Aspirus Ontonagon Hospital, a small not-for-profit hospital in Ontonagon, Mich., last year generated about $1 million in revenue from a federal program that allows safety-net providers to purchase deeply discounted drugs.
With improved margins due to savings from the 340B drug discount program since 2011, the 18-bed hospital prevented closures of its emergency department, family practice clinic and skilled-nursing facility. It also filled new positions and expanded services to offer oncology treatment for the first time.
“We would not have been able to start oncology without 340B,” said William Wood, a board trustee for Aspirus Ontonagon Hospital, who called 340B participation a “major contributing factor” in the broader turnaround.
The hospital's turnaround is the kind of success story that makes the case for the 340B program, which was established by Congress in the early 1990s to help clinics and hospitals serving the poor and uninsured by allowing them to purchase certain outpatient drugs at up to a 50% discount and has since been expanded several times.
However, the 340B program has become controversial because of alleged misuse by some hospitals.
Critics say some hospitals may not be using the 340B savings and revenue they generate to improve care for the uninsured and indigent patients for whom the program was designed. Other providers have raised questions about whether physicians will alter prescribing patterns toward more expensive drugs to boost profit margins.
Hospitals in the 340B program purchase discounted drugs for any patient receiving medical care, not only those who are poor or uninsured, although Medicaid beneficiaries are excluded. The providers can then use savings or revenue generated from purchasing the discounted medications to enhance patient care and services for all eligible patients. It's up to the providers to decide how to use the savings.
The number of providers participating in the 340B program has significantly increased in recent years, and roughly one-third of the nation's hospitals now participate in the program.