Hospital Cost Comparisons Should Be Fair

Andrew L. Pecora, MD

The debate continues to rage over whether the difference in the cost of oncologic care between outpatient hospital and physician private offices is appropriate. There is a particularly large pricing gap for chemotherapy administration. Numerous studies have shown that chemotherapy in the outpatient hospital setting costs more than in the private physician office, with a recent report showing it to be 60% more expensive. An economic study by Lucio Gordan, MD, medical director in the Division of Quality & Informatics at Florida Cancer Specialists & Research Institute, and Xcenda found that 1 year of all-related treatment for 3 common cancers— lung, breast, and colon—was as much as $90,000 more costly in the hospital outpatient setting than in the private office. The higher cost was largely due to chemotherapy charges, although physician visits contributed to the added expense in the hospital outpatient setting. Compounding this was the finding that emergency department visits after chemotherapy administration were more frequent in the hospital setting: 9.8% versus 7.9% in the private physician office.

In defense of these higher costs, hospitals correctly cite that they have “hidden” expenses that don’t exist in the private office setting. These include charity care, such as expensive chemotherapy treatment of the underinsured, who are turned away from private physician practices. Also, there are state rules for staffing and facilities that do not apply to private office practices. These also generate expense. In addition, many services provided in the hospital inpatient setting are paid for with outpatient revenues. Unlike a private practice, a hospital must provide services on a 24-hour, 7-day-a-week basis, such as emergency and inpatient care, regardless of the level of utilization. Thus, fixed costs are very different for a hospital from those for a private physician office, and comparing the appropriateness of total revenue might seem unfair. In addition to costs, another issue is the appropriateness of care and clinical outcomes for patients treated in hospitals versus private clinics. Hospitals claim to produce better outcomes, and this may be true, but similar claims are made by physicians in private offices. The fact is, there are no reliable, properly risk-adjusted data to make such comparisons, but such data seem warranted and should be generated.

So where do we go from here? How about—first and foremost—ensuring that each patient receives the proper care every time—neither too little nor too much—regardless of the site of service. Next, if a comparison must be made, level the playing field by normalizing the cost comparison. Give hospitals credit for costs that private physician offices do not incur. Then use proper risk adjustment, including consideration of patient socioeconomic status, and do a side-by-side comparison to determine whether quality is truly better in either of the settings. There is no doubt hospitals play a critical role for oncology care in any community.

Hospitals need to maintain operating margins so that emergency departments, inpatient beds, and intensive care units remain available for patients with cancer. Even without an analysis, there is a clear role for private physician outpatient oncology to provide convenience and lower the total national tab for cancer. In the end, I suspect both settings will be found to be beneficial and necessary.