Impact on oncology practices of including drug costs in bundled payments

Jeffery C. Ward, Laura A. Levit, Ray D. Page, John E. Hennessy, John V Cox, Deborah Y. Kamin, Suanna S. Bruinooge, Ya Chen Tina Shih, Blase N. Polite

Research output: Contribution to journalArticle

3 Citations (Scopus)

Abstract

Introduction: This analysis evaluates the impact of bundling drug costs into a hypothetic bundled payment. Methods: An economicmodelwas created for patient vignettes from: advanced-stage III colon cancer and metastatic non-small-cell lung cancer. First quarter 2016 Medicare reimbursement rates were used to calculate the average fee-for-service (FFS) reimbursement for these vignettes. The probabilistic risk faced by practiceswas captured by the type of patients seen in practices and randomly assigned in a Monte Carlo simulation on the basis of the given distribution of patient types within each cancer. Simulations were replicated 1,000 times. The impactof bundled payments that include drug costs for various practice sizes and cancer types was quantified as the probability of incurringa loss at four magnitudes:anyloss, >10%, >20%, or >30%. Aloss was defined as receiving revenue fromthe bundle thatwas less than what the practice would have received under FFS; the probability of loss was calculated on the basis of the number of times a practice reported a loss among the 1,000 simulations. Results: Practices that treat a substantial proportion of patients with complex disease compared with the average patient in the bundle would have revenue well below that expected from FFS. Practices that treat a disproportionate share of patients with less complex disease, as compared with the average patient in the bundle, would have revenue well above the revenue under FFS. Overall, bundled payments put practices at greater risk than FFS because their patient case mix could greatly skew financial performance. Conclusion: Including drug costs in a bundle is subject to the uncontrollable probabilistic risk of patient case mixes.

Original languageEnglish (US)
Pages (from-to)E259-E268
JournalJournal of Oncology Practice
Volume14
Issue number5
DOIs
StatePublished - Jan 1 2018
Externally publishedYes

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Drug Costs
Fee-for-Service Plans
Diagnosis-Related Groups
Medicare
Non-Small Cell Lung Carcinoma
Colonic Neoplasms
Neoplasms

ASJC Scopus subject areas

  • Oncology
  • Oncology(nursing)
  • Health Policy

Cite this

Ward, J. C., Levit, L. A., Page, R. D., Hennessy, J. E., Cox, J. V., Kamin, D. Y., ... Polite, B. N. (2018). Impact on oncology practices of including drug costs in bundled payments. Journal of Oncology Practice, 14(5), E259-E268. https://doi.org/10.1200/JOP.17.00036

Impact on oncology practices of including drug costs in bundled payments. / Ward, Jeffery C.; Levit, Laura A.; Page, Ray D.; Hennessy, John E.; Cox, John V; Kamin, Deborah Y.; Bruinooge, Suanna S.; Shih, Ya Chen Tina; Polite, Blase N.

In: Journal of Oncology Practice, Vol. 14, No. 5, 01.01.2018, p. E259-E268.

Research output: Contribution to journalArticle

Ward, JC, Levit, LA, Page, RD, Hennessy, JE, Cox, JV, Kamin, DY, Bruinooge, SS, Shih, YCT & Polite, BN 2018, 'Impact on oncology practices of including drug costs in bundled payments', Journal of Oncology Practice, vol. 14, no. 5, pp. E259-E268. https://doi.org/10.1200/JOP.17.00036
Ward, Jeffery C. ; Levit, Laura A. ; Page, Ray D. ; Hennessy, John E. ; Cox, John V ; Kamin, Deborah Y. ; Bruinooge, Suanna S. ; Shih, Ya Chen Tina ; Polite, Blase N. / Impact on oncology practices of including drug costs in bundled payments. In: Journal of Oncology Practice. 2018 ; Vol. 14, No. 5. pp. E259-E268.
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abstract = "Introduction: This analysis evaluates the impact of bundling drug costs into a hypothetic bundled payment. Methods: An economicmodelwas created for patient vignettes from: advanced-stage III colon cancer and metastatic non-small-cell lung cancer. First quarter 2016 Medicare reimbursement rates were used to calculate the average fee-for-service (FFS) reimbursement for these vignettes. The probabilistic risk faced by practiceswas captured by the type of patients seen in practices and randomly assigned in a Monte Carlo simulation on the basis of the given distribution of patient types within each cancer. Simulations were replicated 1,000 times. The impactof bundled payments that include drug costs for various practice sizes and cancer types was quantified as the probability of incurringa loss at four magnitudes:anyloss, >10{\%}, >20{\%}, or >30{\%}. Aloss was defined as receiving revenue fromthe bundle thatwas less than what the practice would have received under FFS; the probability of loss was calculated on the basis of the number of times a practice reported a loss among the 1,000 simulations. Results: Practices that treat a substantial proportion of patients with complex disease compared with the average patient in the bundle would have revenue well below that expected from FFS. Practices that treat a disproportionate share of patients with less complex disease, as compared with the average patient in the bundle, would have revenue well above the revenue under FFS. Overall, bundled payments put practices at greater risk than FFS because their patient case mix could greatly skew financial performance. Conclusion: Including drug costs in a bundle is subject to the uncontrollable probabilistic risk of patient case mixes.",
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