UnitedHealth's Lee Newcomer: Effective bundled payments require physician leaders, collaboration

November 5, 2014 | By Dina Overland

UnitedHealthcare has created and implemented effective bundled payments, including one program that lowered medical costs for breast, colon and lung cancer treatment by 34 percent. Its pilot program paid the five participating medical oncology groups an upfront payment to cover drug treatments for the cancers.

In partnership with those providers, UnitedHealth established more than 60 quality and cost measures to determine whether the bundled payment program was achieving its goals.

"We are able to reduce the cost of care while improving quality," Lee Newcomer, UnitedHealth's senior vice president of oncology, told FierceHealthPayer (pictured right), in an exclusive interview.

"That gives me a lot of hope because all of us are struggling with how [we can] afford healthcare."

To learn more about how UnitedHealth succeeded in improving care using bundled payments, FierceHealthPayer spoke with Newcomer about the insurer's bundled payment program.

FierceHealthPayer: How did you define each episode of your bundled payment program?

Lee Newcomer: We recruited five volunteer medical groups to work with us and those groups agreed that we would start a new approach to paying for breast, colon and lung cancer drug treatments. We then split those three cancers into 21 different episode categories. For example, a stage three colon cancer that was treated with surgery and found in the lymph glands would lead everyone to agree that the patient requires additional chemotherapy, but there might be a lot of disagreement about what kinds of chemotherapy to give.

Each group was allowed to pick its own treatment for each of the 21 episodes. We didn't have any input in that at all. Once they did that, we calculated what they would have made on profits for each of the regimens that they selected. That sum of money became the basis of our episode payments. And we paid it on the very first day that the group saw the patient.

From there forward, we just paid drugs at cost. As new drugs came out, the groups were allowed to use them, but they didn't make any more profit because they were using a newer, more expensive medication, as they would have in a fee-for-service program.

We drew a line at this point and said the money you used to make in drug profits is now an efficient care fee and the only way you increase that fee going forward is to get a better outcome by either having the patient live longer or reducing their total cost of care.

FHP: How do you quantify whether the bundled payments have been successful?

Newcomer: We treated 810 patients in the bundled payment pilot and then compared them to 85,000 patients with breast, colon and lung cancer from across the country under UnitedHealth's fee-for-service model. So we matched up the 810 patients that these groups took care of and compared them to very similar patients from our database and determined what physicians would have been paid if those 810 patients had been treated uner a fee-for-service plan.

The answer was about $99 million, and what we actually paid was about $66 million. We saved 34 percent by using the episodes approach. More importantly, patients had far fewer hospitalizations, which means their symptoms were controlled better, they didn't have toxicity issues from treatment or cancer and the survival for lung cancer patients was exactly the same as fee-for-service.

We just don't have enough time to measure the same thing yet for breast and colon cancer patients, but it is being measured and we will follow that as well.

FHP: How did you choose the provider groups that participated in the program?

Newcomer: We started talking about four years ago, in public forums, about exploring new ways to pay oncologists and we had about two dozen groups come to us who expressed interest. The ones we picked all had a few things in common. They had very strong clinical and business leadership, and they were larger groups. I think the smallest group was around 20 physicians. And thirdly, they were in areas where UnitedHealth had a lot of membership.

FHP: What's the advantage to the provider groups having clinical and business leadership?

Newcomer: We were changing how we paid people, so the business leader had to make sure the bills were reconciled correctly--and that's a lot of reposting in their books. There were operational processes that had to be changed. They needed to identify our patient on the first day and get us a notice so that we would pay correctly.

On the clinical side, we had to get physicians to agree on which treatments they would be providing for each episode. In any different group, there are probably several different treatments being used for exactly the same problem because people have been trained at different places or had a slight favorite. So these clinical leaders had to get a consensus around making sure the group was using one single treatment for the UnitedHealth patients. That wasn't easy.

FHP: It seems that one of the key factors to this pilot is that you paid the providers an upfront fee. Do you think that was essential?

