Centers for Medicare and Medicaid Services have designed an episode-based model of oncology care that incorporates elements from several successful model tests. It is hoped that this model will demonstrate how oncology care in the United States can be transformed into a high-value, high-quality system.

Cancer is a medically complex and expensive disease with costs projected to rise further as new treatment options increase and the United States population ages. Studies showing significant regional variation in oncology quality and costs and model tests demonstrating cost savings without adverse outcomes suggest there are opportunities to create a system of oncology care in the US that delivers higher quality care at lower cost.

The Centers for Medicare and Medicaid Services (CMS) have designed an episode-based payment model centered around 6 month periods of chemotherapy treatment. Monthly per-patient care management payments will be made to practices to support practice transformation, including additional patient services and specific infrastructure enhancements. Quarterly reporting of quality metrics will drive continuous quality improvement and the adoption of best practices among participants. Practices achieving cost savings will also be eligible for performance-based payments. Savings are expected through improved care coordination and appropriately aligned payment incentives, resulting in decreased avoidable emergency department visits and hospitalizations and more efficient and evidence-based use of imaging, laboratory tests, and therapeutic agents, as well as improved end of life care.

New therapies and better supportive care have significantly improved cancer survival in recent decades. This has come at a high cost, with cancer therapy consuming $124 billion in 2010. CMS has designed an episode-based model of oncology care that incorporates elements from several successful model tests. By providing care management and performance based payments in conjunction with quality metrics and a rapid learning environment, it is hoped that this model will demonstrate how oncology care in the US can transform into a high value, high quality system.

The United States spends 16% of its gross domestic product on healthcare, approximately 80% more than the Organisation for Economic Co-operation and Development average.1 Although there are many reasons for this disparity, inefficient, fragmented, and unnecessary care are certainly components. The Institute of Medicine (IOM) has estimated that up to 30% of health care expenditures may be unnecessary.2 Cancer is a medically complex and expensive disease that represents a high disease burden. It is the second greatest cause of death in the United States, responsible for an estimated 585,000 deaths yearly,3 exceeded only by the estimated 600,000 annual deaths attributable to heart disease.4 Expenditures for oncology care across all payers were $124 billion in 2010 and are projected to rise to $157 billion by 2020, the product of both an aging population and increasing costs for individual patients.5 A recent study showed a 32% to 41% variation in the cost of oncology care for Medicare fee-for-service (FFS) beneficiaries with advanced cancer across US regions, without any consistent differences in survival. High-cost regions had 30% to 40% more inpatient hospitalizations, 70% to 120% more intensive care unit days, and 12% less hospice use.6

For these reasons, testing episode-based payment models, which appropriately align financial incentives with improved care coordination, quality of care, and lower expenditures for oncology care has been identified as a priority of many stakeholders within the oncology and payer communities. In such models, financial incentives for appropriate care should reduce health care expenditures as participating practices collaboratively and comprehensively address the complex care needs of the oncology population while decreasing the use of services that do not improve health outcomes. A recent oncology care pilot has demonstrated 30% cost savings by aligning payment incentives and reimbursing for enhanced care that is not reimbursed in the current FFS system.7

The Oncology Care Model (OCM) was developed by the Centers for Medicare and Medicaid Services (CMS) as an effort to test improvements in the oncology delivery system by incentivizing physicians to provide efficient, coordinated care while supporting the infrastructure improvements and personnel additions necessary to provide higher quality patient care at lower cost. Savings are projected to come from reductions in complications, emergency department visits, and hospitalizations that are expected from enhanced care coordination, use of evidence-based guidelines, and improved end-of-life care.

CMS is currently testing more than 20 health care payment and service and delivery models. These models aim to achieve better care for patients, to improve care and health in our communities, and to lower costs through improvement of our health care system. CMS is exploring specialty practitioner payment models that focus on services that are typically provided by specialists and has identified oncology care, particularly chemotherapy treatment, as an area where health care and care coordination can be improved while reducing spending. CMS has developed the OCM to test the effects of better care coordination, improved access to practitioners, and appropriate clinical care on improving health outcomes at lower cost.

