The Evolving Concept of Value in Oncology Care

The Evolving Concept of Value in Oncology Care

The Concept of Value in Oncology Care

An Historical Perspective

June 15, 2014

Wes Chapman


Preface: This article examines what is meant when payers and regulators talk about “value” in clinical care delivery, and how it applies specifically to oncology.


We’ve all struggled with compliance to “value oriented” reporting requirements from CMS and other payers, including Meaningful Use, PQRS and Value Based Purchasing and bundled payments. These programs are efforts to move the practice of medicine in general, and oncology in particular, away from fee-for-service based care, first to Evidence Based Practice and then to Value Based Care delivery. What does this really mean?

Evol 3


What does this really mean – an historical perspective?

The first national experiment in payment reform – HMOs – began in 1973 with the requirement that all group plans include an HMO option. HMOs fell into disrepute, due to the perception of poor quality care, limited provider access, and marginal success in cost control. Back in 1995, the CMS lifted the requirement that an HMO option be offered to all participants in group health plans. While HMOs had a lot of problems, they did tend to limit growth in healthcare expenditures, and the elimination of a mandatory HMO option led to a spike in expenditures beginning in 1996.

 Annotated Chart

A group at Dartmouth led by Dr. Jack Wennberg had been looking at the relationship between expenditures on medical care and outcomes, dating back to 1967, and had concluded that increases in expenditures had nothing to do with improved outcomes – in fact there was very good evidence that increased expenditures were negatively correlated to outcomes. The more you spent, the worse the outcome. This was pretty upsetting news to both the provider and payer communities, and confusing to consumers.

The initial response was to push patient education – effectively pushing the burden of clinical decision making back onto the patient. There were a couple of obvious problems with this approach – the biggest of which was that the underlying practice of medicine was erratic all over the country, and even within a single practice. The art of medicine was running headlong into the reality of scientifically determined best practice. Simply put, you couldn’t expect best outcome without best practice – and no amount of informed choice by the patient was going to change that.

About this time, the Agency for Health Care Policy and Research (the predecessor to Agency for Healthcare Research and Quality or AHRQ) was running into some strong political headwinds – largely the result of strongly backing the Clinton’s effort at healthcare reform. In 1999 the Agency was renamed and re-tasked with a de-politicized mission – focus like a laser on the determination of clinical best practices – and the IP (and enforcement) behind Evidence Based Medicine in the US was formed. The construct was simple, pay researchers to determine and publish best practices within the context of their clinical specialties, then use those EBM practices to standardize care. Additionally, this effort went a long way at the state level to blunt and even reverse the growing wave of litigation surrounding malpractice – malpractice suits are hard to win in a best practice environment.

Value Cube

Value = Outcome ÷ Price

Within the last 10 years, the focus of national healthcare priorities veered toward a definition of value that incorporated both EBM and informed decision making, with the two leading spokesman being two Harvard based policy experts, Don Berwick and Michael Porter. Berwick, then at IHI, popularized the “Triple Aim” strategy of national healthcare goals, “improving the individual experience of care; improving the health of populations; and reducing the per capita costs of care for populations” in his landmark 2008 paper, The Triple Aim: Care, Health, And Cost. Porter pushed the concept of value in his 2010 paper, What Is Value in Health Care?:

Value should always be defined around the customer, and in a well-functioning health care system, the creation of value for patients should determine the rewards for all other actors in the system. Since value depends on results, not inputs, value in health care is measured by the outcomes achieved, not the volume of services delivered, and shifting focus from volume to value is a central challenge. Nor is value measured by the process of care used; process measurement and improvement are important tactics but are no substitutes for measuring outcomes and costs. Since value is defined as outcomes relative to costs, it encompasses efficiency. Cost reduction without regard to the outcomes achieved is dangerous and self-defeating, leading to false “savings” and potentially limiting effective care. Outcomes, the numerator of the value equation, are inherently condition-specific and multidimensional. For any medical condition, no single outcome captures the results of care. Cost, the equation’s denominator, refers to the total costs of the full cycle of care for the patient’s medical condition, not the cost of individual services. To reduce cost, the best approach is often to spend more on some services to reduce the need for others (emphasis added).”

These two concepts combined into the modern concept of the Patient Centered Medical Home and the Patient Centered Specialty Practice. Unfortunately, neither of these concepts came around in time to mitigate the damage done by the 2003 Medicare Prescription Drug, Improvement, and Modernization Act, which together with 340B, set up a two tier system of CMS based pricing, with private providers receiving 4% margins, and politically favored groups receiving margins up to 54%.

Today, the inequities in the payment system dwarf the economic benefits of value based care delivery – which are hard won and can never realistically make up for a 50% margin differential. Predictably, the private providers are rushing to pick up the benefits of value based care delivery – no matter how meager.

Cost begins to matter

Cost begins to matter in a shift to value

Finally, oncology is faced with a challenge by very high priced drugs, which are in certain circumstances very effective. This combines for a very high cost treatment for chronic disease, a challenge recently faced by HIV treatment. As Quintiles recently pointed out in a white paper by Huber and Doyle, “Cancer continues to be a “politically and emotionally sensitive” disease. Efforts to seek better treatments are applauded, but emerging oncology treatments are not immune to the universal shift in medicine to focus on overall treatment value. Value is an economic construct that is inherently driven by the appraiser – or customer. Recent global economic factors aside, the advent of new and more expensive drug treatments has led a range of stakeholders (patients, clinicians, payers, policy makers, and society) to add their voice and perspective on the value of treatment innovation in oncology. Value-based medicine (VBM) is seen as the next, progressive step in the evolution and maturation of simple evidence-based medicine (EBM). This emergence of VBM has important implications for continued, successful drug development and innovation in oncology.”

 Evolution from ebm to value bm

Source: Quintiles


The shift to value based compensation models will ultimately depend on value from the patient’s perspective. That means a gradual shift from the evaluation of evidence based pathways on the basis of “clinical efficacy” (typically progression free survival and overall survival) to Quality Adjusted life years – a value based metric that can vary based on individual preferences.


Starting from the simple process compliance “value” of today we are moving into a concept of value where process compliance is a given – adoption of EBM is a practical necessity. Patients will have greater responsibilities – actually determining value based on their preferences. At the core, only the full implementation of Medical Homes can offer the required patient management and engagement to make this system work.

Wes Chapman
Written by Wes Chapman

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