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OCM Practices Take on Two-Sided Risk, but Uncertainty Looms

Publication: OBR

Participating in the Oncology Care Model (OCM) since 2016, oncology practices have known the time would come when they would have to make a difficult decision: Should they continue in the one-sided risk arrangement, where they may have a track record of success, or make the leap to two-sided risk? Two-sided risk has the appeal of higher performance-based payments but also holds the practice accountable for Medicare costs that exceed the target amount, which is the allowable amount a practice can spend on a patient population without incurring a penalty. In one-sided risk, practices are not held accountable for any costs over the target amount.1

CMS offers OCM participants two downside risk paths: the original two-sided risk arrangement and the alternative two-sided risk arrangement. The original two-sided risk arrangement allows practices to earn a payment as high as 20% of their benchmark amount, which is set by CMS and does not include the discount. This payment track also penalizes practices by 20% of the benchmark amount if their costs exceed the target amount.2

Although practices have been aware of the original two-sided risk arrangement since the beginning of the OCM and have had the option to enter since 2017, the prospect of incurring such a high penalty has deterred most practices from entering two-sided risk.

To offer practices a more palatable option, the alternative two-sided risk arrangement was announced in the fall of 2018. The alternative two-sided risk arrangement calculates financial payments and penalties based on the practice’s revenue, not the amount spent on a patient population. Practices can incur penalties up to 8% of their revenue and earn payments up to 16% of their revenue.1,2

Starting in January 2020, OCM practices that failed to earn at least one performance-based payment are required to either enter one of the two-sided risk options or exit the program. Practices had to make this decision by December 2019, in order to be an active participant in the OCM in 2020.  Only practices that earned one or more performance-based payments could continue one-sided risk.2

For Texas Oncology, the fact that the alternative two-sided risk arrangement calculates financial payments and penalties on the basis of a practice’s revenue, not expenditures, was one reason the practice chose to move to downside risk.

Lalan Wilfong, MD, Medical Director of Quality Programs at Texas Oncology, said that the basis of payments and penalties on the practice’s revenue is better aligned with what the practice can control, whereas expenditures are not.

The alternative two-sided risk arrangement also offers a lower OCM discount rate of 2.5% compared with 2.75% in the original two-sided risk arrangement. The one-sided risk discount is 4.0%.1

The OCM discount is important because it determines the amount a practice can spend on a patient population. For example, if Medicare sets a benchmark amount of $100,000 for a patient population and the discount is 4.0%, the practice can spend $96,000 on the patient population without being penalized. However, if the discount is 2.5%, the practice can spend $97,500 on the patient population.1 In other words, the lower the discount, the more a practice can spend and the easier it is to perform under the allowed amount and earn a performance-based payment.

In addition, the alternative two-sided risk arrangement has a neutral performance zone in which practices are neither financially penalized nor rewarded for exceeding or meeting the target amount. Only when the practice goes over the benchmark amount, which does not include the discount, does the practice incur a financial penalty.  The original two-sided risk arrangement does not have a neutral performance zone.

Additional reasons for moving to downside risk that apply to two-sided risk arrangements is that by participating in an advanced alternative payment model, practices do not have the burden of reporting into the Merit-Based Incentive Payment System (MIPS), while also having the opportunity to earn a 5% incentive bonus from Medicare that is in addition to the performance payment.2

Ultimately, practices may be considering the bigger picture and view two-sided risk as inevitable. “This is really where reimbursement and healthcare are going,” said Sarah Cevallos, MBA, Chief Revenue Cycle Officer of American Oncology Network (AON). AON voluntarily entered the alternative two-sided risk arrangement in January 2020.

Time to Act

With the possibility of downside risk now at play, practices are proactively avoiding such a fate. Stop-loss insurance, also known as reinsurance or excess insurance, is an option for practices in two-sided risk to protect against any losses that may incur if they fail to meet the target amounts, but the premiums are high and may be too expensive for some practices to purchase.2

“I don’t think the insurance industry is ready to understand exactly what the risks are,” said Lucio Gordan, MD, president and managing physician of Florida Cancer Specialists & Research Institute (FCS). FCS voluntarily entered the alternative two-sided risk arrangement in January 2020.  He said the premium is “way of out of proportion” to what it would cover.

