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The American Journal of Managed Care July 2018
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Differences in Spending on Provider-Administered Chemotherapy by Site of Care in Medicare
Yamini Kalidindi, MHA; Jeah Jung, PhD; and Roger Feldman, PhD
Value-Based Health Insurance Design: How Much Does Socioeconomic Status Matter?
Bruce W. Sherman, MD, and Carol Addy, MD, MMSc
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Kavita Patel, MD, MPH, and A. Mark Fendrick, MD
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Ammarah Mahmud, MPH; Justin W. Timbie, PhD; Rosalie Malsberger, MS; Claude M. Setodji, PhD; Amii Kress, PhD; Liisa Hiatt, MS; Peter Mendel, PhD; and Katherine L. Kahn, MD
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Julius L. Chen, PhD; Andrew L. Hicks, MS; and Michael E. Chernew, PhD
Forgotten Patients: ACO Attribution Omits Those With Low Service Use and the Dying
Mariétou H. Ouayogodé, PhD; Ellen Meara, PhD; Chiang-Hua Chang, PhD; Stephanie R. Raymond, BA; Julie P.W. Bynum, MD, MPH; Valerie A. Lewis, PhD; and Carrie H. Colla, PhD
Postdischarge Engagement Decreased Hospital Readmissions in Medicaid Populations
Wanzhen Gao, PhD; David Keleti, PhD; Thomas P. Donia, RPh; Jim Jones, MBA; Karen E. Michael, MSN, MBA, RN; and Andrea D. Gelzer, MD, MS, FACP
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Margje H. Haverkamp, MD, PhD; David Peiris, MD, PhD; Alexander J. Mainor, JD, MPH; Gert P. Westert, PhD; Meredith B. Rosenthal, PhD; Thomas D. Sequist, MD, MPH; and Carrie H. Colla, PhD
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Ann M. Annis, PhD, RN; Marcelline Harris, PhD, RN; Hyungjin Myra Kim, ScD; Ann-Marie Rosland, MD, MS; and Sarah L. Krein, PhD, RN
Inpatient Placement: Associations With Mortality, Cost, and Length of Stay
Daniel A. Handel, MD, MBA, MPH; Zemin Su, MS; Nancy Hendry, MSN; and Patrick Mauldin, PhD

Differences in Spending on Provider-Administered Chemotherapy by Site of Care in Medicare

Yamini Kalidindi, MHA; Jeah Jung, PhD; and Roger Feldman, PhD
Spending on chemotherapy drugs was lower among Medicare beneficiaries who received chemotherapy in hospital outpatient departments than among comparable beneficiaries receiving chemotherapy in physician offices.

Objectives: To compare Medicare spending on provider-administered chemotherapy in hospital outpatient departments (HOPDs) and physician offices after controlling for cancer type.

Study Design: Secondary data analysis.

Methods: We used 2010-2013 claims data for a random sample of Medicare fee-for-service beneficiaries who had cancer and received chemotherapy services either in physician offices or in HOPDs. We constructed 2 spending measures: (1) spending on chemotherapy drugs and (2) spending on chemotherapy administration. Each spending measure was the allowed payment, which includes both Medicare reimbursement and patient out-of-pocket spending. We compared the spending measures in the 2 care settings using regression analysis to control for certain patient risk factors, including cancer type. We also compared the number of chemotherapy and administration claims per beneficiary and spending per claim by cancer type to understand differences in utilization patterns in the 2 care settings.

Results: Risk-adjusted chemotherapy drug spending per beneficiary was $2451 lower in HOPDs compared with physician offices. Risk-adjusted chemotherapy administration spending was $322 higher in HOPDs than in physician offices. Patients in physician offices received chemotherapy drugs more frequently than those in HOPDs. However, the chemotherapy spending per claim line was higher in HOPDs than physician offices.

Conclusions: Chemotherapy drug spending per Medicare beneficiary was lower in HOPDs than in physician offices, driven by less frequent use of chemotherapy in HOPDs. As the site of provider-administered chemotherapy shifts from physician offices to HOPDs, continuing assessment of cancer care spending by site of care is necessary.

Am J Manag Care. 2018;24(7):328-333
Takeaway Points

Using 2010-2013 Medicare claims data, this study's results demonstrate that:
  • Spending on chemotherapy drugs was $2451 lower for Medicare beneficiaries receiving chemotherapy in hospital outpatient departments (HOPDs) than in physician offices.
  • The spending on chemotherapy administration was $322 higher for Medicare beneficiaries receiving chemotherapy in HOPDs than in physician offices.
  • As chemotherapy infusions are increasingly provided in the hospital outpatient setting, policy makers and payers should be aware that this shift in the site of chemotherapy may influence cancer care patterns and spending.
Chemotherapy is a common cancer treatment modality and a significant contributor to the cost of cancer treatment.1 Many chemotherapy drugs are available in injectable forms, which are administered by providers in clinical settings.2 Provider-administered drugs are usually reimbursed under the medical benefit of an insurance policy instead of the pharmacy benefit.2 In Medicare, they are reimbursed by Part B coverage for outpatient medical services. Providers purchase drugs and then submit claims to Medicare for reimbursement of the drugs and associated administration costs.2 Most Part B–covered drugs are administered in physician offices or hospital outpatient departments (HOPDs).

