Search tips
Search criteria 


Logo of jopHomeThis ArticleASCO JOPSearchSubmitASCO JOP Homepage
J Oncol Pract. 2010 September; 6(5): 265–269.
PMCID: PMC2936476

Reducing Cancer Costs and Improving Quality Through Collaboration With Payers: A Proposal From the Florida Society of Clinical Oncology


One of Florida's largest private payers has retained an outside consulting firm to develop a program to reduce cancer care spending, which could seriously limit the ability of oncology practices in Florida to provide quality care to their patients.


The cost of health care is rising at an unsustainable rate in the United States. Our nation spends 16% of its gross domestic product (GDP) on health care, a total of more than $2 trillion in health care–related expenditures each year.1 If the current trend continues, health care expenditures will reach 20% of the total GDP by the year 2017.2

In 2002, US per-capita health care spending was 53% higher than that of any other country.3 In 2003 and 2004, US per-capita health care spending was 2.5 times more than the median Organization for Economic Cooperation and Development (OECD) country.4,5 In 2005, the United States spent $6,401 per capita on health care, which was more than double the per-capita spending in the median OECD country.6 Despite our nation's having the third-highest level of spending from public sources, public insurance covered only 26.2% of the population in 2005.6

From 1970 to 2005, the United States had the largest increase—a full 8.3%—in the percentage of GDP spent on health care of all the OECD nations.7 Despite our nation's high costs, we have consistently had fewer physicians, nurses, hospital beds, doctor visits, and hospital days per capita than the median OECD country.5,7 In addition, the United States is as much as 10 years or more behind other industrialized nations in adoption of health information technology.7

So why is our spending so high compared with that of other countries? Health care prices and higher per-capita income are one reason.5 Greater prevalence of obesity-related chronic conditions may be another factor.5 Also to be considered seriously is the nation's complex and highly fragmented payment system, with its related administrative costs.6 Lack of a universal or even consistent health information technology infrastructure severely limits care coordination, which may account for costly duplication and miscommunication in care.

Cancer costs account for approximately 5% of US health care spending, and that proportion will likely continue to increase as patients with cancer live longer with their disease and thus consume a greater share of US health care dollars. According to the National Institutes of Health, the United States spent more than $89 billion on cancer care in 2007, with a total economic burden of $219.2 billion, including the indirect costs of reduced productivity and death.

The cost associated with new technologies such as robot-assisted surgery, advanced imaging techniques, sophisticated radiation treatment options, and the introduction of new therapeutic drugs have all driven up the cost of cancer care. More than $19 billion (> 21.3% of cancer care spending) was spent on drugs alone in 2007.8 Ninety percent of the cancer drugs approved by the US Food and Drug Administration during the past 4 years will have a calculated cost of at least $20,000 for each 12-week cycle.9,10

The cost to deliver high-quality cancer care is rising as a result of inflation, increasing regulatory burden, and increasing overhead costs—not the least of which is the need for additional personnel to meet payers' administrative demands. An accumulating body of data suggests that patients are deferring treatment because of high out-of-pocket costs.

Public and private payers are attempting to decrease their cost of cancer care by reducing reimbursements, leaving oncology practices trapped in the middle as overhead expenses increase simultaneously with payment decreases. Further cost increases are on the horizon with the implementation of government-mandated electronic health records (EHRs), resulting from the $19.2-billion HITECH Act (Health Information Technology for Economic and Clinical Health Care Act), as part of the American Recovery and Reinvestment Act of 2009.

Under the HITECH Act, providers will be eligible for up to $44,000 in incentive payments over 5 years through 2014 in the form of Medicare reimbursements for “meaningful use” of EHRs (interim criteria for meaningful use were published in the Federal Register in January 201011). The incentive payment is equivalent to 75% of Medicare-allowable charges for covered services furnished by the eligible provider in a year, subject to maximum payments; providers operating in designated Health Professional Shortage Areas will be eligible for up to an additional 10%. Beginning in 2015, however, practices that do not demonstrate meaningful use of EHRs will be penalized in the form of a 1% reduction in Medicare payments. The penalty climbs to 2% in 2015 and 3% in 2016, with a maximum penalty of 5% per year.