Dr. Wilfong echoed a similar view, describing an insurance quote as “crazy expensive.”

As a result, practices are looking at other ways to control costs in order to avoid falling into downside risk and includes using biosimilars where appropriate, adhering to national guidelines, and increasing patient accrual for clinical studies. In clinical studies, the drugs as well as the laboratory and radiological tests are often covered by the sponsor, which leads to cost-savings for the patient and the practice.

Controlling drug waste is another way to contain costs. Texas Oncology, for example, has reduced the inappropriate use of antiemetics for patients receiving chemotherapy by standardizing their use. Previously, the use of antiemetics was at the discretion of the physician.

“Now we have our pharmacy team making sure that we give the appropriate antiemetics,” Dr. Wilfong said.

Pressure Builds

Given the newfound risk practices are facing, putting pressure on pharmaceutical companies to control costs is also coming into play.

“I am very appropriately vocal in explaining to [pharma] that they have to be part of the solution of cost control,” said Dr. Gordan. “I think [they] have been very receptive to the idea, as it becomes a problem of sustainability.”

Pharmaceutical companies are working with FCS to develop health economic outcome research studies to prove that certain drugs that come with a high price may actually lower overall total costs of care by reducing emergency department visits, hospital admissions, and other complications.  “That’s the burden that I’m pushing to pharma,” said Dr. Gordan.

Terrill Jordan, president and chief executive officer of Regional Cancer Care Associates (RCCA), which voluntarily entered one of the two-sided risk arrangements in January 2020, is also having new conversations with pharmaceutical companies about their role in controlling costs. He explains that up until now they have not “truly” participated in the risk the practice bears with drug cost and encourages them to work constructively with the practice to bear some of the risk and control costs.

“The Pressure is on”

For OCM practices, downside risk may be coming in 2021 in the form of the Oncology Care First (OCF) model, which is in the beginning stages of development by CMS’s Innovation Center. According to the Request for Information (RFI) put forth by the agency, the OCF would start in January 2021. Current OCM participants would be forced to enter a two-sided risk arrangement, but the details of the OCF are not yet clear.3

“The pressure is on,” said Kerin Adelson, MD, Chief Quality Officer, Yale University. To better understand the impact of downside risk and prepare for the OCF, Yale University is using its past performance in the OCM to model their future downside risk in the OCF.

Although the RFI is limited on specifics, concerns have emerged about the OCF’s prospective monthly population payment (MPP).

Aaron Lyss, MBA, OneOncology, describes the MPP as “extremely” different from the monthly enhanced oncology services (MEOS) payment that practices receive in the OCM. The monthly per beneficiary MEOS payment of $160 is given to practices to help them provide enhanced services, whereas the MPP would be an estimated bundled payment that includes enhanced services, evaluation and management, drug administration services, and total cost of care for a defined patient population.3

During the reconciliation process, another payment would then be calculated based on the actual patient population. If the calculation is higher than the estimated MPP, practices in the OCF would receive a payment. If the calculation is lower, the practice would be held accountable to repay the losses.3

Practices currently lack the infrastructure needed to carry out this type of payment model. In the early days of the OCM, practices had difficulty just monitoring which patients were in the model and eligible for the MEOS payment. “This [payment model] is going to be several orders of magnitude more challenging,” Mr. Lyss said.

View the full story at OBR.


  1. Oncology Care Model overview. Centers for Medicare & Medicaid Services Innovation Center. July 2019. https://innovation.cms.gov/Files/slides/ocm-overview-slides.pdf. Accessed December 18, 2019.
  2. Patel K, Patel M, Lavender T, et al. Two-sided risk in the Oncology Care model. AJMC.com. https://www.ajmc.com/journals/evidence-based-oncology/2019/june-2019/twosided-risk-in-the-oncology-care-model?p=2. Accessed December 18, 2019.
  3. Oncology Care First model: Informal Request for Information. Centers for Medicare & Medicaid Services Center for Medicare and Medicaid Innovation. https://innovation.cms.gov/Files/x/ocf-informalrfi.pdf. Accessed December 18, 2019.