Spending for outpatient cancer drugs is rising, and a new analysis of private insurance claims suggests that's largely because providers are charging more for the drugs as hospitals employ more oncologists.
Average spending per person for outpatient cancer drugs increased 34% for each percentage point hike in the market share of oncologists acquired by hospitals, according to an analysis of medical claims from commercial health plans. Higher prices (rather than higher volume) accounted for two-thirds of that spending increase—even after accounting for pricey new drugs entering the market, the study found.
That suggests that market consolidation gives hospitals and doctors the power to raise prices for commercial health plans. It also underscores how the proliferation of oncology drugs and the financial incentives unique to cancer treatment can drive spending without clear evidence that patients gain much as a result, said Rena Conti, an assistant professor of health policy at the University of Chicago, whose work focuses on healthcare financing and biopharmaceuticals.
“We're in this golden age of treating cancer,” Conti said. “There are more and more options to treat the most common cancers.” But more expensive drugs don't always deliver substantially better results for patients. For example, a study published last year in the Journal of Clinical Oncology compared two colorectal cancer drugs, bevacizumab and cetuximab, and found a significant difference in their costs but no difference in outcomes.
Doctors, meanwhile, have discretion in selecting the drugs they use for cancer treatment and are paid each time they dispense them. They're also paid more for higher-priced drugs under oncology contracts that cover the drug's average price, plus an additional amount equal to a percentage of the price.
Hospitals that employ doctors can also charge an administrative fee each time a patient receives an oncology drug.
The new study looked at roughly 350 markets from 2008 to 2013, using medical claims provided by Aetna, Humana, Kaiser Permanente and UnitedHealthcare to the not-for-profit research organization, the Health Care Cost Institute.
By the end of that time period, about one-third of oncologists were employed or affiliated with hospitals in the average market, up from 17% five years earlier.
In consolidating markets, the study found, average per-person spending increased for chemotherapy that included those hospital fees. But spending also increased for chemotherapy administered by doctors without the fee and by pharmacies.
The rising cost of oncology care leaves patients vulnerable to financial stress as they combat cancer, particularly for those with high deductibles, Conti said. She said she fears the costs will limit access to life-saving treatments.
Insurers' efforts to change how doctors are paid for oncology drugs could reduce spending, she said. That includes giving doctors a budget for each patient, known as capitation. Doctors that hold spending below budget keep the difference saved, and those that go over budget must absorb the loss.