Milliman Report on Cancer Care

Hospital horizontal and vertical consolidation has a number of pernicious effects.  One is described in a Milliman report on cancer care costs.   (Milliman Report)   The researchers compared costs for non-small cell lung cancer, colorectal cancer and breast cancer patients receiving either adjuvant chemotherapy or metastatic chemotherapy at a physician’s office versus in a hospital outpatient setting.  The data source was a commercial claims database for the years 2009 and 2010 and the comparisons were adjusted for various patient characteristics.     The lowest difference was for adjuvant therapy for colorectal cancer at a mere 28% more for hospital outpatient treatment and the highest was for metastatic chemotherapy for colorectal cancer, 53% higher.  Adjuvant breast cancer therapy and metastatic lung cancer treatment were both around 50% higher in the hospital setting.  No treatment was cheaper.  Hospital ownership of oncology practices has increased rapidly, with one source predicting it will be 42% by 2015, and the incentive to move treatment to the hospital outpatient setting is obvious.  Hospital facility charges are very high and unit costs for drugs are at least twice as high.  In most cases, there is no reason why patients cannot be treated in a physician’s office and the much greater cost of hospital outpatient services also usually means higher cost-sharing for the patient.  MedPAC has been urging CMS for years to equalize the payments for the same service across settings.  Commercial payers seldom have the leverage CMS has in regard to hospitals.   This is blatant abuse of market power which just wastes money.  While cancer patients make up a small part of the commercial population, they obviously have disproportionate costs, and paying only the physician office rates, regardless of setting, would result in significant savings.  If necessary, policymakers should enact legislation or rules to equalize payments and end this unnecessarily expensive effect of the hospital system aggregation of providers.