Dec 5, 2024
Christy Banach | Senior Director, Access Experience Team | Market Access
Managing the multitude of various reimbursement models in oncology is a complicated and challenging process for organizations, whether it’s a small private oncology practice, a large community practice, or an IDN/academic center.
The rising costs of oncology drugs, especially new immunotherapies and targeted therapies, are creating challenges in reimbursement. Payers are increasingly scrutinizing the cost-effectiveness of oncology treatments, which could result in reduced reimbursement, or they are looking for innovative payment models to improve the quality of care and reduce costs.
The Shift from Fee-for-Service to Value-Based Care
Many payers have shifted from a fee-for-service reimbursement model to value-based models that emphasize patient experience and outcomes, while linking reimbursement to the oncology practice's ability to reduce costs and demonstrate the efficacy and value of the treatments it provides.
CMS Oncology Models: OCM and EOM
The evolving Centers for Medicare & Medicaid (CMS) Oncology Care Model (OCM) and its successor, the Enhancing Oncology Model (EOM), are models designed to promote value-based care, but both have presented challenges for the participating oncology practices. Some of these challenges include:
- The need for practices to invest in new systems and processes to track and report quality measures.
- The inclusion of financial risk-sharing and potential penalties for exceeding spending targets, which puts pressure on practices to manage their budgets and patient care effectively, to avoid financial losses. This can be difficult for smaller practices, which have fewer economic and administrative resources.
- The administrative burden of data collection and reporting is significant. It requires practices to invest in IT infrastructure, EHR updates/upgrades, and staff training, which can be costly and time-consuming.
- The expectation that practices must meet care coordination requirements, including patient navigation, follow-up care, and management of comorbidities. Many practices have had to implement new workflows/departments and hire additional staff to perform these functions.
- The requirement that practices must meet specific quality metrics established by CMS, which are tied to reimbursement levels. Failing to meet the metrics can result in reduced payments.
- The complexity of the OCM and EOM payment models involves multiple layers of reimbursement, shared savings, and performance-based adjustments. Practices need a deep understanding of these payment structures to optimize reimbursement and avoid financial penalties, which has led many organizations to hire or contract specialists in healthcare finance for necessary support.
- The changing landscape as CMS has continued to refine and evolve these models based on performance data and policy changes, which requires practices to be able to understand and implement these changes quickly to ensure compliance and success.
Commercial Payers Follow Suit
The OCM and EOM models introduced by CMS have influenced commercial health plans to adopt or refine their own value-based care frameworks in oncology. Many of these pilot programs are focused on improving outcomes, controlling costs, and aligning reimbursement with value instead of volume.
As a result, many oncology practices/organizations are managing both fee-for-service and value-based reimbursement contracts with multiple payers, forcing them to navigate a complex reimbursement system that includes operational challenges, financial risks, and robust data management and care coordination systems.
Buy and Bill vs. Specialty Pharmacy Distribution
Reimbursement is further complicated by how oncology drugs are supplied.
The buy and bill model allows the practice to purchase drugs directly, administer to the patients, and bill the payer for reimbursement of both the drug and the administration fee. In theory, this model gives the practice more control and potentially higher profit margins; however, it does present some risks as well.
Depending on the payer contract, reimbursement rates can vary and fluctuate, and practices must bear the financial risk of drug price changes. The practice also must assume the financial risk if reimbursement rates do not cover the cost of the drugs or if payment is delayed or denied.
When the payer mandates that some or all oncology drugs must be supplied under the specialty distribution model, the drugs are dispensed directly to the patients by a specialty pharmacy. When drugs are supplied through the payer by a specialty pharmacy, the oncology practice loses the ability to negotiate the price paid for the drug and the ability to bring in revenue/profit into the practice, which could be achieved through the buy and bill process.
Most practices prefer the buy and bill model to remain profitable/operational and will push back on payers that try to implement a specialty distribution model. However, some smaller practices may lean on the specialty distribution model to reduce their financial risk and administrative load.
Legislative and Regulatory Pressures
Changes to Medicare Part B and Part D, along with reforms to the 340B Drug Pricing Program, are reshaping oncology reimbursement. There is constant pressure to reform these Medicare programs to control costs and improve drug spending while ensuring access to care. Initiatives aimed at drug price transparency and reforms to the 340B Drug Pricing Program are also reshaping the reimbursement landscape in oncology.
How Manufacturers Can Support Oncology Practices
Oncology manufacturers can help practices overcome reimbursement challenges by offering a wide range of resources for organizations and patients, such as reimbursement assistance programs, patient assistance initiatives, and value-based contracting models.
They can provide educational resources and data collection tools to help ensure practices can manage both fee-for-service and value-based care models effectively.
Additionally, manufacturers can facilitate access to clinical pathways, advocate for favorable state and federal policies, and foster partnerships with payers to streamline reimbursement processes.
By supplying real-world evidence, manufacturers can help oncology practices demonstrate the value of treatments, improving outcomes, and securing appropriate reimbursement.