The Four Pillars of an Ideal Two-sided Risk Value-based Payment Model in Medical Oncology

Aaron J. Lyss, MBA. Director of Strategy and Business Development, Tennessee Oncology, Nashville, TN

Tracy L. Bahl, MBA. President and Chief Executive Officer, OneOncology, Nashville, TN

Jeffrey F. Patton, MD. Chief Executive Officer, Tennessee Oncology; President of Physician Services, OneOncology, both in Nashville, TN

Stephen M. Schleicher, MD, MBA. Medical Oncologist, Tennessee Oncology, Nashville, TN


Value-based payment models (VBPMs), which aim to incentivize the highest quality care at the lowest possible cost, have become increasingly prevalent in oncology in recent years among commercial and publicly-funded payers in the US.[1] Several recent federal policy initiatives implemented by the Centers for Medicare and Medicaid Services (CMS) have explicitly aimed to spur the growth of VBPMs, including the Medicare Access and CHIP Reauthorization Act of 2015 (MACRA), which incentivizes providers to participate in alternative payment models, and the Oncology Care Model (OCM), which is the largest cancer-specific VBPM with 176 medical oncology physician groups (MOPGs) participating in the upside-only (indicates no risk) option.

One challenge CMS has faced with OCM is sufficiently incentivizing MOPGs to voluntarily elect to participate in the two-sided risk option. Under two-sided risk, performance-based payments accrue to MOPGs if they generate greater than 2.5% total Medicare cost savings relative to projected benchmark costs for their attributed patient population, while financial penalties are imposed on MOPGs if total costs are higher than Medicare’s benchmarks. As of today, not a single oncology practice has opted for participation in the OCM two-sided risk option.

Beginning in January of 2020, practices who have not earned performance-based payments will be forced to either exit the model or accept mandatory two-sided risk. Therefore, we found it timely to present a framework to define an ideal two-sided risk model for oncology. Here we describe four fundamental pillars (see Figure 1) of VBPM design that are critical to supporting what we believe are the four primary objectives of VBPMs (higher quality, better access to care, lower costs, better patient experience), and creating value for payers, MOPGS, and most importantly our patients.

Figure 1:  The four pillars of an ideal two-sided risk oncology value-based payment model.

Figure 1: The four pillars of an ideal two-sided risk oncology value-based payment model.

The four fundamental pillars of VBPM design

I.  Aligning control and accountability  

MOPGs should be held accountable for measures of quality that are within their control. There are two subcategories of quality metrics that are especially important to consider in the design and implementation of VBPMs: (1) pathway adherence; and (2) care-coordination related utilization measures.

(1) Appropriate drug utilization should be measured through clinical pathway adherence, not total dollars spent

VBPMs should ensure that patients have access to the most effective therapies for their conditions, and that patients receive treatments that are consistent with their personal goals of care.

MOPGs can control their treatment decisions and should be held accountable for concordance of treatment decisions with clinical pathways. However, MOPGs cannot control the prices of treatments used. Therefore, MOPG accountability for appropriate drug utilization should not be measured by the total dollars spent by payers for patients with cancer, and instead should be measured by clinical pathway adherence provided that the following conditions are met:


        1. MOPGs should maintain documentation of physician and patient attestation that treatment decisions were made through a process of shared-decision making. Documentation of the shared-decision making process is critical to ensuring that the treatments patients receive are consistent with their personal goals of care, and that patients are appropriately informed of the risks associated with the treatment they elect to receive.


        2. Clinical pathways are updated in real-time based on groundbreaking clinical trial data and FDA approvals, and consider clinical and financial toxicity when appropriate. Pathways should be expert designed and conflicts of interest should be transparent.


        3. Physicians should document a reason for any off-pathway treatment decisions.


(2) Measured performance outcomes should reflect improved care coordination

Two-sided risk VBPMs should tie MOPG reimbursement to the measurement of outcomes in care-coordination-related utilization categories, since these are metrics that can be influenced (and hence controlled) through the implementation of practice improvement efforts by MPOGs. Studies have shown that the utilization of care-coordination related utilization such as inpatient hospital, emergency department, and inpatient post-acute care services vary widely across MPOGs and represent appropriate measures of high quality, well-coordinated cancer care across a wide variety of tumor types. [ii]

In contrast, reduction in payer drug spending has not been reliably correlated to high quality care, and therefore MOPGs should include distinct compensation thresholds for drug utilization vs.  care-coordination related utilization in two-sided risk VBPMs.[iii], [iv]

II. Accurate benchmarking

At the core of any VBPM is the methodological considerations that create accurate performance benchmarks for participating MOPGs. However, accurate benchmarking in cancer is complicated by the heterogeneity and rising costs of cancer treatments over time.

First of all, due to limitations of claims data, the OCM and many commercial payer VBPMs include drug cost benchmarks that do not consider cancer stage or specific cancer histology. For example, none of the 31 ICD-10 codes for the lung cancer disease grouping of OCM differentiate between non-small cell lung cancer and small cell lung cancer.

