In recent years, payors, including pharmacy benefit managers (PBMs), commercial insurers, and Medicare Advantage plans, have accelerated efforts to shift the delivery of high-cost therapies away from hospital outpatient departments (HOPDs) and into lower-cost settings. These “site of care optimization” strategies are no longer isolated initiatives; they are now a central component of payor cost-containment strategies. As a result, hospitals and health systems are facing increasing pressure on one of their most important outpatient service lines: infusion therapy.
At the same time, these pressures are creating opportunities for hospitals that are willing to rethink how, and where, they deliver infusion services. With the right structure and a careful eye toward regulatory compliance, health systems can deploy alternative models that preserve clinical oversight, protect revenue, and align more closely with evolving payor expectations.
Key Site of Care Optimization Trends
- Expansion of White Bagging Mandates
One of the most prominent trends is the continued expansion of white bagging requirements. Under these arrangements, payors require that provider-administered drugs be dispensed by a payor-designated specialty pharmacy and shipped directly to the provider for administration. Many national insurance companies expanded these requirements across a growing number of therapeutic classes, including oncology, rheumatology, and rare disease treatments. In many cases, providers that attempt to continue traditional “buy and bill” practices are met with claim denials or reimbursement reductions. For hospitals, this not only disrupts pharmacy operations but also removes a critical source of margin associated with drug acquisition and administration.
- Restricting HOPD Reimbursement
In parallel, payors have increasingly targeted reimbursement for hospital-based infusion services themselves. Many plans now either deny or significantly limit reimbursement for HOPD infusions where a lower-cost alternative site of care is deemed clinically appropriate. Others impose prior authorization requirements that effectively steer patients away from hospital settings. Even where reimbursement is technically available, differential rate structures often make hospital-based care economically disadvantageous relative to physician offices or independent infusion providers. These policies reflect a broader shift toward site-neutral payment concepts, which continue to erode the historical reimbursement advantages associated with hospital outpatient departments.
- “Site of Care” Redirection Programs
Layered on top of these approaches are more formalized site-of-care redirection programs. Under these programs, payors actively manage where patients receive care, often requiring transitions to home infusion or ambulatory infusion centers after an initial course of treatment. Patients may be contacted directly and incentivized, financially or otherwise, to move to alternate settings. These programs are increasingly integrated into utilization management protocols, making them difficult for providers to challenge on a case-by-case basis. The cumulative effect is a steady migration of infusion volume away from hospitals.
Strategic Responses for Hospitals and Health Systems
In response to these trends, hospitals and health systems are exploring a range of strategies designed to maintain control over infusion services while adapting to payor-driven site-of-care requirements.
- “Clear Bagging”
One of the most immediate and accessible strategies is the implementation of clear bagging programs. Under a clear bagging model, the hospital’s own specialty pharmacy dispenses patient-specific medications and delivers them internally for administration. This approach can, in certain circumstances, allow providers to comply with payor expectations around specialty pharmacy distribution while avoiding the operational and financial downsides of white bagging. From a regulatory perspective, clear bagging must be carefully structured to comply with state pharmacy laws governing dispensing and delivery, as well as internal controls designed to prevent diversion or inventory commingling. Additionally, payor contract language must be closely reviewed, as some payors expressly prohibit clear bagging arrangements. From a 340B standpoint, clear bagging can preserve access to 340B pricing if the covered entity maintains ownership and ensures compliance with patient eligibility requirements, although it requires rigorous inventory tracking and audit readiness.
- Health System-Owned Home Infusion Pharmacies
Another increasingly common strategy is the development or expansion of health system-owned home infusion pharmacy capabilities. By delivering therapies in the patient’s home, hospitals can align with payor preferences while keeping care delivery within their broader ecosystem. However, home infusion is operationally complex and heavily regulated. Health systems must navigate state pharmacy licensure requirements, potential home health or nursing agency regulations, and Medicare Part B home infusion therapy benefit rules. Staffing, logistics, and cold chain management also present meaningful operational challenges. Nevertheless, when implemented effectively, home infusion can serve as a powerful tool to retain patients and revenue that might otherwise be lost to third-party providers. From a 340B perspective, these arrangements can be advantageous, particularly where the home setting is appropriately integrated into the covered entity structure or supported through compliant contract pharmacy models. That said, they require heightened attention to patient eligibility and diversion risk.
- Provider-Based Infusion Clinics
Hospitals are also increasingly turning to off-campus, provider-based infusion clinics to balance cost considerations with institutional control. These facilities, when properly structured, may offer a lower-cost alternative to traditional HOPDs while still operating under the hospital’s umbrella. However, maintaining provider-based status requires strict adherence to Medicare’s integration, supervision, and billing requirements, and evolving site-neutral payment policies have reduced some of the historical reimbursement advantages associated with these models. From a 340B standpoint, such clinics may qualify as eligible child sites if they are properly registered and reflected on the hospital’s Medicare cost report, but they remain subject to the same compliance and audit risks as any other 340B location.
- Standalone Ambulatory Infusion Centers
Finally, some health systems are exploring the development of standalone ambulatory infusion centers, either independently or through joint ventures. These centers are often designed to compete directly with payor-preferred sites of care and capture patient volume that would otherwise be redirected. While this model can offer greater flexibility and potentially improved alignment with payor reimbursement structures, it also raises more complex regulatory considerations. Depending on the state, facilities may require specific licensure, and joint venture arrangements must be carefully structured to comply with fraud and abuse laws, including the Anti-Kickback Statute. Importantly, these centers are generally not eligible for 340B unless they are fully integrated within the covered entity framework, which requires careful strategic consideration when evaluating their role within a broader infusion strategy.
Key Takeaways for Hospitals and Health Systems
The continued expansion of site of care optimization strategies is unlikely to slow in the near term. Payors have made clear that shifting care to lower-cost settings is a long-term priority, and hospitals that rely exclusively on traditional HOPD infusion models will face increasing financial pressure as a result.
However, hospitals and health systems are not without options. By proactively evaluating and implementing alternative care delivery models, providers can maintain clinical oversight, preserve patient relationships, and mitigate revenue loss. The most effective strategies are those that are thoughtfully designed to align with both regulatory requirements and payor expectations, while also accounting for operational realities and 340B program implications.
How Frier Levitt Can Help
For many hospitals, the challenge is not simply identifying potential solutions, but rather determining which strategies are viable within their specific regulatory, financial, and operational constraints, and then executing on those strategies in a compliant and sustainable way.
Frier Levitt helps providers and health systems understand the implications of site of care programs, develop strategic partnerships, optimize operational workflows, and engage effectively with payors and PBMs.
Our attorneys provide strategic, industry-focused legal counsel to help organizations navigate regulatory, contractual, and reimbursement challenges, protect patient care, sustain revenue, and position them for long-term success in the rapidly evolving home infusion industry. Contact our team today to learn how we can help you.
Senior Counsel
