UnitedHealthcare's MD Anderson deal may spur more bundled payments

Two major private-sector players have launched a bundled-payment model for cancer care that could be a harbinger of more value-based payment arrangements in a wide range of clinical areas.

UnitedHealthcare, a subsidiary of UnitedHealth Group, and the University of Texas MD Anderson Cancer Center in Houston last week announced a three-year deal in which the insurer will pay MD Anderson a fixed annual amount for the care of up to 150 patients with certain types of head and neck cancer.

The program will cover eight different bundles of care, which will differ based on the types of care patients need. MD Anderson will not receive increased payments for patients who experience complications and need additional treatments.

“There's so much interest in this,” said Kimberly Crow Hartsfield, a senior manager at the Camden Group, a consulting firm. “There's so much spend in oncology and so much variation in the care delivery that takes place.”

The pilot program, which is being closely watched by other insurers and providers, is part of UnitedHealthcare's concerted push toward more value-based payment mechanisms. The insurer has about $36 billion in annual provider payments tied to some kind of risk-based arrangement.

UnitedHealthcare officials said they want more bundled payments for cancer care because oncology and related drug costs represent 11% of the insurer's commercial health-plan spending. Only patients with employer-sponsored health plans will be enrolled in the MD Anderson program.

“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,” said Dr. Lee Newcomer, UnitedHealthcare's vice president of oncology services, in a written statement.

MD Anderson officials were quoted in the Wall Street Journal as saying they want to test the feasibility of bundled payments and may use them for other types of cancer.

Bundled payments are an alternative payment model encouraged by the Patient Protection and Affordable Care Act and are being tested for a variety of different services. Medicare's Bundled Payments for Care Improvement program has received widespread interest among providers.

Private insurers including Aetna and Blue Cross and Blue Shield plans also have created bundled-payment arrangements with hospitals. And large self-insured employers such as General Electric Co. have established direct bundled-payment contracts with providers.

Medicare does not yet have any bundled payments for cancer care.

Most current bundled deals between private insurers and providers involve orthopedic or cardiovascular procedures, since those service lines tend to have higher volumes and more fixed costs.

But Humana and 21st Century Oncology have a bundled-payment agreement for radiation therapy services. Horizon Blue Cross and Blue Shield of New Jersey also has a fixed, episodic payment deal with a regional cancer practice for breast cancer patients, which started in October.

“We're going to see more and more of what we see as condition-based bundles, as opposed to the procedure-based ones,” said Francois de Brantes, executive director of the Health Care Incentives Improvement Institute. “You look at where payers spend their money, and it's in far longer time-frame episodes,” such as those involving chronic conditions, he said.

UnitedHealthcare officials think substantial savings can be achieved with more standardized cancer care. The insurer released a study this past summer that showed fixed payments for 810 patients with breast, lung and colon cancers saved more than $33 million over three years.

“This was a pretty dramatic change,” Newcomer said at the time.

With 1.6 million people diagnosed annually with cancer in the U.S., half of them Medicare patients, insurers and providers see potential in bundled payments if they lead to better quality.

Medicare is developing an oncology-care model that would pay providers for episodes of cancer care.

“You're going to see continued expansion,” Hartsfield said. “All payers are interested in progressive physician and hospital groups that are looking to eliminate the variation and provide very patient-centric care.”

Follow Bob Herman on Twitter: @MHbherman