Newcomer: The upfront fee represented what used to be profits. For everything else, we continued to pay fee-for-service, including office visits and laboratory fees. The drugs were paid at cost, so the clinician was never at risk for the cost of the drug.

What's different is that the drug profit wouldn't get any larger. So in some cases, that was a very large sum of money--as much as several thousand dollars. First, we had to make sure that our members knew that the huge payment they saw on the first visit wasn't going to happen every time they returned to the doctor's office. So there was an education component involved. The physician groups usually allowed the patients to pay that off over time. And for physicians, it gave them a large amount of money to use and allocate in ways they thought was best for patient care.

So for example, the Northwest Georgia group decided to hire a nurse practitioner who would stay in the hospital full-time seeing their patients. By using that person full-time in the hospital, they were able to reduce the number of days the patient stayed in the hospital or prevent them from being hospitalized all together. So we freed up some cash for these folks for them to decide how they would like to provide better care.

FHP: You developed about 60 quality measures to determine whether the provider groups actually improved quality. How did you develop those measures and did you coordinate with the provider groups?

Newcomer: It was a collaborative effort. We sat down and decided what measures we thought would best represent good cancer care. The obvious ones were patients living longer and relapse rates improving. So some of these patients get treated right after surgery for cure and the intent is that they never relapse. We measured hospitalizations, use of certain supported medications and kinds of hospitalizations and emergency room visits that were occurring to make sure that symptoms were being controlled. So each of the 21 categories had measures like that to make sure patients were getting good care.

The fascinating part was these groups had never seen measures like that before. No one else had ever measured things such as lowering relapse rates. So they were as interested in seeing that data as we were.

FHP: Was there any pushback in the decision-making process around the measures?

Newcomer: I can't be more pleased about how collaborative it was. From the very first minute of the meeting--and we met every year together to review all this data--it was all about determining how to make improvements. There wasn't a finger pointed during the entire meeting. It was much more about sharing experiences with things like high hospitalization rates to learn what the rest of the physicians did to keep them down.

For example, the use of diagnostic X-rays varied by as much as 300 percent, so there were discussions about how often you should re-X-ray a patient that you're treating. And groups were surprised to find out that some did it every month and others did it every three months and the results tended to be the same. So it was those kinds of collaborative discussions that I think made such a big difference in reducing these costs.

And another point--none of these groups are in the same market, so none of them were competing with each other. That made it a lot easier to have these discussions.

FHP: What were the biggest challenges you and the provider groups faced while implementing the bundled payments?

Newcomer: The thing that I would say was the hardest thing to do was getting the participating physician offices to identify a UnitedHealth patient on the first day they arrived for treatment and give us a call so that we could place the patient into our bundled payment system and be sure to pay the providers correctly. When a physician sees a patient, the chart is exactly the same, whether the patient comes from UnitedHealth, Blue Cross or Medicare. But we needed the notification so we could set up the payment correctly, and the physicians wanted to make sure that they used the regimen that they agreed to.

So there were misses. Patients got started on treatments or we failed to get notified and we had to go back and clean those up. Every group got better as time went on--they developed systems to figure that out. But that was probably our biggest operational issue.

We tracked the data and we would go back to the groups to tell them how many patients they missed. But we left the changes up to each medical group because each group is different. They all have different ways of approaching things, and again, with strong business leadership, those folks were able to go back into their systems and change things up in the process to make it better. I don't have all the answers out in Minneapolis. They were far better suited to fix the problems out in their local areas.

FHP: Will you continue with the bundled payment approach for these cancers?

Newcomer: Yes. We've renewed contracts with all five groups, and this time the episode payment is higher because they saved money. So, as promised, their bundled payments went up. And we're extending the program to another group of physicians. And we're out talking to other groups using the same concept and expanding to them, so we hope to either double or triple the number of patients in this program by next year.

[Editor's Note: This interview has been edited and condensed for length clarity.]