Location, location, location: Cancer treatment costs more in hospital

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Costs associated with privately insured patients receiving radiation therapy vary between freestanding radiation treatment facilities and the hospital outpatient setting, with freestanding facilities being less costly for treatment episodes lasting one or two months, and the hospital setting being less expensive for treatments of a longer duration, according to a study by Avalere Health.

Approximately two-thirds of the treatment episodes in Avalere’s study, which included data from 2008 to 2010, lasted one or two months. One-month treatment episodes cost approximately 15 percent more in the hospital outpatient setting versus the freestanding facility; two-month episodes cost 4 percent more.

The cost equation doesn’t flip until the third month, when freestanding locations are about 8 percent more expensive than hospitals, according to Avalere.

The average radiation therapy episode lasted 2.1 months for patients managed in a physician’s office and 1.9 months for patients managed in a hospital outpatient setting. Total unadjusted cost of care for patients who received radiation therapy during the study period was more than $318 million--$165 million for office-managed treatment episodes and $153 million for hospital outpatient treatment episodes.

In addition to radiation therapy, Avalere Health also looked at costs associated with privately insured patients receiving chemotherapy in the different care settings. Chemotherapy in the hospital outpatient setting was an average of 24 percent more expensive than treatment received in a physician’s office. Average costs for patients receiving chemotherapy in a hospital outpatient setting were approximately $35,000 compared with $28,200 for treatments in a physician’s office, and unlike radiation therapy treatments, the length of chemotherapy treatment did not change the fact that office treatments cost less.

"At a time when the healthcare community is focused on managing costs, these findings show the importance of where care is delivered, and raise important questions about how best to manage cancer treatment,” said Eric Hammelman, Avalere vice president and one of the authors of the study.

The study was commissioned by the Community Oncology Alliance, in partnership with the National Association of Managed Care Physicians (NAMCP) Medical Directors Institute. Data were provided by NAMCP members and included three large commercial managed care plans and one large self-funded employer, covering an estimated nine million individuals.