Oncology practices cannot continue to absorb falling revenue as costs rise, and the strain is reaching a critical level. If this financial trend continues, the result may be a dramatic change in the way cancer care is delivered in the United States. Over time, more and more practices will fail, shifting cancer care back to the hospital setting. In fact, a recent survey by the Association of Community Cancer Centers shows substantial growth in practice referrals to hospitals for chemotherapy treatment, from 11% in 2007 to 18% in 2009.12 This change is caused in large part by low reimbursement of expensive drugs and infusion codes resulting from the Medicare Modernization Act of 2003. If more and more cancer treatments are being delivered in the hospital setting, costs will continue to rise; hospital-based care is more expensive than identical care delivered in a private-practice setting.13

Florida's Tipping Point

A recent action by one of the large private payers in Florida has crystallized the need for the oncology community to take a firm stand. Without any prior discussion with oncology practices, the payer retained an outside consulting firm to develop a program to reduce cancer care spending. The program will reduce payments to physicians for drugs and services while implementing a number of precertification programs designed to decrease utilization and access to cancer care.

The consulting firm hired by the payer has no previous experience with cancer care delivery, and the program they propose could seriously limit the ability of oncology practices in Florida to provide quality care to our patients. The program as currently proposed makes no attempt to evaluate the quality of care currently being delivered as it attempts to decrease service utilization.

The Florida Society of Clinical Oncology (FLASCO) believes that the abrupt service interruption that will surely result from the payer's so-called cost-saving plan will actually raise the cost of cancer care as patients are moved to alternative settings to access essential treatment. We take strong opposition to the implementation of these types of programs, which attempt to reduce health care costs solely by restricting access and reducing payments for care and services.

This payer's unilateral action prompted FLASCO to investigate alternative methods to deliver quality cancer care to Florida residents while continuing to help control growing costs to patients and payers alike. Our recommendations should allow private practices to maintain their current standard of care to the patient community without compromising reimbursement.

We feel that an optimal program should include utilization of clinical pathways, disease management, end-of-life care, and patient guidance to preferred providers. Preferred provider status would require that practices comply with quality and cost-effectiveness measures as part of a partnership between payers and those practices that invest in quality principles. FLASCO's Effective Value Program can accomplish these goals of reducing the cost of cancer care while maintaining patient access and adequate reimbursement for practitioners.

FLASCO's Recommendations

FLASCO proposes a program that combines clinical pathways, disease management, end-of-life care, and patient guidance to preferred providers as part of a larger partnership between payers and practices investing in quality principles. The solution we outline accomplishes the payer's stated goals without the adverse impact of limiting access to care for those patients who need it. FLASCO's Effective Value Plan reduces the cost of cancer care while maintaining high quality, broad access, and adequate reimbursement to practitioners.

FLASCO's Effective Value Program

Core components of FLASCO's plan to reduce costs and improve quality of cancer care in Florida include:

  1. Standardizing treatment through clinical pathways.
  2. Managing disease effectively.
  3. Providing appropriate end-of-life care.
  4. Guiding patients to cost-effective providers.

Clinical Pathways

The clinical pathway is a patient management tool that outlines a patient's clinical course on the basis of best practices specific to his or her diagnosis. Pathways include the interventions, provider interactions, and outcomes patients can expect to experience during their treatment course. They are more focused than general guidelines in that they outline a specific, targeted course of care.

There are a number of vehicles for implementing pathway programs. In addition to individual practice pathway development, there are proprietary options available wherein practices and payers collaborate with established pathway program development groups.

Clinical pathways create savings by standardizing care, which reduces inappropriate drug utilization. Standardization allows for savings in nursing time, which creates the opportunity for more and higher quality nurse-patient interaction. Although care can and should be customized to meet the needs of individual patients, the clinical pathway provides an all-encompassing care map and a means to capture deviations from the usual care for a specific diagnosis.

