Some hospitals serving large volumes of low-income patients are at risk of getting kicked out of a popular federal discount drug program as the fallout from the pandemic's unprecedented impact on healthcare providers continues.
The 340B program, which allows qualifying hospitals and providers to buy deeply discounted drugs from manufacturers, has strict eligibility requirements and an annual recertification process. Providers must show that a certain percentage of patients they served in the year prior were low-income or on Medicaid.
But some hospitals that saw fewer patients last year might miss that threshold and have to exit the program absent action from President Joe Biden's administration or Congress.
A Modern Healthcare analysis of available cost reports shows 26% of disproportionate-share hospitals (DSH) could be vulnerable if the percentage of DSH yet to be reported in their 2020 cost reports falls below the threshold to participate in the program. For hospitals designated as Rural Referral Centers or Sole Community Hospitals, about 10.6% could be in danger of being affected.
"Many hospitals are already facing financial concerns due to the pandemic, and then on top of that, these hospitals are also worried about losing their 340B eligibility due to the changes—temporary changes, we expect—brought on by the COVID pandemic," said Aimee Kuhlman, senior associate director of federal relations at the American Hospital Association.
More than 2,540 hospitals in the U.S. participate in 340B, allowing them discounts 20% to 50% off a drug's list price, according to the Government Accountability Office. Hospitals say those savings are then channeled into programs for uninsured patients and other vulnerable populations.
It's not yet clear how many hospitals could be impacted. 340B eligibility is in part determined by the information on a hospital's cost report, and many have not yet filed for 2020 as HHS extended deadlines due to COVID-19.
Hendrick Health, a three-hospital, not-for-profit chain in Texas, saw one of its facilities lose access to 340B pricing this year because its 2020 cost report showed the hospital didn't meet the DSH threshold. Hendrick Health CFO Jeremy Walker blamed the pandemic's impact on patient volume.
When the system became eligible for 340B in 2019, the savings it generated went toward launching a new medication management clinic that helps low-income patients control diabetes, keeping them out of the hospital and improving their overall health.
Hospital leaders hoped to expand that program to cardiac issues and other illnesses that can cause recurrent hospitalization if not managed properly. Those plans are now on hold.
"That's one of the disheartening and deflating things. We just got some momentum going and really putting this to good use, and that sort of knocked the wind out of us when we were no longer eligible," said Dr. Joshua Reed, physician advisor at Hendrick Health System.
The system plans to keep its current program, funding it through charity care and private donations.
"The ability to expand beyond what we already were doing, I think that's the challenge," Reed said. "Our ability to scale up is going to be significantly hampered."