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As the healthcare landscape evolves, one major shift is occurring in how care is delivered: the increasing transition from inpatient to outpatient settings. This change isn’t just about patient preference or convenience—it’s deeply tied to cost, resource availability, and the rising price of medications.
Hospitals and healthcare providers are facing mounting pressure to deliver high-quality care while managing tight budgets. Drug prices, in particular, are playing a growing role in determining how and where care is provided. In this article, we’ll explore how drug costs influence the balance between inpatient and outpatient care—and why understanding this shift matters for healthcare organizations today.
Inpatient care refers to treatments or procedures where patients are admitted to a hospital and stay overnight or longer. Outpatient care, by contrast, includes services such as same-day surgeries, routine checkups, or diagnostic tests where patients return home the same day.
Over the past decade, outpatient care has become more common. This shift has been driven by advancements in medical technology, greater emphasis on preventive care, and financial considerations. On average, outpatient services are less costly than inpatient stays, with a multi-country analysis showing inpatient services costing around 40% more than comparable outpatient care.
Prescription drug spending has risen sharply in recent years. In 2021, the U.S. healthcare system spent approximately $603 billion on prescription drugs, with $421 billion allocated to retail drugs alone. Hospitals not only face high acquisition costs for many medications but are also affected by frequent drug shortages, which further impact operational budgets and treatment planning.
These rising costs can significantly influence how hospitals decide where to administer care. When medications for outpatient procedures are more accessible or less expensive, hospitals may be more likely to shift care away from inpatient settings—if it remains clinically appropriate.
Between FY2015 and FY2017, outpatient drug spending per adjusted admission rose by 28.7%, while inpatient drug spending increased by only 9.6%. This trend underscores a growing challenge: while shifting to outpatient care may reduce facility and labor costs, the rising price of outpatient medications can still drive up overall costs.
Healthcare leaders must account for these increasing outpatient drug expenses, especially as more treatments move out of the hospital and into clinics or home settings.
Many hospitals and healthcare systems rely on the 340B Drug Pricing Program, a federal initiative that allows eligible providers to purchase outpatient drugs at a discount. The intent of the program is to enable covered entities—often safety-net hospitals and clinics—to stretch limited resources and serve vulnerable populations.
However, the program has also influenced how hospitals structure their services. Some systems have acquired outpatient physician practices to extend 340B eligibility, aligning care delivery with available drug discounts. While this helps control costs, it also highlights how deeply drug pricing strategies can impact care setting decisions.
As drug prices rise and outpatient care expands, healthcare providers must carefully balance cost control with patient access and outcomes. In some cases, keeping a patient in the hospital may provide better oversight and reduce medication errors. In others, shifting to outpatient care may improve comfort, convenience, and adherence to treatment.
Ultimately, the goal is not to favor one care setting over another, but to ensure that care decisions are informed, cost-effective, and patient-centered.
Drug pricing is no longer just a budgeting issue—it’s a strategic factor shaping care delivery models. As hospitals and clinics adapt, they need visibility into where and how drug costs are affecting their operations.
At RxTrail, we work with healthcare organizations to optimize their 340B programs, ensure audit readiness, and bring financial clarity to their operations. Whether your team is navigating drug procurement challenges or exploring outpatient expansion, we’re here to help you make informed decisions that support both compliance and care.
Want to learn more about how drug pricing impacts your 340B strategy?
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