The 340B program was created for an important purpose: to help uninsured, needy patients access the medicines they need. However, a new analysis paints a very different picture of how the program is currently operating. While 340B hospitals are tasked with serving vulnerable patients, data show 64 percent of these hospitals provide less charity care than the national average for all hospitals, including for-profit entities. Not only is this low number concerning, it represents a decrease in charity care rates for 340B hospitals since 2011. This begs the question of whether hospitals or patients are benefitting more from the program.
The new report, with analysis by Avalere Health, sheds more light on the issue and raises questions about hospital eligibility criteria in the 340B program. Specifically, based on a review of Medicare cost reports, the number of 340B hospitals providing charity care that represents less than 1 percent of total patient costs grew from nearly a quarter (24 percent) to more than one-third (37 percent) from 2011 to 2014. In addition, the national average level of charity care for all hospitals—340B and non-340B—dropped from 3.3 percent to 2.2 percent from 2011 to 2014.
Even with the coverage expansion following the Affordable Care Act, if 340B-participating hospitals are actually serving the vulnerable, uninsured patients the program was created to help, then more 340B hospitals should have charity care levels above the national average for all hospitals.
An underlying problem and likely reason for the charity gap in 340B-participating hospitals is the eligibility criteria for hospitals to qualify for the 340B program in the first place. With the Affordable Care Act’s expansion of insurance coverage and Medicaid, it is possible that many hospitals are seeing fewer patients that need charity care. But while more Americans have become insured, the 340B program has not adjusted its eligibility criteria to align with the program’s intent of assisting providers that serve safety-net populations. Additionally, the current eligibility criteria for hospitals lead more hospitals to become eligible when uninsured patients enroll in Medicaid. As a result, many hospitals qualifying for the program may not be providing charity care to the vulnerable or uninsured patients 340B is intended to help.
Compounding the issue, outdated eligibility criteria are also contributing to unsustainable program growth over the last decade. According to recent research by Berkley Research Group, in 1997 DSH hospitals accounted for 42 percent of total 340B sales. By 2013, the percentage had increased to more than 80 percent. There is no evidence uninsured, needy patients are seeing the benefit of this rapid expansion.
340B is a critical program that requires reform to ensure the appropriate hospitals are qualifying for the program and serving our nation’s most vulnerable patients as intended. As a first step, we must revise hospital eligibility criteria and, in the long run, do more to keep the program accountable and sustainable, so the program is driven by patient needs not hospital profits.
Stephanie Silverman is spokesperson for the Alliance for Integrity and Reform of 340B.