Chemotherapy Costs

Cancer is a frightening disease and the costs can be quite substantial, with patients often bearing much of it.  One of the reasons cancer care can be expensive is the increasing use of specialty drugs, often with an annual cost of over $10,000.  Physicians administer many of these drugs in their offices and used to make a fair amount of money doing so.  Medicare, which pays for about half of cancer care, changed reimbursement and this has created an upheaval, shifting more care to hospital outpatient sites which raises spending.  Two reports give some sense of what is happening in cancer care.  The first, from the Community Oncology Alliance, reports on the impact to community oncology practices, largely from reimbursement issues.  It says that 241 clinics have closed, 442 are struggling financially, 47 are sending patients to another practice, 392 have become aligned with a hospital in some way and 132 have merged with or been purchased by another practice.  This is a large percentage of all community practices.   (Avalere Report)   (COA Report)

The second report, from Avalere, shows why policymakers should be especially concerned about hospital acquisitions of oncology practices.  The report compares the cost of cancer care in a physician office versus a hospital outpatient setting.  The study was a risk-adjusted comparison of chemotherapy or radiation treatment episode expense for commercial health plan members.  On average, the costs of chemotherapy in a hospital outpatient setting were 24% higher than similar treatment in a physician’s office, and if the chemotherapy lasted 12 months it was 53% more expensive.  Similarly, for radiation therapy, spending was 4 to 15% higher in hospital outpatient departments than in physician practices.  These reports show both an unintended consequence of a Medicare reimbursement change and the pernicious effect of hospital care on overall health spending growth.  One solution is to equalize payments for treatment, regardless of setting.