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Hospitals just lost their chemotherapy profit margins overnight.
CMS dropped a bombshell this February: site-neutral payments now apply to drug administration services.
Translation? That chemotherapy infusion that hospitals billed at premium rates? Now it’s reimbursed at the same rate whether given in a hospital outpatient department or a physician’s office.
The numbers are staggering:
• Hip replacements: $3,500 less in hospital settings
• Chemotherapy administration: thousands less per treatment
• Immunotherapy infusions: massive margin compression
Here’s what’s really happening:
For years, hospitals acquired physician practices and converted them to hospital outpatient departments. Same service, same location, double the Medicare payment.
Patients paid higher copays. Medicare spent billions extra. Hospitals pocketed the difference.
CMS finally said enough.
But here’s the twist most people miss:
This isn’t just about cost-cutting. It’s about access.
When Medicare pays the same rate regardless of setting, suddenly those community infusion centers become viable again. That imaging center down the street? It can compete.
Patients win with:
✓ Lower out-of-pocket costs
✓ More convenient locations
✓ Shorter wait times
✓ Less exposure to hospital-acquired infections
Hospitals are scrambling. Some are already:
• Partnering with independent infusion centers
• Redesigning outpatient strategies
• Focusing on truly complex cases requiring hospital resources
The smart ones see opportunity. They’re asking: What services truly need our four walls? Where can we add real value beyond facility fees?
MedPAC signals this is just the beginning. More site-neutral expansions are coming.
The era of geographic arbitrage in healthcare pricing is ending.
And honestly? It’s about time.
The question isn’t whether your organization will adapt. It’s how quickly you’ll embrace this new reality where value, not venue, determines payment.
♻️ Repost if site-neutral payments will reshape your local healthcare landscape
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Author:
Jonathan Govette is a seasoned healthcare and technology executive with more than two decades of experience building, scaling, and advising digital health companies. He is the Co-Founder and CEO of Oatmeal Health, an AI-driven Lung Cancer Screening and Diagnostics company focused on expanding access to early detection for underrepresented populations, particularly patients served by Federally Qualified Health Centers and value-based health plans.
With a background in engineering, product development, and strategic partnerships, Jonathan has founded and led multiple health technology ventures across clinical care delivery, regulated medical software, and AI-enabled diagnostics. His work sits at the intersection of medicine, technology, and health equity, with a consistent focus on translating complex clinical problems into scalable, real-world solutions.
Jonathan has spent much of his professional life dedicated to improving outcomes for marginalized and underserved communities. He has designed and implemented frameworks that align clinical quality, reimbursement, and technology to sustainably advance health equity at scale. This mission is deeply personal and informs his leadership philosophy and long-term vision for healthcare transformation.
In addition to his operating experience, Jonathan is an author and long-time writer in the healthcare domain, with over 20 years of published work covering digital health, medical innovation, and healthcare systems. He is a frequent mentor to early-stage founders and regularly advises startups on product strategy, partnerships, and go-to-market execution in regulated healthcare environments.
Before entering industry full-time, Jonathan nearly pursued a career in medicine with an early path toward cardiothoracic surgery, an experience that continues to shape his clinical perspective and respect for frontline care delivery.
CEO | Oatmeal Health | AI Lung Cancer Startup | Engineer | Writer | Almost Became a Doctor (Cardiac Thoracic Surgeon) | 3x Health Tech Founder | Startup Mentor | Follow to share what I’ve learned along the way.
