May 2013, Vol 2, No 3

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Personalizing Cancer Care, Policy, and the Payer Perspective:

An Interview with Peter F. Hayes of Healthcare Solutions

Peter F. Hayes

Interview with the Innovators

The Association for Value-Based Cancer Care (AVBCC) held its annual conference on May 2-5, 2013, in Hollywood, Florida. AVBCC is the fastest growing national specialty organization dedicated to improving the care of cancer patients and their quality of life by discussing, considering, and evaluating the value equation as it relates to new and existing cancer therapies. This organization, which currently consists of more than 450 members, was established to provide a forum for payers and healthcare professionals to consider and evaluate the cost/value issues specific to cancer treatments and their impact on patient care and outcomes. This unique focus is achieved through discussions and collaborations with those involved in evaluating therapies, treating patients, and paying for care.

Much of the discussion of value revolves around the evolution of personalizing cancer care and the associated costs of achieving such an ideal. This was certainly true of the presentations at this year’s AVBCC conference as evidenced by talks entitled, “Trends in Cancer Treatment Decision-Making: Pathways, Personalized Medicine, and Stakeholder Collaborations” and “Personalized Medicine, Companion Diagnostics, Molecular Profiling, Genomic Sequencing: The Impact on Cost, Treatment, and the Value Proposition.”

Personalized Medicine in Oncology had the pleasure of talking with AVBCC faculty member Peter F. Hayes, principal of Healthcare Solutions and former Director of Associate Health and Wellness at Hannaford Supermarkets, about the payer perspective of personalizing cancer care.

Mr Hayes is currently a principal of Healthcare Solutions. Formerly, he served as Director of Associate Health and Wellness at Hannaford Supermarkets. Mr Hayes has over 20 years of experience in innovative, strategic benefit design. During his tenure at Hannaford, the company received numerous national awards in recognition of the company’s commitment to working collaboratively with healthcare providers and vendors to deliver health benefits that are focused on value.

Mr Hayes has participated in healthcare reform leadership roles at both the national and regional levels. He is a cofounder of the Maine Health Management Coalition and has been appointed by 2 Maine governors to serve on the Maine Health Care Reform Commission to recommend public policies to improve access to and affordability of healthcare for Maine citizens.

PMO Thank you so much for making the time to talk with us. To start, we’d like to ask about the Affordable Care Act. Is the Affordable Care Act financially compatible with the growth of personalized medicine, specifically in oncology? Or will the additional cost reduce the spread of personalized medicine?

Mr Hayes The question is really what impact will ObamaCare, or the Affordable Care Act, have on all care, and in particular oncology care, going forward. I think all of us are really underestimating the impact. To give you a good example, there are estimates that healthcare cost premiums for all of us are going to go up, on average, 30% next year. Some states are facing 80% increases. There are new studies estimating that costs are going to double or triple for the young and healthy singles, anybody who’s 21 to 29. We have this healthcare crisis coming. It’s unaffordable.

Unfortunately, we are just spending far more money than we have resources for in cancer care; we can’t afford it. This situation is going to force the discussion that nobody wants to have. We’re going to have to start deciding as a society what we will spend money on in healthcare and what we will not.
Cancer care will be impacted. I’ll give you a good example. I recently had the privilege of participating in a fascinating panel discussion. Alan Garber, MD, PhD, from Stanford University, presented a case about a new drug for prostate cancer. The cost of the therapy is $900,000, and it adds 3 days of life at the margin.

As a society, should we spend $900,000 for 3 days of life versus spending that on a young diabetic to make sure they’re at clinical guidelines so they have 40 or 50 years of life?
Europe has already crossed this threshold. Europe has taken a look at quality of life, or the years of life we add for the therapy that’s being discussed. There is an equation stating a year of life is worth “X.” If the therapy cost is over that number, it’s not provided.

I think ObamaCare or the Affordable Care Act is going to force those types of conversations. The sky is not the limit. We can’t do everything for everybody. How do we start making decisions as a society? I think it will absolutely impact cancer care.

PMO Value is more than cost – we believe it is the balance of cost, quality, and access. In your opinion, how long will it take for personalized medicine to start paying dividends and become attractive to payers by showing value?

Mr Hayes This is a tough but interesting question. The question really touches upon how do you define value – and what it means as we think about personalized medicine and how it’s delivered. Is it quality? Cost? Access? It builds on the theme that we just discussed, the other consideration that no one really talks about: quality of life.

The problem involves an issue of perspective; what is a definition of value? Is it the definition of the individual, or of society? The answers are very different.

If you’re an individual, and you’re faced with the prostate cancer example I mentioned, a $900,000 therapy that may add a couple of days of life, you as a patient may think that’s value, you should have access to it, and it should be done.

From a societal point of view, as Europe has explored, is that how we should be spending healthcare resources? Or should it go into helping a young diabetic, or some other condition?

I think what’s really left out of that value conversation is much more complex than the 3 metrics you mentioned. The last metric we really need to think about is the value to society. What’s the value to the community of the dollars that we spend, for the whole population, not just an individual?

PMO How would you articulate the value proposition or justify the cost of personalized medicine to the clinical, business, and government sectors – and the patients?

Mr Hayes The question is, how do you define value to the various stakeholders, be it personal, business, government, or community? I think that becomes a really challenging issue, because each one of those perspectives is going to be very different.

If you’re the individual who is ill, you’re probably going to want and expect that the system will provide whatever it can to help you, and the families will expect that as well.

