The traditional system for paying for healthcare, known as fee-for-service, reimburses medical providers for the volume of tests, procedures, and office visits they perform. This structure can unintentionally incentivize a higher quantity of services, even if they are not always linked to the best patient outcomes. Value-based care models have emerged to shift the focus toward quality, care coordination, and overall cost reduction. Cancer treatment, which is medically complex and involves high spending, became a primary target for testing these new payment arrangements. The Oncology Care Model (OCM) was the government’s attempt to move oncology practices toward this value-based approach.
Defining the Oncology Care Model
The Oncology Care Model was a voluntary demonstration project developed by the Center for Medicare and Medicaid Innovation (CMMI). CMMI, a division of the Centers for Medicare & Medicaid Services (CMS), tests new payment and service delivery models. The OCM was designed as a multi-payer model, including Medicare and several commercial health insurance plans that partnered with CMS.
The goal of the model was to provide higher quality, coordinated oncology care for patients receiving chemotherapy while simultaneously controlling costs. This objective addressed the high costs and fragmented nature of cancer treatment in the United States. By aligning financial incentives with high-quality, patient-centered services, the OCM sought to improve patient health outcomes and reduce unnecessary spending. Better coordination was expected to lead to fewer preventable hospitalizations and emergency department visits during treatment.
The Structure of Payment and Risk
The financial structure of the OCM centered on an “episode of care,” defined as a six-month period. This episode began when a Medicare beneficiary received their first chemotherapy treatment. The OCM used a two-part payment system to incentivize practices to manage the total cost of care during this six-month window.
The first part was the Monthly Enhanced Payment (MEP), an upfront fee paid to the oncology practice for each enrolled patient. This payment, initially set at $160 per beneficiary per month, funded the practice transformation activities required by the model. The MEP provided practices with resources to hire care coordinators or implement new technology, which are not typically reimbursed under the traditional fee-for-service system.
The second component was the Performance-Based Payment (PBP), which introduced financial accountability for the total cost of the episode. CMS established a target price for each patient’s six-month episode based on the practice’s historical costs, adjusted for patient characteristics. Practices whose total costs came in below the target price could earn a PBP, effectively sharing the cost savings with Medicare.
Participating practices chose between one-sided or two-sided financial risk. Under the one-sided arrangement, a practice could earn a PBP for savings but would not be penalized if costs exceeded the target price. Practices electing the two-sided risk arrangement could earn a larger PBP for savings but were also required to pay back a portion of the over-spending if costs went above the target price. This mechanism incentivized careful management of all healthcare services used by the patient during the six-month period.
Mandatory Practice Transformation Requirements
To receive the Monthly Enhanced Payment, oncology practices were required to fundamentally change how they delivered patient care, focusing on six specific functions. One change was the requirement to offer patients 24-hour, seven-day-a-week access to an appropriate clinician. This clinician needed real-time access to the patient’s medical records to provide informed guidance. The aim was managing symptoms at home and avoiding unnecessary emergency room visits or hospital admissions.
Practices also had to ensure that patients received dedicated patient navigation and care coordination services. This involved guiding patients through the complex treatment process, helping them overcome logistical barriers, and coordinating care among multiple specialists. Furthermore, all treatment decisions had to be consistent with nationally recognized clinical guidelines to ensure patients received evidence-based care.
A foundational requirement was the documentation and discussion of a comprehensive care plan for each patient. This plan had to contain all 13 components recommended by the Institute of Medicine (IOM) in its framework for quality cancer care.
The required elements of the care plan included:
- Documenting the patient’s prognosis.
- Outlining treatment goals.
- Describing the care team.
- Addressing end-of-life planning and palliative care needs.
The model also mandated the use of certified Electronic Health Records (EHRs) to facilitate coordinated care. Practices were expected to regularly track performance metrics and make measurable changes to their operations for continuous quality improvement. These mandatory operational changes were intended to foster a proactive, patient-centered approach to treatment management.
OCM’s Timeline and Transition to New Models
The Oncology Care Model officially began on July 1, 2016, and was originally planned as a five-year demonstration. Due to its complexity and external factors like the COVID-19 pandemic, the model was extended. It ultimately concluded its performance period on June 30, 2022.
Throughout its six-year run, the OCM served as a testing ground for how episode-based payments could work within specialized cancer care. The lessons learned became the foundation for its successor program, the Enhancing Oncology Model (EOM). The EOM began on July 1, 2023, following a one-year gap after the OCM concluded.
The new EOM builds on the operational transformations required by the OCM but has a greater focus on managing financial risk. It includes a more aggressive shift toward the two-sided risk arrangement for participating practices. While it maintains the six-month episode structure and the concept of a monthly enhanced payment, the EOM applies to a more limited set of seven specific cancer types than its predecessor. This evolution demonstrates the government’s continued commitment to refining value-based payment strategies in oncology.