In 2012, health care spending in the United States grew more slowly than the overall economy for the fourth straight year, providing some hope that runaway costs may eventually be tamed. But costs for cancer care are proving an exception—spending on cancer is projected to increase by a staggering 26.8% over the next 7 years.

The aging population, prolonged survival, reduced mortality from other conditions, and the development of personalized treatment all play a role in rising cancer costs. Writing in the Journal of Oncology Practice, Kavita Patel and colleagues from the Brookings Institution in Washington, DC, propose that another important contributor is the physician payment system, which misses opportunities to improve access to care and quality of care while reducing overall costs.1

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Thus far, the problems spawned by the fee-for-service model of physician payments have proved all but intractable. Providers are rewarded for ordering intensive treatments and prescribing expensive drugs, whereas reimbursement for services such as office visits, patient counseling, and adherence to guidelines, which could improve the quality of care, have been sharply reduced. As a result, a large portion of cancer care has shifted to the hospital setting, where costs are as much as 24% higher than in the community setting.

New Approaches, With New Incentives

Dr. Patel and colleagues described several payment models designed to improve quality of care while reducing costs.

The bundled or episode-based payment system is intended to provide greater support for effective use of health care services. In this model, oncologists are paid less for providing chemotherapy and more for other aspects of patient care. The result is greater flexibility in meeting patients’ individual needs and greater accountability for oncologists as they manage their available resources.

The oncology patient-centered medical home is designed to encourage disease management, coordination of care, and patient education while monitoring performance, quality of care, and cost. Some of the quality-improvement measures implemented in this model are the use of electronic medical records, adherence to preferred treatment regimens, and 24-hour telephone access to oncology nurses. This model has been shown to substantially reduce emergency room visits, hospital admissions and length of hospital stay, and has resulted in savings of as much as $1 million per physician each year.

The Way Forward?

Dr. Patel and colleagues believe that, in the future, quality, affordable cancer care will rely on a blended payment model—one that bundles a case management payment to the oncologist, which will be tied to improvements in quality of care, and a second payment to the oncologist and other health care providers (including pathologists, surgical oncologists, and radiation oncologists), which will be tied to coordination of care.

This model reduces the incentive to provide excessive services to patients and promotes coordination among providers while encouraging documented improvements in the quality of care and in patient outcomes.

With this model, physicians can provide high-quality care without reducing their income as a result of reductions of billable procedures. For example, the 6% margin for chemotherapy currently paid to oncologists would be replaced by a bundled payment of an equivalent amount so as to encourage the use of the most appropriate chemotherapy, regardless of price.

Theoretically, this model would actually increase payments to oncologists and reduce the overall cost of care.


  1. Patel KK, Morin AJ, Nadel JL, McClellan MB. Meaningful physician payment reform in oncology. J Oncol Pract. 2013;9(suppl 6):s48-s53.