Hospital Drug Payments Exceeded Physician Office Rates
New research shows hospital outpatient departments received 102% more for drugs, costing employers billions annually.
Updated on Sept. 29, 2026 in Healthcare
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A recent analysis revealed that hospital outpatient departments were reimbursed at a rate 102% higher than physician offices for the same medications. This payment disparity added $12.7 billion in annual health spending for U.S. employers.
Why it matters
The findings highlight a significant cost burden within the healthcare system, as employers and workers could save $12.7 billion annually if medications were reimbursed at physician-office rates. This shift represents $101 in potential annual savings per covered member.
Hospital outpatient departments received higher reimbursement for 93 of 106 analyzed high-spending drugs, with a median per-unit payment difference of 64%. The study noted a median annual payment difference of $5,531 per patient.
The players
Merative MarketScan Commercial Database
This entity maintains a comprehensive collection of longitudinal health data used by researchers to analyze commercial claims for patients aged 18 to 64.
The details
The study examined 106 high-spending physician-administered drugs using commercial claims data from 2023-2024. While hospital outpatient departments accounted for 59% of medication administrations, they consistently secured higher payments compared to the 31% performed in physician offices.
Timeline
In 2019, the median hospital outpatient department drug markup reached 98%.
During the 2023-24 period, commercial claims data was collected for the study.
In 2024, the median hospital outpatient department drug markup reached 70%.
Research findings were officially released on Sept. 28.
Market Landscape
The findings reflect a persistent competitive environment where hospital outpatient departments maintain higher reimbursement rates than independent physician offices. This practice highlights a structural trend in the healthcare sector where billing variations between facility types significantly impact total employer expenditures.
These reimbursement discrepancies contribute directly to higher healthcare premiums and out-of-pocket costs for employees enrolled in employer-sponsored plans. Workers could see lower annual costs if reimbursement policies were standardized across different site-of-care locations.
The takeaway
Patients may find lower medication administration costs by utilizing physician offices instead of hospital outpatient departments when possible. Employers are increasingly evaluating these site-of-care differences to reduce annual health benefit expenditures.
Further reading
For more information on costs, visit the Healthcare section.
Source note: This article includes information reported by Becker's Hospital Review | Healthcare News & Analysis.
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