This analysis, which was funded by the Alliance for Integrity and Reform of 340B (AIR 340B) and conducted by Avalere Health, discovered that most 340B-eligible hospitals do not provide much charity care. (Details below.) Only 22% of hospitals account for 80% of the total charity care that 340B hospitals provide. These new data are consistent with the Office of Inspector General’s recent finding that two-thirds of the hospitals do not offer discounted 340B drug prices to uninsured patients.
Safety Net Hospitals for Pharmaceutical Access (SNHPA) immediately shouted, “Bah! Humbug!” But now that so many uncomfortable 340B facts are being revealed, SNHPA may see its shrill, uncompromising position marginalized as change comes to the program.
THE GHOST OF 340B PAST
The 340B program applies to outpatient drugs that covered entities provide to eligible patients. Covered Entities include six hospital types or those receiving federal grants. Hospital categories include those with a disproportionately large share of Medicare and Medicaid patients (disproportionate share hospitals, or DSHs), children’s hospitals, freestanding cancer hospitals, and sole community hospitals.
Using Medicare cost reports, Avalere Health analyzed charity care at hospitals that qualified based on their DSH percentage. Alas, this percentage doesn’t measure charity care, as the report explains:
“The DSH percentage, therefore, is a reflection of care provided to low-income insured patients and does not reflect the share of uninsured patients or the amount of charity care provided at a hospital. Additionally, the DSH metric is based solely on inpatient utilization, which makes it a poor proxy for a program such as 340B that is limited to outpatient drugs.”EVEN SCROOGE WOULD DISAPPROVE
Here are the unfortunate results: About 70% of 340B hospitals provide less charity care than the overall 340B and non-340B average. For one in four 340B hospitals, charity care accounts for 1% or less of the hospitals’ total patient costs. (See chart below.)
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In 340B Is Taking Over the Hospital Market—With a 25% Share, I found that hospitals’ overall share of uncompensated care has not materially increased along with the explosion in 340B purchases. Avalere’s analysis provides a compelling explanation for this awkward reality.
In SNHPA's press release response, it stated that “two-thirds of hospital uncompensated care is provided by 340B hospitals.” However, the Avalere analysis found that only 22% of hospitals account for 80% of the total charity care that 340B hospitals provide. (See page 7 of the report.)
THE HOLIDAY’S OVER?
These latest data reinforce my previously stated position on the 340B program. Some legitimate entities truly require additional financial support. However, there are also many large, profitable, well-funded health systems that appear to be taking advantage of the program by using 340B revenues in ways that can’t be linked to the drug discount program’s initial purpose.
Congress should require that hospitals fully disclose how they use their 340B profits. Let’s hope that HRSA’s promised “mega-rule” starts to focus the program on truly deserving hospitals and the neediest patients.
To read more on this topic, check out Charity Care Program Fails, an editorial by a spokesperson for AIR340B.