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This report describes the results of a simulation analysis of a payment model for specialty oncology services that is being developed for possible testing by the Center for Medicare and Medicaid Innovation at the Centers for Medicare & Medicaid Services (CMS). CMS asked MITRE and RAND to conduct simulation analyses to preview some of the possible impacts of the payment model and to inform design decisions related to the model. The simulation analysis used an episode-level dataset based on Medicare fee-for-service (FFS) claims for historical oncology episodes provided to Medicare FFS beneficiaries in 2010. Under the proposed model, participating practices would continue to receive FFS payments, would also receive per-beneficiary per-month care management payments for episodes lasting up to six months, and would be eligible for performance-based payments based on per-episode spending for attributed episodes relative to a per-episode spending target.

The simulation offers several insights into the proposed payment model for oncology: (1) The care management payments used in the simulation analysis — $960 total per six-month episode — represent only 4 percent of projected average total spending per episode (around $27,000 in 2016), but they are large relative to the FFS revenues of participating oncology practices, which are projected to be around $2,000 per oncology episode. By themselves, the care management payments would increase physician practices' Medicare revenues by roughly 50 percent on average. This represents a substantial new outlay for the Medicare program and a substantial new source of revenues for oncology practices. (2) For the Medicare program to break even, participating oncology practices would have to reduce utilization and intensity by roughly 4 percent. (3) The break-even point can be reduced if the care management payments are reduced or if the performance-based payments are reduced.

Table of Contents

  • Chapter One

    Background

  • Chapter Two

    Construction of an Episode-Level "Baseline" Dataset

  • Chapter Three

    Structure of the Simulation Model

  • Chapter Four

    Evidence from the Literature on the Range of Possible Behavioral Responses

  • Chapter Five

    Simulated Spending Impacts

  • Chapter Six

    Alternative Model Designs and Participation Assumptions

  • Chapter Seven

    Conclusion

The research addressed in this report was conducted in RAND Health, a division of the RAND Corporation, under a subcontract to MITRE.

This report is part of the RAND Corporation research report series. RAND reports present research findings and objective analysis that address the challenges facing the public and private sectors. All RAND reports undergo rigorous peer review to ensure high standards for research quality and objectivity.

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