Various options were considered, including a patient-centered oncology medical home, an oncology-centered accountable care organization, and a clinical pathways model with add-on case payments. Ultimately, it was decided to develop a blended model that combines the patient coordination elements of a medical home with the payment incentives of a bundled payment model. The OCM will use episodes of care, defined as 6-month periods during which a patient has received nontopical chemotherapy. Beneficiaries will continue to trigger episodes if they continue to receive chemotherapy beyond this 6-month period. The total model duration will be 5 years.

Input has been received from a diverse group of stakeholders including physicians, payers, patient advocacy organizations, professional organizations, academic medical centers, and policy research centers. Stakeholder input has emphasized that new models of care must incentivize high-quality and high-value care by appropriately aligning payment incentives and tying performance rewards to quality metrics. Stakeholders also advocated for reimbursement for clinically important interventions not currently reimbursed in the FFS system, such as patient navigators responsible for care coordination. Accordingly, the OCM will provide a $160 per-beneficiary-per-month payment to participating practices for each Medicare FFS beneficiary receiving chemotherapy during an episode of care in the model to help support the enhanced services under the model.

In order to effectively transform their practice and provide comprehensive care coordination, practices will be expected to use an Office of the National Coordinator–certified electronic health record, attest to stage 2 of meaningful use by the end of the third model year, have a clinician continuously available to patients with real-time access to the practice's medical records, provide designated patient navigator services, and incorporate the IOM care management plan for oncology patients.8 Quality metrics reflecting both process and care improvements, as well as clinical outcome measures, will be reported throughout the model. The level at which these metrics are attained will affect performance-based payments. Adherence to accepted clinical guidelines will be included as a quality metric, as guidelines have been demonstrated to improve quality and decrease costs without adversely affecting survival.9,10 Continuous, timely feedback will be given to practices on these measures, and conferences and webinars will be organized to foster quality improvement and the rapid adoption of best practices.

CMS will calculate a risk-adjusted performance year benchmark expenditure for chemotherapy episodes of care based on data from a historical baseline period trended forward to the current performance period. Expenditures in both the baseline and performance periods will reflect the total cost of care (including chemotherapy drugs) as determined from Medicare administrative claims (including part A, B, and certain D expenditures) during the episode of care. Benchmarks will differ between beneficiaries with and without part D coverage, so that they will appropriately reflect Medicare costs. Other data collected and analyzed will include beneficiary, episode, and disease characteristics; types of services furnished; as well as other potential risk-adjustment factors such as cancer stage, clinically relevant biologic markers, and geographic variation. CMS will incorporate regional or national data to increase precision for target prices in practices with a low number of historical episodes. A discount will be applied to the trended benchmark to determine a target price for participants' performance period episodes. If total Medicare FFS payments for the episode are below this target price, the participant may be eligible for a performance-based payment. The performance-based payment amount would be based on the difference between actual expenditures and the target price and the participant's achievement on quality metrics.

The OCM will feature two voluntary risk arrangements. The first will be a one-sided risk arrangement for the duration of the model. In the one-sided arrangement, the Medicare discount percentage (representing Medicare savings) would be 4%. Any OCM participant whose performance year actual expenditures meet or exceed the target price will not be financially responsible for additional costs. Continued participation in the OCM will be contingent on each participant qualifying for a performance-based payment by the end of the third performance year. The second arrangement will be a phased-in two-sided risk arrangement that will feature one-sided risk in the first two model performance years and symmetric two-sided risk thereafter. After year two, participating entities will be allowed to elect to switch between the two arrangements on a semiannual basis. To increase participation in the second track, the Medicare discount percentage in that track (representing Medicare savings) will be 2.75%, rather than the higher discount amount of 4% of benchmark expenditures in the one-sided risk track. As previously noted, and consistent with previously cited model tests, savings are anticipated to derive from decreases in preventable emergency department visits and hospitalizations, more efficient use of laboratory tests and advanced imaging, better supportive care, and improved coordination of end-of-life care.

