Hospitals say the U.S. Government Accountability Office used faulty methodology when it determined that hospitals that serve large numbers of low-income patients abuse a federal drug discount by overprescribing medications.
HHS raised similar concerns about the findings.
Hospitals that serve a disproportionate number of low-income patients have access to discounted outpatient drug prices through the 340B Drug Pricing Program, which is administered by HHS.
The GAO report released Monday found that in both 2008 and 2012, per-beneficiary Medicare Part B drug spending, including oncology drug spending, was substantially higher at hospitals utilizing the 340B discount than at other hospitals.
“This indicates that, on average, beneficiaries at 340B disproportionate share hospitals (DSH) were either prescribed more drugs or more expensive drugs than beneficiaries at the other hospitals in GAO's analysis,” the watchdog agency said.
For example, in 2012, average per-beneficiary spending at 340B DSH hospitals was $144, compared to approximately $60 at non-340B hospitals.
Provider trade groups questioned how the GAO came up with its results. They said the report doesn't take into account that 340B hospitals may see sicker patients than other hospitals, and noted that the GAO may have unfairly ignored other reasons for higher spending, including the fact that patients of non-340B hospitals more frequently receive drugs in non-hospital settings.
“None of this stopped GAO from reaching unsupported conclusions and policy recommendations based on its faulty analysis,” Dr. Bruce Siegel, CEO of America's Essential Hospitals, a trade group for safety net hospitals, said in a statement. “We're surprised not only by the lack of evidence and data for GAO's conclusions and recommendations, but also by its suggestion that physicians in our nation's essential hospitals would ignore patient needs to enrich hospitals.”
American Hospital Association Senior Vice President Tom Nickels made similar criticisms of the methodology in a newsletter to members. "Simply put, the GAO report misses the mark,” he said.
340B Health, an association of more than 1,000 hospitals, echoed those remarks in its own statement, and appears to have an ally in HHS, which expressed similar skepticism in its response to the report.
“We are concerned that the report characterizing spending on Part B in 340B DSH hospitals … is not supported by the study methodology,” HHS said. “GAO's study, which only examined average difference in per-beneficiary spending by hospital type, did not examine any patient differences in terms of outcomes or quality.”
A GAO representative stood by the methodology.
“We carefully examined several factors that could potentially affect Part B drug spending and, even after accounting for these factors, found substantial differences in spending between 340B DSH and non-340B hospitals," said Chuck Young, managing director of the GAO's office of public affairs.
He added that several classifications that might result in higher proportions of low-income patients could not explain the substantial differences in Part B drug spending the GAO found.
“Also, to understand whether the substantially higher payments could be due in part to patients who were more likely to receive Part B drugs in non-hospital settings, we also conducted an analysis that was limited to patients who only received Part B drugs in a hospital outpatient department," Young said.
The analysis found that higher spending at 340B DSH hospitals persisted, and was more than twice as high at those hospitals than at non-340B DSH hospitals.
There were 1,039 disproportionate share hospitals participating in the 340B program as of May 31, 2013, the last year a federal count was available, according to congressional data.
The program has been around since 1992, but was expanded after the Affordable Care Act allowed more providers to become eligible for the discount. The number of participants taking advantage of the discounts has since risen.
More troubling, is the potential that overprescribing may be how hospitals “maximize Medicare revenues,” the report stated. “While hospitals may be financially benefiting … this poses potentially serious consequences to the Medicare program and its beneficiaries,” the agency said.
The GAO suggested that Congress consider eliminating the incentive to prescribe more drugs or more expensive drugs than necessary to treat Medicare Part B beneficiaries at 340B hospitals.
Safety net providers and clinics that participate in the 340B program are expected to meet this month to address the criticisms. They're now contending with a pile of reports that cast a shadow over the program.
An analysis released last year by Avalere Health and sponsored by the pharmaceutical industry-backed advocacy group, Alliance for Integrity and Reform, found that roughly two-thirds of hospitals participating in the 340B program provide less charity care than the average U.S. hospital, with charity care making up 1% or less of total costs at a quarter of those facilities.
An analysis conducted by the Berkeley Research Group found that drug purchases made at the 340B price rose from $1.1 billion in 1997 to more than $7 billion in 2013, with projections of reaching more than $16 billion by 2020.
More positive studies include an analysis conducted in May by healthcare policy consulting firm Dobson DaVanzo & Associates. It found that 340B hospitals provided nearly twice as much care to Medicaid and low-income Medicare beneficiaries as hospitals that did not participate in the program.
The Health Resources and Services Administration, the federal agency that regulates 340B, estimated that the program saved providers about $3.8 billion in drug costs in 2013.