Provider-administered drugs are one of the fastest-growing and least-managed cost drivers for commercial plan sponsors.
Despite that, recent data from the Pharmaceutical Strategies Group show that only 35% of commercial plan sponsors currently have a site of care (SOC) program in place for specialty pharmacy. That result is surprising given the size of the savings at stake.
Medicare has figured this out and started site-neutral payments over a decade ago, but the employers who fund the bulk of commercial health spending largely haven't.
The evidence supporting SOC management is no longer the story. The real question is why so many commercial plans continue paying hospital prices when lower-cost alternatives already exist.
LOCATION DRIVES COSTS, NOT CLINICAL NEED
Commercial plans often pay substantially more when specialty drugs are reimbursed at hospitals rather than physician offices or through specialty pharmacies. An Oliver Wyman analysis, which we highlighted in our 2025–26 Economic Report on Pharmaceutical Wholesalers and Specialty Distributors, showed a set of seven drugs and the commercial reimbursements paid under patients’ medical benefit compared with reimbursements paid to specialty pharmacies under patients’ pharmacy benefits.
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Average prices paid to hospitals for provider-administered specialty drugs were often twice the prices paid to specialty pharmacies and about 30% higher than prices paid to physician offices.
More recent commercial claims data reach the same conclusion. Below is our analysis of the cost and quality outcomes from the study data.
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Infusions in hospital outpatient departments (HOPDs) had 42% higher costs for the plan compared with those who received infusions in alternative SOCs—all without measurable improvements in safety or outcomes. As a direct hit to the patient, the study also found out-of-pocket costs were 21% higher on average for HOPD infusions.
MEDICARE EMBRACES SITE-NEUTRAL PAYMENTS
Medicare has increasingly concluded that paying a hospital rate for an outpatient service that could safely be delivered in a physician office is inefficient spending.
The CY 2026 OPPS/ASC final rule effective January 1, 2026, represents the most recent major step related to drugs. CMS finalized site-neutral payment for drug administration services in previously excepted off-campus HOPDs, bringing reimbursement for drug administration in line with physician fee schedule rates. CMS estimated the policy would reduce OPPS spending by $290 million in 2026—$220 million in Medicare program savings and $70 million in beneficiary savings through lower cost-sharing. For context, that’s 0.29% of roughly $100 billion for total OPPS spending.
The CBO’s broader estimate for extending site-neutral rates to most services at all off-campus and on-campus HOPDs is $156.9 billion in reduced federal payments over 2025–2034. Drug administration accounts for $5.6 billion of those projected savings.
These are Medicare numbers, but the commercial implications may be even larger.
A 2024 analysis “Impact of Site-Neutral Payments for Commercial and Employer-Sponsored Plans” estimated that plans could have saved $58.2 billion in 2022 alone from site-neutral payment, with total employer-market savings projected at $847 billion over 2024–2033 if broad site-neutral pricing were adopted by commercial plans. The same study estimated this would result in commercial premium reductions of roughly 5% each year over the decade.
The precise estimates vary by methodology and come with limitations, but they all point clearly in one direction: employers that get patients to lower-cost sites of care spend significantly less on provider-administered drugs.
EMPLOYERS ARE STILL SITTING ON THE SIDELINES
Commercial plan sponsors have for years tried with limited success to move infusions into lower-cost sites of care. Common SOC tactics include clinical policy requirements, reduced patient cost sharing at preferred sites, prior authorization for nonpreferred sites, the mandated use of certain sites of care, and specialty pharmacy white bagging strategies.
However, despite significant potential savings, Pharmaceutical Strategies Group’s 2026 Trends in Specialty Drug Benefits Report found adoption of SOC programs to be surprisingly low. Below is our analysis of the data in the report.
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For 2025, over half of health plans and one-quarter of employers have SOC strategies for provider-administered specialty drugs. Even for the most sophisticated health plans, SOC program adoption is far from universal.
Beyond the overall low number of plans with SOC programs, the voluntary site of care program—with no mandate and no incentive—essentially asks patients to “pretty please” redirect their care. For patients who have an established relationship with their infusion provider at a nearby hospital system, there’s no real reason to change sites.
If administering specialty drugs in a physician office or home infusion setting instead of an HOPD saves 30%+ per infusion, the aggregate savings from a well-designed, mandatory or incentive-based SOC program can translate into millions of dollars annually for a large self-funded employer. The administrative complexity and provider pushback to implementing a SOC program is real—and often cited as a barrier—but so is the growing financial penalty for doing nothing.
POOR EXECUTION
The real surprise is that most commercial plan sponsors still haven't acted on what the industry has known for years. This is a problem with execution on the evidence, not the evidence itself, which has been remarkably consistent.
Administrative complexity explains part of the slow adoption, but complexity alone doesn't explain why SOC management remains uncommon after years of evidence, federal policy changes, and billions in projected savings. At some point, inaction becomes a business decision rather than an implementation challenge.
Every infusion administered in a higher-cost HOPD when a lower-cost alternative is clinically appropriate represents a decision by the plan sponsor to accept higher spending.
You can be sure the hospitals are grateful for that decision.
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