The OCM will use a multipayer approach to leverage the opportunity to transform care for oncology patients across the population. Although 50% of patients in oncology practices are Medicare beneficiaries, involving other payers in the model offers the opportunity to transform care on a larger scale and align incentives for care improvement and savings at the practice level. Multipayer participation also offers an opportunity for other payers to incentivize improved quality of care at a lower cost for their beneficiaries. There may be differences among payer participants in the implementation of certain components of the OCM, such as the selection of performance-based payment measures, but the approach to practice transformation will be consistent across the OCM. Examples of other payers could include commercial health insurers, as well as state Medicaid agencies.

Clinical oncology is at the forefront of many advances in clinical medicine. These advances have improved cancer survival in recent decades but have come at a high financial cost to an already overburdened US health care system. The challenge of the next decade will be to continue this progress while improving quality at lower cost. Fortunately, model tests in several clinical areas, including oncology, have led the way, demonstrating how improvements might be achieved. With the participation of the oncology community and forward-looking insurers, CMS hopes that the OCM will be a successful model of how a comprehensive, multipayer system based on episodes of care can help transform the oncology care delivery system for the benefit of all patients.

Further information on the model, including the Request for Applications, can be found at Letters of Intent (LOIs) for interested payers are due by 5:00 pm EDT on Thursday, March 19, 2015. LOIs for interested practices are due by 5:00 pm EDT on Thursday, April 23, 2015. Practices and payers that submit timely LOIs will be eligible to submit applications. All applications must be submitted by 5:00 pm EDT on Thursday, June 18, 2015.

Copyright © 2015 by American Society of Clinical Oncology


We acknowledge the work of Amy Bassano, Laura Mortimer, Lawrence Muldoon, Pamela Pelizzari, Jyme Schafer and Andrew York in the development of the OCM. All authors are associated with the Center for Medicare and Medicaid Innovation. The views expressed in this manuscript represent the authors and not necessarily the views or policies of Centers for Medicare and Medicaid Services.

Disclosures provided by the authors are available with this article at

Conception and design: All authors

Data analysis and interpretation: All authors

Manuscript writing: All authors

Final approval of manuscript: All authors

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Centers for Medicare and Medicaid Services: Using an Episode-Based Payment Model to Improve Oncology Care

The following represents disclosure information provided by authors of this manuscript. All relationships are considered compensated. Relationships are self-held unless noted. I = Immediate Family Member, Inst = My Institution. Relationships may not relate to the subject matter of this manuscript. For more information about ASCO's conflict of interest policy, please refer to or

Ronald M. Kline

Employment: Comprehensive Cancer Centers of Nevada

Leadership: Comprehensive Cancer Centers of Nevada

Stock or Other Ownership: Comprehensive Cancer Centers of Nevada, US Oncology, GlaxoSmithKline (I), Salix (I), Xoma (I), Biota, AllScripts, Johnson and Johnson, Perrigo, Prothena, Novartis (I), Biocurex (I), Tenet Health Care (I), AllScripts (I), US Oncology (I), Biota (I), Perrigo (I), Prothena (I)

Other Relationship: Center for Medicare and Medicaid Innovation, Centers for Medicare and Medicaid Services

Carol Bazell

Other Relationship: Centers for Medicare and Medicaid Services

Erin Smith

Other Relationship: Centers for Medicare and Medicaid Services

Heidi Schumacher

Other Relationship: Centers for Medicare and Medicaid Services

Rahul Rajkumar

Other Relationship: Centers for Medicare and Medicaid Services

Patrick Conway

Other Relationship: Centers for Medicare and Medicaid Services


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DOI: 10.1200/JOP.2014.002337 Journal of Oncology Practice 11, no. 2 (March 01, 2015) 114-116.

Published online February 17, 2015.

PMID: 25690596

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