Healthcare spending could be reduced to the tune of $12.7 billion, or $101 per year per covered plan member, if medications administered in hospital outpatient departments were reimbursed at the same rates as those given at physician officers, the findings from a recent Employee Benefit Research Institute analysis suggest.
The group’s latest analysis—funded with support from employers, insurers and drugmakers— focused on site-of-treatment pay differences within commercial health insurance claims from 2023 and 2024. It specifically reviewed claims for 106 physician-administered outpatient drugs (PAOD) that represented 77% of total PAOD spending.
Among these, the research group found that allowed amounts were higher in hospital outpatient departments (HOPDs) than in physicians’ offices for 93 PAODs. Per unit price differentials were a median 64% higher in the former setting compared to the latter, and 102% higher on average—though EBRI noted in its report that the median annual reimbursement difference ranged as far as $5.531 per patient to $135,306 for one oncology medicine.
Amplifying the impact of that price differential on payers is the higher output of HOPDs. Fifty-nine percent of PAODs occurred in a HOPD as opposed to 31% in a physician office and 9% in other settings.
All told, the differences EBRI researchers tallied $9.8 billion among the 106 PAODs they reviewed, or a difference of $77.40 per member per year that represents 0.8% of aggregate spending. Extrapolating the trend to all PAODs brought the group to its topline $12.7 billion estimate, or $101.05 per member per year and 1% of aggregate spending.
EBRI researchers said their findings are intended to guide employers and health plans as they contract and make decisions on network design and reimbursement policies.
“While not every treatment can or should be provided in a lower-cost setting, these findings show that reducing unnecessary reimbursement differences could generate meaningful savings for employers and health plans and, over time, help reduce cost pressures for workers and their families,” Paul Fronstin, Ph.D., director of health benefits research at EBRI and the analysis’ lead author, said.
EBRI noted that its findings come in the context of a care delivery shift toward outpatient settings, and added that patients who receive physician-administered specialty medications “are disproportionately high users of healthcare services and frequently satisfy both their annual deductibles and maximum out-of-pocket limits early in the benefit year.”
As such, any trimming down of site-of-treatment reimbursement differences would primarily bring “immediate financial benefit” to employers and health plans rather than patients at the point of service who have largely fulfilled their cost-sharing obligations, the group’s researchers wrote in their report.
“Over time, however, workers and their families would be expected to benefit indirectly from lower site-of-treatment reimbursement through slower growth in health plan spending and, ultimately, lower health insurance premiums,” they wrote.
Outside of plans’ contracting strategies, the findings speak to broader site-neutral policy changes that have become increasingly popular among lawmakers, long recommended by nonpartisan policy advisors and incrementally implemented by the Centers for Medicare and Medicaid Services. Such proposals to pay more similar rates across settings have been broadly opposed by the hospital industry, which is quick to highlight their broader range of available services, administrative burdens and emergency care requirements when justifying the differences.