Hospitals question decision to redistribute $900 million in 340B funds
Hospital officials say that a proposed $900 million reduction in payments through the 340B drug discount program will cut into charity care and may not be redistributed fairly by the CMS as intended.
The $900 million cut would be enacted by the CMS through a sharp reduction in the rate paid to hospitals in the program, which aims to reduce operating costs for hospitals that see a disproportionate share of low-income patients. The CMS suggested that hospitals in the federal program be paid 22.5% less than the average sales price for drugs, rather than the current rate of 6% above the average sales price. Under the proposed changes, if a drug costs $84,000, the CMS would pay just over $65,000, instead of the current $89,000.
The reduction is intended to be budget-neutral, so the CMS said it would redistribute the savings by increasing Medicare payments to hospitals by 1.4% next year.
“You’re taking funds from hospitals that treat the most fragile populations and spreading it across all hospitals,” said Karen Fisher, chief public policy officer at the Association of American Medical Colleges.
Providers now use savings from the 340B program to provide ongoing care management for conditions ranging from HIV to diabetes, according to Ted Slafsky, CEO of 340B Health, an association of more than 1,300 340B hospitals.
For instance, Monroe County (Ala.) Hospital, uses the $1.1 million it gets from the 340B program to fund cancer care for patients with no insurance coverage. The University of Rochester (N.Y.) Medical Center saves more than $4 million and uses the money to offer patients free medications.
Approximately 45% of all acute-care hospitals participate in the 340B program. The Medicare Payment Advisory Commission estimates that 2,140 were relying on the program in 2014, up from 583 in 2005. Spending during that period jumped from $2.4 billion to $14 billion, according to federal data.
One of the ongoing criticisms of the 340B program is that hospitals with mostly high-income patients have taken advantage of the program, sometimes turning it into a moneymaking opportunity. MedPAC wrote in 2015 that “covered entities can purchase 340B drugs for all eligible patients, including patients with Medicare or private insurance, and generate revenue if the reimbursements for the drugs from payers exceed the discounted prices they pay for the drugs.”
Plus, the Affordable Care Act made new categories of hospitals eligible for 340B discounts, including some children’s hospitals, free-standing cancer hospitals and sole community hospitals.
A CMS spokesman said the agency wants feedback on ways to ensure the savings return to hospitals that serve uninsured and underinsured patients. The agency is taking comments through Sept. 11. If finalized, the change would become effective Jan. 1, 2018.
One of the ongoing criticisms of the 340B program is that hospitals with mostly high-income patients have taken advantage of the program, sometimes turning it into a moneymaking opportunity.