Over the past decade, the site of provider-administered cancer drugs has shifted from physician offices to HOPDs.3 This trend has led to a concern that cancer care costs may increase because of differences in care costs between HOPDs and physician offices. Spending on cancer care in commercial settings is considerably higher in HOPDs than in physician offices, mainly due to higher payment rates for chemotherapy drugs and other services in HOPDs.4-7

However, these findings may not apply to Medicare. Medicare typically reimburses hospitals and physicians the same fee for Part B–covered drugs: 106% of the manufacturer’s average sales price (ASP; the budget sequestration of 2013 reduced payments received by providers to 104.3% of ASP).8 No consistent pattern exists in Medicare’s reimbursement for drug administration. Some administration codes are paid more in HOPDs, whereas others are paid more in physician offices. In general, payments are higher in HOPDs. For example, in 2011, 14 of 20 administration codes payable in both settings were paid more in HOPDs.3 However, administration fees are much smaller than chemotherapy drug costs. Thus, differences in chemotherapy-related costs in Medicare Part B mainly come from differences in chemotherapy drug utilization, such as the quantity of chemotherapy or use of more expensive chemotherapeutic agents.

A report by The Moran Company compared spending on chemotherapy between HOPDs and physician offices in Medicare using 2009-2011 claims data.3 The report documented that the average number of chemotherapy claims per patient was slightly higher in HOPDs than in physician offices and average spending per patient on chemotherapy agents was substantially higher in HOPDs. Based on these findings, the Moran report concluded that more and costlier chemotherapy treatments are used in HOPDs than in physician offices, given the same Medicare fees for chemotherapy drugs in both settings. However, the Moran analysis did not adjust for differences in patient risk factors between the 2 settings. An important risk factor is cancer type. The distribution of cancer types differs by setting,9 and cancer drug utilization patterns differ by cancer type.10 If patients with specific cancer types requiring expensive chemotherapy are more likely to be treated in HOPDs, the Moran report’s conclusion is not valid.

To our knowledge, no study has examined chemotherapy-related spending in Medicare Part B after controlling for patient characteristics, such as cancer type. Our study fills this gap. We compared chemotherapy drug and administration spending in HOPDs and physician offices after controlling for cancer type. In addition, we explored differences in chemotherapy utilization patterns between the 2 settings.



The primary data sources were the 2010-2013 Medicare Outpatient file, which contains records for services in HOPDs, and the 2010-2013 Medicare Carrier file, which has claims for services by noninstitutional providers. Both files contain information on diagnosis, Healthcare Common Procedure Coding System (HCPCS) code, service date, and payments. Medicare Master Beneficiary Summary files provided beneficiaries’ demographic characteristics and disease indicators, including cancer type, and the American Community Survey supplied zip code–level income, education, and unemployment rates.

Study Population

The study population is a random sample of Medicare fee-for-service beneficiaries with cancer between 2010 and 2013. To select the sample, CMS first identified all patients with cancer from 100% of Medicare claims based on the standard algorithm used to create cancer indicators in the Medicare Chronic Condition Warehouse: having at least 1 inpatient or skilled nursing facility claim with a cancer diagnosis or at least 2 Carrier or Outpatient claims with a cancer diagnosis in a given year. Next, CMS provided us with the data for a random sample of those patients.

We restricted the sample to patients who had at least 1 chemotherapy claim identified by HCPCS Level II (J-codes) in the Outpatient or Carrier data. Chemotherapy includes all antineoplastic drugs (immune, hormonal, and targeted therapy). We selected claims with both cancer diagnosis and chemotherapy J-codes to exclude cases using cancer drugs for other conditions. All cancer diagnosis codes and chemotherapy J-codes used are reported in eAppendix A (eAppendices available at Claims for chemotherapy reported in both Carrier and Outpatient files using the same J-code on the same day were considered duplicates, and duplicate claims in the Carrier file were excluded to avoid double counting. We considered Carrier claims with the service place code of HOPDs as HOPD claims.

We further restricted the sample to patients with cancer who had both Medicare Part A and Part B coverage for the full year, and we excluded those who died within 3 months of diagnosis. We excluded enrollees in Medicare Advantage plans because their claims data are not available to researchers.

The study sample was categorized into 2 groups depending on the site of chemotherapy administration: HOPD-only if they received chemotherapy in HOPDs only and office-only if they received chemotherapy in physician offices only. Patients receiving chemotherapy in both settings, who accounted for 4.4% of the sample, were excluded to make a clean comparison of costs between HOPDs and physician offices.

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