Numerous studies in the overall medical literature have demonstrated significant savings to the health care system resulting from adherence to clinical pathways. A 2007 report on the treatment of patients with pneumonia published in The European Respiratory Journal showed a cost of €1,665.5 for patients receiving pathway-adherent treatment versus €1,710.5 for those receiving nonadherent treatment. Mortality was 10% for adherent treatment versus 13.6% for nonadherent treatment, and readmission was 2.1% versus 6.2%, respectively. The incremental cost-effectiveness ratio showed that adherence to treatment guidelines saved €1,121 per patient cured compared with nonadherence.14

Also in 2007, a report on use of clinical pathways in treatment of acute low back pain published in Medical Care demonstrated that patients who received adherent treatment had fewer physician visits, lower cost of care, 25.8% adjusted mean difference in improvement in disability, and 22.4% adjusted mean difference in improvement in pain. Approximately 64.7% of patients who received adherent care had a successful physical therapy outcome, compared with 36.5% of patients who received nonadherent care.15

Characteristics of Effective Clinical Pathways

  1. Designed by physicians
  2. Evidence based
  3. Updated regularly
  4. Informed through a formal physician feedback mechanism
  5. Evaluated for key data points on an ongoing basis
  6. Monitored for minimum compliance

Patients with brain trauma experienced better outcomes and lower cost when they received treatment that adhered to clinical pathways.16,17 The same result was found in patients with acute decompensated heart failure. Although there was increased drug utilization in patients who received pathway-adherent treatment, there was no increase in total cost of care; patients who received adherent treatment responded more quickly and had better outcomes compared with patients who received nonadherent care.18

Data are emerging in the oncology literature showing significant cost savings in pathway-adherent treatment. Highmark Blue Cross Blue Shield (BCBS) and CareFirst BCBS, through the University of Pittsburgh Medical Center, achieved savings of more than $1 million in only 6 months by controlling and reducing the use of Avastin (bevacizumab; Genentech, South San Francisco, CA) through clinical pathways.19 In Spokane, WA, Premera BCBS partnered with a practice of 22 medical oncologists to deliver $1 million in cost savings by using clinical pathways.20

A 2010 report by Neubauer et al in Journal of Oncology Practice demonstrated measurable cost savings for patients with non–small-cell lung cancer treated on a clinical pathway compared with those who received nonpathway treatment. Overall, outpatient costs were 35% lower for patients on clinical pathways, with an average 12-month cost of $18,042 for pathway versus $27,737 for nonpathway treatment. The cost savings was significant in both the adjuvant and first-line treatment settings.21

Successful clinical pathway programs share a number of characteristics. Pathways are developed by physicians, rooted in evidence-based practice, and updated on a regular schedule. Programs contain a mechanism for feedback from physicians who use the pathways in their day-to-day clinical practice. Collection of key data points is also essential to successful pathway programs. Such data should include cancer staging, line of therapy, tumor characteristics, performance status, and the reason for any treatment alterations (eg, disease progression, toxicity).

Effective pathway programs also include a minimum compliance requirement, with clear guidelines for identifying and treating patients for whom the existing clinical pathway is not appropriate. Within the compliance requirement must be a formal system to determine and approve required exceptions on the basis of patient or physician factors. By creating a system to track adherence and modifications to clinical pathways, as well as a plan for treating patients for whom the pathway is not appropriate, practices can standardize care and reduce costs while maintaining high quality for all patients.

Disease Management

Direct, proactive patient intervention—disease management—is a core component of any coordinated cost-control program. Although disease management is a part of many practices, it is often disorganized and lacks an established path and focus. By training staff to evaluate patients for treatment-related toxicities, practices can identify and resolve problems before they become acute, avoiding emergency room visits and hospital admissions while improving patients' quality of life. Whether or not toxicities are present, staff can recommend lifestyle changes to mitigate symptoms and improve overall health.

Staff working with a clear disease management plan can also support patient compliance with prescribed medication. As the number of oral medications increases rapidly, compliance is ever more important. In a study by the University of Michigan, compliance-focused interventions in patients with asthma resulted in an overall decrease in health care costs because patients who took their medications as prescribed had fewer emergency room visits and hospital admissions. Although drug utilization actually increased, the overall cost of care was significantly lower.22

Disease management activities are a core component of any cost-saving plan, and must be adequately reimbursed. The cost savings generated by disease management would be an ideal source for its own funding.

End-of-Life Care

Patients receiving Medicare benefits consume approximately one quarter of their total Medicare expenditures in the last 12 months of life, with 40% of that amount being consumed in the final 30 days.23,24 Multiple studies have explored chemotherapy and the use of hospice care in the final stages of patients' disease. The results thereof reveal an extreme degree of variability in treatment provided, with many patients receiving therapy that in some instance could have been detrimental to quality of life and well-being.

