The Infusion Therapy Cost Employers Can’t See, and How to Find It

A self-funded health plan paid about $9,000 for one employee’s infusion therapy treatment at a hospital. Eight weeks later, the patient returned for the same infusion, and the claim came back at $97,000. The drug never changed. The hospital’s billing did.

Price swings like this hide inside many employer health plans. Specialty medications now make up more than half of medical benefit spending, yet more than 61% of employers haven’t fully addressed site of care, one of their biggest levers for cost management, according to research by Local Infusion. 

That gap framed a From Day One’s webinar about “The Infusion Therapy Cost Hiding in Your Health Plan, and What to Do About It.” Neil Kennish and Renee Lizotte, both directors of growth and employer partnerships at Local Infusion, a specialty infusion provider, walked benefits and HR leaders through how to identify hidden costs in their own claims data.

A Small Group Drives Outsized Spend

Specialty infusion refers to medications, mostly biologics, that patients receive through an intravenous (IV) line or injection in a clinical setting, usually on a recurring schedule. Site of care means where that infusion happens: most often a hospital outpatient department or an ambulatory center built for infusions. “The drug is the same in either place. What changes is the setting, and as you’ll see, the price,” Kennish said. 

Hospitals cost two to three times more than other sites for the same care, and that infusion therapy costs have risen about 26% year after year, says Kennish. A handful of plan members drives an outsized share of that spending. Across a typical population, about 1.5% of members account for 42% of total spend, while about 80% account for just 15%. “One or two members can dramatically move your entire year,” Kennish said. 

He estimates that a health plan with about 5,000 members could save as much as $1.5 million by managing where its members receive specialty infusions.

Why the Cost Stays Hidden

Employers see the claim, but not the drug’s actual cost. Each claim rolls the drug’s purchase price, the provider’s margin, and any margin from third-party navigators into one figure. Under the “buy and bill” model, the provider buys the drug and bills the plan, and each layer adds margin.

“That’s not an accusation. That’s just how the system is built, but it means two plans can pay very different amounts for the exact same drug in the exact same dose, and neither can easily see why that is,” Kennish said.

He points to four reasons the cost goes unnoticed. Infusion affects fewer than 2% of members, so it never triggers a population-wide alert. Hospital outpatient bills read like visits and services, which steers the conversation toward utilization instead of price and place. The category compounds quickly while other medical expenses draw attention. And most employers never check for site-of-care gaps. “Nobody was told to check, so nobody did,” Kennish said.

A live poll conducted during the webinar backed up his point: roughly three-quarters of attendees said they weren’t sure what share of their plan’s spending goes to specialty infusion.

Three Fees Drive Hospital Prices

“The gap in those scenarios and sites of care really isn’t coming from a clinical perspective, it’s really coming from how hospitals bill,” Lizotte said.

Lizotte identifies three drivers. The first is drug markup: hospital contracts often base payment on a percentage of charges rather than a multiple of the drug’s actual cost. The second is higher administration fees for chair time, nursing, and monitoring. The third is facility fees tied to the date of service, which rarely surface unless someone looks for them.

To spot the gap, Lizotte recommends comparing the paid amount per unit for the same J codes across sites. Infusion drug codes typically start with a J and appear in medical claims, not pharmacy benefit manager claims.

The $9,000-to-$97,000 jump came from a case Lizotte shared involving the drug Entyvio. At the hospital, the drug cost $97,000 per infusion, plus administration and facility fees, for an annual cost of $590,000. At an ambulatory infusion center, the drug cost fell to $7,300 per infusion, with a lower administration fee and no facility fee, for an annual total of $44,000.

Lizotte noted that the cost savings from one set of data “can be upwards of a half a million dollars per patient.”

Lizotte rejects the assumption that a cheaper setting means weaker care. “There are no significant differences in the quality between the hospital outpatient setting and alternative sites,” she said.

Patients managing chronic conditions want shorter visits, a dedicated team, and a calmer setting, Lizotte adds. Conversely, delays and fragmented care can worsen symptoms and increase absenteeism.

She read a testimonial from a patient who moved from a hospital to a Local Infusion clinic. “What I love most is that it doesn’t feel like a hospital visit. It feels like a little retreat where I can relax, get my treatment, and feel completely comfortable,” the patient wrote.

Where a Provider Model Fits

Kennish describes Local Infusion, which pairs healthcare technology with clinical care, as a provider rather than a vendor or navigator. The company owns scheduling and prior authorization and employs its own nurses. “We are where the care happens, not the company you call when care isn’t happening,” Kennish said.

Local Infusion schedules members within three days of a referral, compared with the three weeks or more that Kennish says hospital outpatient departments typically take. That speed shapes patient outcomes: a missed infusion for someone with multiple sclerosis or Crohn’s disease often means a flare, which could lead to an emergency room visit.

“The cost goes down because the care is better, not in spite of it,” Kennish added. Local Infusion operates roughly 70 clinics across 14 states, mostly along the East Coast, and coordinates home infusion for members outside its clinic areas. Kennish suggests lowering member cost share at alternate sites, even to $0, to give employees a reason to switch without a mandate.

Three Steps to Take This Quarter

Kennish laid out three steps employers can take without a vendor. First, request the data. Ask your third-party administrator or carrier for a report on what the plan spent on drugs under its medical benefit over the last 12 to 24 months. Ask for it broken down by J code, which identifies each drug, and by place of service, which shows where patients received it. “You don’t need member-level data to see a really strong pattern,” Kennish emphasized.

Next, find the hospital share. Identify your top 10 infusion drugs and top 10 members by spend. Then check what share the plan pays at hospital outpatient sites, coded as place of service 19 or 22, versus an office (11) or home (12).

Lastly, vet your options. Evaluate vendors using the five questions Lizotte suggests asking any site-of-care provider: Who owns the execution? What are the quality standards? Who is covered? How long before you go live? What changes to my plan are required?

When a third-party administrator or carrier is slow to hand over claims data, Lizotte says employers have a strong case for insisting on it. “All self-funded employers are fiduciaries of their plan, and they have responsibility to do what’s best for the plan assets,” she said. At minimum, she says, a list of J codes gives a provider enough to start a savings analysis.

As for Kennish’s $1.5 million estimate, he offered it with a caveat. “That number isn’t a promise, but it is a reason to look,” he said.

Editor’s note: From Day One thanks our partner, Local Infusion, for sponsoring this webinar. 

Ade Akin covers artificial intelligence, workplace wellness, HR trends, and digital health solutions.

(Photo by OlenaMykhaylova/iStock)