New Report Finds 47% Higher Costs for Outpatient Cancer Care in the Hospital Outpatient Setting for Medicare Beneficiaries

WASHINGTON, Sept. 10, 2013 -- A report released today by The US Oncology Network, the Community Oncology Alliance (COA) and ION Solutions and prepared by The Moran Company found significantly higher costs to the Medicare program for patients receiving chemotherapy treatment in hospital outpatient departments versus physician community cancer clinics. Significantly, the report reveals that Medicare cancer patients receive more chemotherapy treatments with more expensive chemotherapy drugs in hospital outpatient departments compared to physician-run clinics resulting in chemotherapy costs that are higher by as much as 47 percent.

The Moran Company report analyzed Centers for Medicare and Medicaid Services (CMS) data from the years 2009 to 2011, focusing on payment rate differentials between cancer clinics and hospitals due to differences in the utilization of drugs and services as well as methodologies employed by Medicare to set payment rates.

Key findings in the report include the following:

• On a per beneficiary basis, hospital outpatient chemotherapy spending was approximately 25 to 47 percent higher than physician clinic chemotherapy spending.
• If all physician clinic chemotherapy administration services had been paid using hospital outpatient department payment rates over the 2009 to 2011 period, Medicare would have paid 19 to 38 percent more for these services.
• Chemotherapy days per beneficiary were about nine to 12 percent higher in the hospital outpatient department than the physician clinic setting across the 2009 to 2011 period.

"Medicare data again confirms that outpatient cancer care in hospital outpatient departments costs significantly more than the same care in community cancer clinics. Medicare policies create perverse incentives for hospitals to acquire community practices and bill Medicare at a higher rate," said Barry Brooks, MD of The US Oncology Network. "Unfortunately for patients fighting cancer and for taxpayers, cancer care will cost more than it should until current government policies favoring hospital-based care are ended."

The latest Moran Company report builds upon a report released in June that found that just a mere eight years ago, 87 percent of cancer care occurred successfully in cost-effective community oncology practices.  By 2011, Medicare beneficiaries received nearly a third of their outpatient chemotherapy services in the hospital outpatient setting .[1] 

The Moran report also underscores recent studies by Avalere[2] and Milliman, which indicate that cancer center closures and consolidations result in higher cancer treatment costs to Medicare, seniors and taxpayers. Hospital-based cancer care costs Medicare approximately $6,500 more and seniors $650 more annually.[3] Because more than 60 percent of cancer patients in the United States rely on Medicare to pay for their cancer care, it is essential that policies support the delivery of care in more efficient and less expensive community cancer clinics, or else Medicare payment policies will continue to unnecessarily drive up the cost of care.

"The Community Oncology Alliance has been collecting data about cancer clinic closures and hospital acquisitions for several years, which has demonstrated alarming trends in the number of cancer centers that have been forced to close or consolidate," said Ted Okon, Executive Director of COA.  "The data show why the site of cancer care matters to patients and payers.  Care is drastically shifting towards the higher cost setting.  We call on the Congress and the Administration to act immediately to reverse this trend before cancer care is unaffordable to seniors and Medicare."

The Moran Company's most recent report cites the difference in payment rates for chemotherapy services as attributed to differing policies adopted by CMS that set mechanisms by which payments to hospital outpatient departments and community cancer clinics are determined and updated. The report evidences that continuing disparities in the method of establishing payment rates for both settings are resulting in a widening payment gap that significantly favors hospital-based cancer care over care provided in physician-run community cancer clinics.  The Moran analysis finds this gap will continue to grow without any changes in Medicare policy by Congress.

"As community clinics struggle to keep their doors open, this report drives home the important role of community-based cancer care in providing cost-effective care to all patients fighting cancer.  As lawmakers look to future Medicare reforms, it is clear Congress must act immediately to put community cancer clinics in a sustainable position to maintain cancer care access for seniors," said Jeff Vacirca, MD on behalf of ION Solutions.

To access the full Moran analysis, click here.

[1] Analyses of Chemotherapy Administration Utilization and Chemotherapy Drug Utilization, 2005-2001 for Medicare Fee-for-Service Beneficiaries; The Moran Company (May 2013)

[2] Total Cost of Cancer Care by Site of Service: Physician Office vs Outpatient Hospital. Avalere Health, March 2012.

[3] Site of Service Cost Differences for Medicare Patients Receiving Chemotherapy. Milliman, October 2011.