If you’re the government and you know Medicare has finite resources, you’re then faced with trying to decide how to take the available healthcare dollars and create the most value for the society. For example, if you have an 85- to 90-year-old person who needs a very complex procedure that may add a month of life, and the cost will be $1 million, should you use the money in this way? Or should you invest that money in someone who’s much younger with a health condition that may have 20 or 30 years of productive work life and community life ahead of them? That perspective of value, how you define that, and how you reconcile that, is going to be very challenging. They’re inherently at odds with each other.

PMO Is the pricing methodology of manufacturers for personalized medicine, therapies, and diagnostics becoming more sophisticated and skillful, and less arbitrary, in order to balance profit with product affordability?

Mr Hayes These are really thought-provoking questions. The question is, as we develop new therapies for cancers, and we’re thinking about how that model gets paid for, what is it going to mean? I think it’s going to be really interesting. These therapies are becoming very expensive. In the past, the model has been that the current system is a pass-through payment model, and this is where there’s a real disconnect in the system, because the patient really doesn’t pay for the full cost of care.

The drug manufacturers create a product and price it, the physicians use it, and the health plans pay for it. All those costs end up getting passed through to the ultimate person who’s paying the insurance premium, and that is usually someone totally different than any of those parties, so the incentives are really perverse. Everywhere along that supply chain, someone’s making money. I think this is going to change pretty rapidly.

Although this example is not related to cancer care, the case still applies. I was a director of benefits for a Fortune 100 company in New England. We had a bunch of baby boomers who needed joint replacements, hips and knees. The costs were $75,000 to $100,000 to do a hip replacement. We looked outside the United States. Outside the United States, hip replacements can be done for up to 90% less. Singapore would do a hip for $10,000. They would guarantee it for a year, package price.

As I said earlier, on pass-through, the hips that we do in the United States you pay for every aspirin, you pay for every meal that the patient eats. Think about buying a car a tire at a time, or a nut at a time. Instead, you pay a package price.

In this case, we put a policy in place stating that if our folks wanted to go to Singapore to have a hip replaced, we’d pay 100%; we’d send a significant other, you could go on a vacation. The minute we announced it, the Wall Street Journal picked it up. The next day, I had calls from about 10 hospitals across the country saying they would also match the price.

What I’m getting at is, we’re going to say that for this type of cancer, we will pay the medical providers “X.” It’ll be a fixed price, and that’s going to really change the game, because then there are no more pass-throughs.

Because someone’s going to be on the hook for delivering that high-quality cancer care for a fixed price, they’re going to have to spend a lot more time making sure that they’re using the most cost-effective therapy; they’re not going to be able to pass those prices on. That’s where I think the model’s going.

PMO The oncologists and their compensation, are we moving to fee-for-service?
Mr Hayes Specialists in this country make 3 to 4 times more than they do in any other country. Cardiologists here are making close to 7 figures. Cardiologists in other countries are somewhere around $200,000, so huge differences.

I think what you’re going to see is the Mayo Clinic Model, in which more and more of our specialists and oncologists will go on salary instead of being paid for each patient they see. It’s going to dramatically change their reimbursement model, and it’s also going to dramatically change their incentive model.

For instance, I had a colleague who started to refer any patient who needed open heart surgery to Mayo Clinic. The cardiologists there are on salary, so it doesn’t matter whether they do the procedure or don’t do the procedure.

As a result of that program, 30% of the time when the local cardiologists thought it necessary to do a procedure, Mayo Clinic said surgery didn’t need to be done. This model will dramatically change how we pay the oncologist and specialist, and how we deliver cancer care.

PMO Does that model ultimately benefit the oncologist, or is that going to dissuade oncologists from participating in the healthcare system anymore or a new crop of graduates from choosing oncology as their specialty?

Mr Hayes I think the question is, what’s going to happen to specialist pay? What’s going to happen to oncology in particular, as we move away from the fee-for-service model to different reimbursement models?

There’s lots of conversation about how to slow the increase of what we’re spending for healthcare. The reality is, in a competitive global marketplace, we have to get our healthcare costs significantly down.
Don Berwick, MD, who just retired from Medicare and the Institute of Medicine, and the Dartmouth Atlas have both said for a long time that 30% to 50% of all medical services delivered in this country add no clinical value. We’re doing a lot of things that we don’t need to do.

When you start talking about how ObamaCare, the Affordable Care Act, how this is all going to impact specialist salaries, their reimbursements are going to go down dramatically. Right off the bat, to finance ObamaCare, there has to be a 30% reduction in payments by Medicare to all providers.
What’s going to happen over time is that, yes, oncologist salaries, all the specialists, are going to see their incomes reduced. There’s going to be a significant reallocation of how we pay primary care versus specialist.

PMO If a drug is developed that treats a cancer in a large patient population so well that it keeps those patients alive for the rest of their normal life expectancy, how do we avoid bankrupting the healthcare system?

Mr Hayes Great question. If we can develop different agents that make a remarkable difference and keep people alive longer, what do we do with that? How do we keep it from bankrupting the system? I think it goes back to the European marketplace as a model. We have to take a look at quality of life. What are we getting for that investment?

We, as a society, should develop a way to look at healthcare as a finite resource, with the goal of maximizing quality of life. That’s how I think we should make decisions going forward as we develop new medical technologies. How do we make decisions about where we should invest and where we should not invest as a society? I think that’s where we’re heading.

PMO Thank you so much for your time.

Mr Hayes My pleasure.

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