One report that examined all Medicare beneficiaries who died in Massachusetts and California in 2003 showed that 33% of Massachusetts patients and 26% of California patients received chemotherapy in the last 6 months of life. In the last 3 months, 23% in Massachusetts and 20% in California received chemotherapy. In the final month, 9% of patients in both states received chemotherapy. Although much of this treatment may have been appropriate, in many instances it may not have been.25

Another report, from Duke University, determined that hospice care could reduce the cost of care for patients with terminal cancer. Researchers conducted a retrospective case-control study of Medicare beneficiaries, 1,819 hospice decedents and 3,638 controls. Hospice use reduced Medicare program expenditures during the last year of life by an average of $2,309 per hospice user. The savings was greatest in patients with cancer, whose average savings was $7,000 for hospice versus nonhospice care for those who used hospice in the last 58 to 103 days (2 to 3.5 months) of life.26,27

Although treatment near the end of life may be appropriate for some patients, the data show that many patients receive costly treatment with little benefit. Certainly some of these patients would experience better quality of life, as well as substantial cost savings, in the terminal stages of cancer with palliative care and symptom control rather than curative treatment. However, physicians currently are not reimbursed for the complex and often time-consuming discussions with patients and their families regarding advanced planning for end-of-life care. Practices that actively provide support to their patients for advanced planning should be recognized for these services and the savings they produce, and should receive appropriate reimbursement for palliative care planning.

Patient Guidance to Cost-Effective Providers

Because significant savings can occur when patients are directed to providers who offer the most cost-effective care, practices and providers should work together to identify practices that use clinical pathways and hands-on disease management to ensure low cost and positive outcomes for their patients. We propose partnerships with payers to identify preferred providers, including laboratories, imaging centers, and others, who will adhere to best practices. Providers who deliver high-quality care to their patients should be rewarded with a differential in their reimbursement rates.

By aligning incentives for payers and providers, together we can generate significant cost savings that can be shared by both practitioners and payers. These savings allow patients to access the most appropriate, most current, and highest quality care while appropriately reimbursing providers for their services.


There is undoubtedly a need to control and reduce medical spending in our nation and in the state of Florida, and FLASCO's hope is that the cancer care provider community and payers can work together to trim costs while ensuring that patients are not denied care that is of the highest quality. We remain committed to the delivery of high-quality cost-effective medical care, and we firmly believe that through a program that includes some of the principles discussed above, such care could be delivered with significant savings to the health care system.

Restricting access and reducing payments will only serve to make cancer care more costly. Instead, we propose the use of clinical pathways as a means to standardize care, the implementation of good disease management practices to promote wellness and prevent symptom escalation to the point of hospitalization or chronic condition, the provision of appropriate end-of-life care, and the guidance of patients to preferred providers who will give them the quality of care they deserve with the cost effectiveness our economy demands.

Authors' Disclosures of Potential Conflicts of Interest

The authors indicated no potential conflicts of interest.

Author Contributions

Conception and design: Thomas Marsland, Gerald Robbins, Robert Cassell

Administrative support: Thomas Marsland, Dorothy Green Philips

Provision of study materials or patients: Alan Marks

Collection and assembly of data: Thomas Marsland

Data analysis and interpretation: Thomas Marsland, Alan Marks

Manuscript writing: Thomas Marsland

Final approval of manuscript: Thomas Marsland, Gerald Robbins, Alan Marks, Robert Cassell, Dorothy Green Philips, Kristen King


