The CMS Innovation Center launched its first specialty-specific, multi-payer alternative payment model, the Oncology Care Model (OCM), on July 1. The first performance period of the five-year initiative starts on Jan. 1, 2017. Nearly 200 physician-led oncology practices are participating in the model—almost double what CMS anticipated—along with 16 private insurers across the country. The Medicare arm of the OCM includes more than 3,200 oncologists and will cover approximately 155,000 beneficiaries. 

Goals of the initiative

Similar to accountable care organizations for primary care physicians, the OCM is intended to improve the quality of care and health outcomes while holding down costs. And like ACOs, the oncology model is designed to reward the value of care rather than the volume of care. The model covers almost all types of cancer.

Participating practices

Providers participating in the OCM range from solo practices to large physician groups with hundreds of oncologists. While participation is voluntary, practices have agreed to provide beneficiaries who are undergoing chemotherapy with 24-hour access to practitioners, and they must create a patient-focused care management plan that follows nationally recognized treatment guidelines. They are also required to use electronic health records.

Participating payers

Private insurers participating in the OCM have agreed to align their models with the OCM by providing monthly payments for enhanced services, such as care coordination and navigation, and payments for performance. They have also agreed to share data with participating practices to help improve performance, and align with a set of core quality measures. 

Two payment types

All participating practices receive monthly care management payments of $160 per Medicare beneficiary per month during a six-month episode of care that starts on the date of an initial Part B or Part D chemotherapy claim. The model also includes all Part A and Part B services a beneficiary receives during those six months, as well as certain Part D expenditures. If a beneficiary requires chemotherapy beyond the end of an episode, a new six-month episode begins. Practices will also receive monthly payments from payers they have contracted with for providing enhanced services to plan members.

Performance payments will be calculated semiannually and will vary according to providers’ achievements on quality measures and spending targets. CMS performance benchmarks are based on historical data and adjusted for geographic differences. Practices that are able to keep their expenditures below the target price for episodes of care will have an opportunity to share in the savings. 

Two tracks

Practices that choose to participate in the one-sided track will not be responsible for expenditures that exceed the target price. They can participate in this track all five years of the initiative, but they must qualify for performance-based payments by the end of third year.

Practices that select the two-sided track take on financial risk in the third year. This track is an Advanced Alternative Payment Model under the Medicare Access and CHIP Reauthorization Act (MACRA).

CMS will reduce benchmark prices by a 4 percent discount in the one-sided arrangement and by a 2.75 percent discount in the two-sided arrangement when calculating target prices for care episodes. 

Considerations and Consequences

Even before the first performance period gets underway, critics are pointing to potential issues.

Site of care issues

Since performance payments will be distributed to physician practices, it’s not clear how patients will be attributed to the proper practice when chemotherapy is administered in a hospital outpatient department and the hospital’s tax identification number is used on claims. 

Impact on providers

Participating practices will be held accountable for their attributed patients’ total Medicare billings, not just those related to oncology treatments, which means they will be motivated to decrease avoidable hospitalizations and emergency department visits by improving care management. But with the majority of patients having multiple chronic conditions, and the risk of cardiovascular disease and bone fractures being so high in this population, will practices be able to assume this level of responsibility?

Obviously, the largest performance payments will go to practices that achieve the largest reductions in Medicare billings while also improving care. However, we’ve seen that health systems that made substantial investments to improve their care processes ahead of participating in Medicare ACOs were often at a disadvantage, since there was less room for them to improve relative to health systems that hadn’t already taken those steps. The same could be true for oncology practices in the OCM.

Concerns have been raised that the use of historic spending to establish benchmarks, coupled with the model’s financial incentives to reduce total Medicare billings, will cause practices to refrain from using newer treatments because of their higher costs. 

Impact on pharma

Practices will still be reimbursed for prescription drugs at the average sales price (ASP) plus a fixed add-on percentage, but the proposed mandatory Medicare Part B drug payment model could serve as a further deterrent to prescribing higher-priced drugs. 

Under the proposed model, the current 6 percent add-on would be reduced to 2.5 percent, though providers would also receive a flat fee of $16.80 per drug per day. In this scenario, according to an Avalere Health analysis, the break-even point would be for drugs with an average ASP of $480 per day (at 2016 prices). Drugs with an ASP lower than $480 would result in higher reimbursement payments under the new model, whereas drugs with an ASP higher than $480 would result in lower reimbursement payments. 

The analysis also indicated that “seven of the 10 drugs that constitute the largest reduction in reimbursement are used to treat cancer,” and that hospital outpatient departments would likely lose the most revenue (an estimated 60 percent of all payment reductions).


In theory, patients will receive better (and better-coordinated) care, the cost of providing that care will go down, hospitalizations and ED visits will decrease, and practices will be paid for care management services that many are already providing without compensation.

All stakeholders should benefit under OCM. That’s the idea. But as we’ve seen with ACOs, other unforeseen issues will surely arise as the model is implemented. Experience will show if OCM can achieve the Triple Aim in cancer care.

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