However, these distinctions, as well as tumor stage and biomarkers, are critical to determining optimal treatment strategies and expected disease complications that influence reliable benchmarks.[v] For example, the treatment and prognosis of non-small cell lung cancer (which may include surgery) and small cell lung cancer (which often includes prophylactic brain radiation) can vary widely. In contrast, medical oncology clinical pathway development is based on the most important clinical characteristics that drive treatment decisions.

Secondly, accounting for increases in regimen costs due to FDA approvals that occur after baseline periods further complicates the accuracy of benchmarking drug costs. For example, the recent approval of atezolizumab in combination with Nab-paclitaxel in metastatic triple negative breast cancer increased the cost (based on January 2019 average sales price) of the first-line standard-of-care triple negative breast cancer regimen by more than 250-fold compared to the previous standard-of-care treatment single agent weekly paclitaxel.

Therefore, benchmarking MOPGs according to pathway adherence (assuming pathways are updated in realtime based on groundbreaking clinical trial data and FDA approvals) instead of total drug spend may minimize the adverse impact of rising drug prices on the ability for MOPGs to meet benchmarks.


III. Bilateralism

When MOPGs participate in VBPMs in which accountability and control are aligned, the next step is determining the equitable compensation for value creation and appropriate financial incentive for taking on risk.  

OCM will offer an interesting case study on bilateralism in the coming years. Last fall OCM participants were faced with the decision of whether to enter the two-sided risk option of OCM or remain in the upside-only option. Using prior performance period data and the newly proposed OCM two-sided risk option specifications, we conducted financial modeling that projected that the maximum possible downside of the two-sided risk option would be approximately 41x the most likely revenue increase (i.e. upside) associated with our two-sided risk participation (see Table 1).

Table 1:  Downside multiplier change based on different model choices.

Table 1: Downside multiplier change based on different model choices.

Therefore, the risk premium (the most probable increase in revenue from entering two-sided risk) was deemed minimal compared to the magnitude of possible losses, which offers a likely explanation for why OCM participants have been reluctant to enter two-sided risk in its current form.

However, in January 2020 OCM participants will be faced with a different decision: to enter two-sided risk or exit the OCM program altogether. When comparing these two options, the maximum possible downside of entering the two-sided risk would be only 5x the risk premium. This improved downside multiplier (maximum downside divided by risk premium) results from the loss of MEOS revenue for MOPGs that exit the OCM model. In effect, MEOS payments become part of the risk premium for the two-sided risk model (since the only alternative is to exit OCM altogether at that point). This dramatic increase in risk premium will likely increase the number of OCM participants who opt to participate in two-sided risk; however, it is unclear whether this increased risk premium will be sufficient to prevent high-quality, low-cost MOPGs from exiting the model in order to avoid higher levels of risk.


IV. Scalability

Nationwide proliferation of VBPMs requires that VBPMs be operationally scalable for payers who manage these programs. For example, the permeation of bundled payments in oncology has been partially hampered by challenges with scaling claims processing.[vi] In addition, MOPGs and payers alike have not yet benefited from technology-enabled pathway adherence and clinical data reporting capabilities that are scalable for either party.

To address the remarkable complexity of medical oncology, payers must work closely with thought leaders who are currently engaging in oncology VPBMs to learn from successes and challenges of current VBPM experiments and to make these insights publicly available. This transparency would catalyze an evidence-based approach to VBPM design and implementation, and prevent nationwide expansion of sub-optimized payment models that fail to engage providers and improve the value of care for our patients.


Concluding remarks:

The current economics of cancer care in the US are placing an unsustainable strain on our healthcare system. At the same time, payer pressures were cited as the top concern among oncologists in the most recent “State of oncology practice in America, 2018” survey results.[vii] We hope that appropriate VBPM design that incorporates the four pillars described above will mitigate these challenges to our current system of cancer care and lead to higher quality, lower costs, improved access, and better patient experience for our patients.



[1] Aviki E, Schleicher SM, Mullangi S, et al. Value-based healthcare delivery models in oncology: A systematic review. Cancer 124(16): 3293-3306, 2018.  

[ii] Clough JD, Patel K, Riley GF, et al. Wide variation in payments for Medicare beneficiary oncology services suggests room for practice-level improvement. Health Aff (Millwood) 34(4): 601-608, 2015.

[iii] Newcomer et al. Changing Physician Incentives for Affordable, Quality Cancer Care: Results of an Episode Payment Model. J Oncol Pract 10(5): 322-326, 2014.

[iv] Schleicher SM, Bach PB, Matsoukas K, Korenstein D. Medication overuse in oncology: current trends and future implications for patients and society. Lancet Oncol 19(4): 200-208, 2018.  

[v] Zon RT, Edge SB, Page RD, et al: American Society of Clinical Oncology criteria for high-quality clinical pathways in oncology. J Oncol Pract 13: 207-210, 2017.

[vi] Spinks T, Guzman A, Beadle BM, et al. Development and feasibility of bundled payments for the multidisciplinary treatment of head and neck cancer: A pilot progam. J Oncol Pract 14(2): 103-112, 2018.

[vii] Kirkwood MK, Hanley A, Bruinooge SS, et al: The state of oncology practice in America, 2018: Results of the American Society of Clinical Oncology Practice Census Survey. J Oncol Pract 14(7): 412-420, 2018.