1. Keehan S, Sisko A, Truffer C, et al. Health spending projections through 2017: The baby-boom generation is coming to Medicare. Health Aff (Millwood) 2008;27:w145–w155. [PubMed]
2. Meropol NJ, Schrag D, Smith TJ, et al. American Society of Clinical Oncology guidance statement: The cost of cancer care. J Clin Oncol. 2009;27:3868–3874. [PubMed]
3. Anderson GF, Hussey PS, Frogner BK, et al. Health spending in the United States and the rest of the industrialized world. Health Aff (Millwood) 2005;24:903–914. [PubMed]
4. Anderson GF, Frogner BK, Reinhardt UE. Health spending in OECD countries in 2004: An update. Health Aff (Millwood) 2007;26:1481–1489. [PubMed]
5. Anderson GF, Frogner BK, Johns RA, et al. Health care spending and use of information technology in OECD countries. Health Aff (Millwood) 2006;25:819–831. [PubMed]
6. Reinhardt UE, Hussey PS, Anderson GF. US health care spending in an international context. Health Aff (Millwood) 2004;23:10–25. [PubMed]
7. Anderson GF, Frogner BK. Health spending in OECD countries: Obtaining value per dollar. Health Aff (Millwood) 2008;27:1718–1727. [PubMed]
8. American Cancer Society. Cancer Facts & Figures 2008. Atlanta, GA: American Cancer Society; 2008.
9. Mulcahy N. Time to consider cost in evaluating cancer drugs in United States? Medscape Medical News. 2009. Jul 14,
10. Fojo T, Grady C. How much is life worth: Cetuximab, non-small cell lung cancer, and the $440 billion question. J Natl Cancer Inst. 2009;101:1044–1048. [PMC free article] [PubMed]
11. Medicare and Medicaid Programs; Electronic Health Records Incentive Program; Proposed Rule. 42 CFR Parts 412, et al (2010).
12. Association of Community Cancer Centers. ACCC's 5th Annual Hospital Summit: Meeting wrap-up.
13. Vokes EE, Schilsky RL, Kyung E, et al. A randomized study of inpatient versus outpatient continuous infusion chemotherapy for patients with locally advanced head and neck cancer. Cancer. 63:30–36. [PubMed]
14. Menéndez R, Reyes S, Martínez R, et al. Economic evaluation of adherence to treatment guidelines in nonintensive care pneumonia. Eur Respir J. 2007;29:751–756. [PubMed]
15. Fritz JM, Cleland JA, Brennan GP. Does adherence to the guideline recommendation for active treatments improve the quality of care for patients with acute low back pain delivered by physical therapists? Med Care. 2007;45:973–980. [PubMed]
16. Faul M, Wald MM, Rutland-Brown W, et al. Using a cost-benefit analysis to estimate outcomes of a clinical treatment guideline: Testing the Brain Trauma Foundation guidelines for the treatment of severe traumatic brain injury. J Trauma. 2007;63:1271–1278. [PubMed]
17. Fakhry SM, Trask AL, Waller MA, et al. Management of brain-injured patients by an evidence-based medicine protocol improves outcomes and decreases hospital charges. J Trauma. 2004;56:492–499. discussion 499-500. [PubMed]
18. Didomenico RJ, Perez A, Schumann HM, et al. Impact of treatment guidelines on clinical and economic outcomes of acute decompensated heart failure. Ann Pharmacother. 2008;42:327–333. [PubMed]
19. Carlson B. Controlling the cost of care through clinical pathways. Biotechnol Healthc. 2009;6:23–26. [PMC free article] [PubMed]
20. Butcher L. Can insurer, oncology practice really work together? Premera Blue Cross and a large Spokane oncology practice agree on treatment protocols and on the importance of cost control. Managed Care. 2007. Oct, [PubMed]
21. Neubauer MA, Hoverman JR, Kolodziej M, et al. Cost effectiveness of evidence-based treatment guidelines for the treatment of non–small-cell lung cancer in the community setting. J Oncol Pract. 2010;6:12–18. [PMC free article] [PubMed]
22. Chernew ME, Shah MR, Wegh A, et al. Impact of decreasing copayments on medication adherence within a disease management environment. Health Aff. 2008;27:103–112. [PubMed]
23. Raphael C, Ahrens J, Fowler N. Financing end-of-life care in the USA. J R Soc Med. 2001;94:458–461. [PMC free article] [PubMed]
24. Lubitz JD, Riley GF. Trends in Medicare payments in the last year of life. N Engl J Med. 1993;328:1092–1096. [PubMed]
25. Emanuel EJ, Young-Xu Y, Levinsky NG, et al. Chemotherapy use among Medicare beneficiaries at the end of life. Ann Intern Med. 2003;138:639–643. [PubMed]
26. Taylor DH, Jr, Ostermann J, Van Houtven CH, et al. What length of hospice use maximizes reduction in medical expenditures near death in the US Medicare program? Soc Sci Med. 2007;65:1466–1478. [PubMed]
27. Taylor DH., Jr The effect of hospice on Medicare and informal care costs: The U.S. experience. J Pain Symptom Manage. 2009;38:110–114. [PubMed]

Articles from Journal of Oncology Practice are provided here courtesy of American Society of Clinical Oncology