Infusion Services Site-of-Service Reimbursement Differential

Teri U. Guidi, MBA, FAAMA
President & CEO, Oncology Management Consulting Group, Pipersville, PA

As the trend of shifting the site of infusion services from the physician office to the hospital outpatient department continues, so does the conversation about the revenue differences in doing so. Clearly, there can be substantial differentials; however, it is interesting that the largest differences stem from payer contracts. To prove that point, the Oncology Management Consulting Group utilized its proprietary database to illustrate the Medicare differences.

Data Collection

Data from the 2014 National Hospital Oncology Benchmark Study (NHOBS; with data from 2013) was mined for the utilization of infusion services and the associated drugs. There were 40 infusion centers that participated in the study, but 4 centers were excluded from the analysis because of apparent billing anomalies (eg, J0442 was billed at 1 unit when it would more likely be billed at 300 or 480 units).

The final data set represents services provided to 18,535 hospital outpatients, with a total of 156,113 distinct infusion encounters. All of the data discussed below represent the aggregate data for the 36 centers.

Data from the NHOBS include a unique patient identifier, a date of service, the first 3 diagnosis codes associated with that date of service, and the billed codes and units of each code billed. The data do not include charges, collections, or payer mix.

Using the hospitals’ billing data, each encounter was assigned to a disease group based on the reported International Classification of Diseases, Ninth Revision (ICD-9) codes. In some cases, a patient may be counted in more than 1 disease group (eg, on one service date the highest ranking ICD-9 code was for breast cancer and, on a subsequent service date, the highest ranking ICD-9 code was for a different disease site).

To calculate the Medicare revenue, we applied the 2013 Medicare payment rates from the Physician Fee Schedule, the 2013 Hospital Outpatient Prospective Payment System, and the 2013 average sales price (ASP) files available from the Centers for Medicare & Medicaid Services (CMS) to the total volume of services billed. Drug revenue is defined as any item billed and paid based on the ASP data.

Nondrug revenue is defined as any billed service that is not paid based on the ASP data, including hydration, therapeutic injections and infusions, chemotherapy injections and infusions, and procedures such as port or pump services, transfusions, and bone marrow procedures.

We did not include volumes for blood draws, blood products, or therapeutic phlebotomies. To calculate the cost, we reduced the ASP data, which is reported at ASP plus 6%, to ASP plus 0%, and applied those figures to the total volume of drugs billed.


In terms of patient volumes, the top 5 diagnosis groups were benign hematology followed by breast cancer, malignant hematology/leukemia/lymphoma, lung cancer, and colorectal cancer (Table 1).

Table 1

The same 5 groups represent the greatest number of treatment encounters in almost the same order.

The nondrug revenue shows the same 5 groups at the top, although it is not surprising that benign hematology is the lowest of the 5, given the treatments for these patients (Figure 1). For all of the diseases, the nondrug revenue is $32,065,207 to the hospitals, which is 52.6% higher than the $21,009,010 in revenue for physician practices (Figure 1).

Figure 1

In the past, CMS has commented on this disparity, stating their awareness that it is more expensive to operate a hospital outpatient department than to operate a private practice.

The drug revenue reverses the advantage, with hospitals receiving 1.05% less in reimbursements than the practices, at $89,753,744 versus $90,701,621 (Figure 2).

Figure 2

The reason for this is that CMS “packages” certain drugs into the administration service under the 2013 Hospital Outpatient Prospective Payment System (Table 2). In other words, those packaged drugs are not paid separately.

Table 2A Table 2A Table 2A

In the NHOBS data set, there were 250 different drug codes billed; 144 of those are packaged. In 2013, as in 2015, nonpackaged drugs are paid at ASP plus 6% to the hospital and to the practice. Thus, drug revenue for those drugs is identical.

Combining nondrug and drug revenue (Table 3), we find that the hospital outpatient department receives $121,818,951 compared with the practice, which receives $111,710,631, a 9% advantage. Still the hospitals’ drug margin for all disease groups is 84% of the practices’ ($5,080,401 and $6,028,277, respectively).

Table 3

Finally, we delved more deeply into specific drugs for the top 5 disease groups (Table 4). We found that 15 drugs account for approximately 83% of all revenue for these disease sites, with a margin of 6%, because, as discussed above, all of these drugs are paid at ASP plus 6% in both settings. When the remaining drugs are included, we find that the hospital’s drug margin is 5%.


Implications for Oncology Practices

From this brief analysis, we can see that CMS spends a bit more (9%) for outpatient infusion services provided in the hospital outpatient department than for those provided in the private practice setting. Of course, the larger question is what precisely is that differential for nonfederal payers? There have been analyses to answer that question, and they have all concluded that, in aggregate, all payers spend substantially more for hospital outpatient department care than for private office care. By isolating the CMS figures, the current efforts at payment reform should best focus on new models with those nonfederal payers, because they have proportionately more to gain.

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