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Hospitals saved an average of $11.8 million due to 340B drug discount program

Hospitals said cuts to 340B savings would force them to scale back certain programs, though the 340B program remains controversial.

Jeff Lagasse, Associate Editor

The 340B drug discount program resulted in savings for hospitals last year, averaging out to $11.8 million per facility, according to a survey from 340B Health. 340B Health is a trade group that represents more than 1,000 public and private nonprofit hospitals and health systems that participate in the 340B drug pricing program.

The purpose of the survey was to track 340B-related savings and and how they're used to stretch hospital resources. The program is ostensibly a mechanism for safety net hospitals to ease their financial pressured by requiring drug manufacturers to provide discounts on certain outpatient drugs sold to qualifying hospitals and clinics.

WHAT'S THE IMPACT

Hospitals reported that the top two areas for use of 340B savings were to support uncompensated and unreimbursed care and to support patient care services, including clinical services, pharmacy services, and patient auxiliary services.

There were differences between rural hospitals and disproportionate share hospitals when it came to the use of 340B savings. DSH hospitals reported using their 340B savings to offset low reimbursement from Medicaid. Rural hospitals indicated that 340B savings were critical to keeping the doors of their facilities open and operational, and that a loss of those savings would likely force them to close.

All hospitals reported that cuts to 340B savings would force them to scale back certain programs, such as cancer and diabetes programs.

While the average annual 340B savings across all hospitals was $11.8 million, savings ranged wildly across different facilities based primarily on their size. And hospitals reported an average of $100,000-200,000 in 340B compliance costs, and an average of two full-time employees overseeing and maintaining a 340B program.

82 percent of hospitals said cutting or losing their 340B savings would hurt their ability to provide more patient care services, while two-thirds said it would reduce their ability to provide uncompensated care. Seventy-one percent of DSH hospitals said a loss in savings would reduce their ability to provide free and/or discounted drugs.

THE LARGER TREND

In late December, a federal court sided with the American Hospital Association and others in ruling that the Department of Health and Human Services unlawfully cut payment rates for certain outpatient drugs. The ruling was that HHS Secretary Alex Azar exceeded his legal authority in setting new reimbursement rates in the outpatient prospective payment system rule for 2018.

The 340B program was established so that hospitals serving a vulnerable population without the ability to pay could purchase drugs at a steeply discounted rate and charge HHS the higher rate under the outpatient prospective payment system. 340B providers contend that the difference allows hospitals to continue operations serving an underserved population..

But in the December ruling, the judge cited HHS's argument that several  studies have confirmed these hospitals make a large profit from the difference between what they pay for the drugs and the rate at which Medicare reimburses.

And according to court documents, HHS said the current payment methodology could lead to unnecessary utilization and potential overutilization of the drugs, which a 2015 Government Accountability Office report has shown to be true. The GAO found that Medicare Part B drug spending was substantially higher at 340B hospitals than at non-340B hospitals.

Twitter: @JELagasse

Email the writer: jeff.lagasse@himssmedia.com