Wide variation in payments for Medicare beneficiary oncology services suggests room for practice-level improvement.

In recent years many policy makers have recommended alternative payment models in medical oncology in order to reduce costs and improve patient outcomes. Yet information on how oncology practices differ in their use of key service categories is limited. We measured annual payments for key service categories delivered to fee-for-service Medicare beneficiaries receiving care from 1,534 medical oncology practices in 2011-12. In 2012, differences in payments per beneficiary at the seventy-fifth-percentile practice compared to the twenty-fifth-percentile practice were $3,866 for chemotherapy (including administration and supportive care drugs), $1,872 for acute medical hospitalizations, and $439 for advanced imaging. Supportive care drugs, bevacizumab, and positron-emission tomography accounted for the greatest percentage of variation. Average practice payments for service categories were highly correlated across years but not correlated with each other, which suggests that service categories may be affected by different physician practice characteristics. These differences, even when clinical guidelines exist, demonstrate the potential for quality improvement that could be accelerated through alternative payment models.