Landmark Study Takes In-Depth Look at Cost Drivers of Cancer Care

Updated on April 5, 2016

A Milliman study released today shows that over the last decade the total costs of treating patients with cancer in the United States have risen no faster than overall costs for Medicare and commercially insured populations. Contrary to a commonly held misbelief that cancer care costs have rapidly outpaced other health care spending trends, the study actually found that total costs of treating patients with cancer have increased at essentially the same rate as all health care spending since 2004.

Commissioned by the Community Oncology Alliance (COA) and conducted by researchers at the actuarial firm Milliman, the study took a retrospective look at claims data for the Medicare and commercially insured patient populations from 2004-2014. The report is being released today in conjunction with a briefing to U.S. congressional health care staff as well as a meeting with the Centers for Medicare & Medicaid Services (CMS).

The three key findings of the COA study are:

  1. The increases in costs from 2004 to 2014 were essentially the same in actively treated cancer patients and the non-cancer population.
  2. Drug spending, which made up one-fifth of the total costs in actively treated cancer patients in 2014, has increased at the highest rate of all component costs, fueled by new biologic cancer drugs.
  3. Cancer care has moved significantly into the more expensive hospital setting since 2004 and is an important component of the increase in the cost of care.

The study found that per patient costs for the total population, actively treated cancer population, and non-cancer population increased at very similar rates over the 11 year study period. In the Medicare population, the increases were 35.2% per patient per year for the total population, 36.4% for the actively treated cancer population, and 34.8% for the non-cancer population. For the commercially insured, the cost increases were 62.9% for the total population, 62.5% for the actively-treated cancer population, and 60.8% for the non-cancer population.

The total costs of treating patients with cancer in the United States have risen no faster than overall costs for Medicare and commercially insured populations. (PRNewsFoto/Community Oncology Alliance)
The total costs of treating patients with cancer in the United States have risen no faster than overall costs for Medicare and commercially insured populations. (PRNewsFoto/Community Oncology Alliance)

For this study, Milliman researchers defined “actively treated” cancer patients as those with one or more claims for chemotherapy, radiation therapy, or cancer surgery in a given year. “Non-actively treated” cancer patients included all members coded with a cancer diagnosis but not having one or more claims for chemotherapy, radiation therapy, or cancer surgery within the year. All members without a cancer diagnosis code were considered the non-cancer population. The total population contains all three of these groups.

“There has been a long-held belief in research and policy circles that cancer care costs in America have gone up disproportionately as compared to other health care costs. This study shows that this commonly held belief is not supported by the evidence,” said Debra Patt, MD, MPH, MBA, practicing oncologist at Texas Oncology (Austin, TX), and COA board and study team member. “What these data actually show are that per capita oncology cost increases are proportional to total healthcare spending. It is evident that per capita spending in oncology is less when patients are treated in a physician office setting in comparison with the hospital outpatient department. I hope with the advent of new initiatives such as the Oncology Medical Home, pathway management, and other value-based care initiatives, we should see even more success in providing high value care for our patients.”

As expected, when looking at a breakdown of specific elements of costs for treating cancer patients, the researchers found large increases in spending for cancer drugs. The portion of these costs associated with all chemotherapy (including biologic, cytotoxic, and other chemotherapy and cancer drugs) in the actively treated cancer population increased over the study period from 15% to 18% in the Medicare population and from 15% to 20% in the commercially insured population.

Practicing oncologists on the COA study team noted that a significant portion of the drug cost trends align with specific clinical advances in new biological therapies and breakthrough drugs.

“Patients’ cost of cancer drugs remains a huge issue that drug manufacturers and the entire oncology community must immediately address. However, this study shows that drug prices are but one piece of a complex puzzle that adds up to the total cost of cancer care for patients and payers,” said David Eagle, MD, a practicing oncologist at Lake Norman Oncology (Mooresville, NC), COA board and study team member  “If we are to make any meaningful progress in controlling spending on cancer care we need to take a much more holistic look at all of the cost drivers, including site of service differences.”

The study also took an in-depth look at cost trends in the site of service for chemotherapy infusion. It found that the site of service for chemotherapy infusion in America has dramatically shifted away from the physician office to the generally higher-cost hospital outpatient settings. Milliman found that the proportion of chemotherapy infusions delivered in hospital outpatient departments nearly tripled, increasing from 15.8% to 45.9% in the Medicare population during the study period. For the commercially insured population the increase was much more dramatic, going from 5.8% to 45.9%. As of 2014, 340B hospitals accounted for 50.3% of all hospital outpatient chemotherapy infusions in the Medicare population.

The study confirmed that patients who had their chemotherapy delivered entirely in the hospital outpatient setting incurred a significantly higher cost than patients whose chemotherapy was delivered entirely in a physician office. For Medicare patients, the difference was $13,167 (37%) higher in 2004 and $16,208 (34%) higher in 2014; for commercially insured patients it was $19,475 (25%) higher in 2004, and $46,272 (42%) higher in 2014.

“We combined several perspectives and skill sets – actuarial, public health, and clinical – to conduct this real world data project,” said Pamela Pelizzari, MPH, lead study researcher with Milliman. “As a result, I believe that this work will inform organizations across the spectrum of healthcare, from ACOs to insurers, from patient advocates to bioscience companies.”

“It is critical that physicians, patients, payers, and policymakers have a clear and accurate understanding of the complex cost drivers behind this devastating disease,” said Ted Okon, executive director, COA. “There is misguided policy coming out of Washington, like the proposed Medicare experiment on cancer care, that will just drive up cancer costs, not get them under control.”

A full copy of the study, methodology, and detailed appendices is available on the COA website at

About Community Oncology Alliance
The Community Oncology Alliance (COA) is a non-profit organization dedicated solely to preserving and protecting access to community cancer care, where almost 70 percent of Americans with cancer are treated. COA leads community cancer clinics in navigating an increasingly challenging environment to provide efficiencies, patient advocacy, and proactive solutions to Congress and policy makers. To learn more about COA visit

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The Editorial Team at Healthcare Business Today is made up of skilled healthcare writers and experts, led by our managing editor, Daniel Casciato, who has over 25 years of experience in healthcare writing. Since 1998, we have produced compelling and informative content for numerous publications, establishing ourselves as a trusted resource for health and wellness information. We offer readers access to fresh health, medicine, science, and technology developments and the latest in patient news, emphasizing how these developments affect our lives.