, nutritional care or psychological counseling, Gould said in a telephone interview" (Nussbaum, 10/19).

Reuters: "The five medical practices in the program have between 18 and 35 oncologists on staff and are based in Dayton, Ohio; Fort Worth, Texas; Kansas City, Mo.; Marietta, Ga.; and Memphis, Tenn. The regimens will be evaluated based on various health outcomes, as well as emergency room visits and complications" (Krauskopf, 10/20).

In the meantime, UnitedHealth reported yesterday that its profits beat expectations. It reported $1.3 billion in quarterly profit, the (Minneapolis St. Paul, Minn.) Star Tribune reports. "On Tuesday, Minnetonka-based UnitedHealth reported stellar third-quarter earnings, boosted by strong membership growth and lower hospital costs. … The insurer gained members in both its commercial and government businesses for health benefits. Its smaller health services businesses — pharmacy management and consulting and technology services — also grew rapidly. … Between now and 2014, health reform is expected to boost the market for UnitedHealth's products as the federal government expands the Medicaid program and begins offering subsidies to help people buy private insurance on new health plan exchanges" (Yee, 10/19).

Morningstar Canada/The Toronto Star: "Medical costs continue to be the primary driver of higher earnings [for UnitedHealth], which is unfortunate for investors because various provisions of the health reform legislation will pressure medical cost ratios in 2011 and beyond. The consolidated medical cost ratio was 80.1% in the third quarter and 81% year-to-date." Starting next year, insurers will have to spend either at least 80 percent or 85 percent depending on if they operate a small- or large-market plan (Coffina, 10/19).