Hospital Charity Care Levels Decline Despite Growth in Drug Discount Program

Today, nonprofit hospitals continue to make headlines for garnishing wages or pursuing patients through aggressive debt collection practices — even though these hospitals are supposed to be serving the vulnerable patients of their communities. What’s more, according to a new report by the AIR340B Coalition, some hospitals participating in a program intended to help them serve their needy patients are actually providing low rates of charity care.

The new report, “Left Behind: An Analysis of Charity Care Provided by Hospitals Enrolled in the 340B Discount Program,” shines light on this issue just as hospitals mount a lawsuit against the Department of Health and Human Services over a new transparency rule. The administration’s efforts represent a positive step forward, but further transparency measures are needed for those hospitals participating in the 340B program. Here’s why.

The 340B drug discount program was established nearly three decades ago to help certain health care facilities — including federally qualified health centers and other grantees, as well as disproportionate share hospitals — that serve a large number of uninsured or otherwise vulnerable patients to reduce prescription drug costs. This help comes through steep discounts that pharmaceutical manufacturers are required to provide 340B-covered entities.

Notably, 340B grantees are required to demonstrate how they use 340B savings to help vulnerable patient populations as a condition of their grants, but there is no such requirement for hospitals. While there is no way of knowing how 340B hospitals are reinvesting revenue from the program to provide care for patients in need, we’d expect that they’d use their savings to support care for needy patients — especially since the 340B program grew exponentially from $6.9 billion to $24.3 billion in discounted sales from 2012-17.

However, the latest analysis of charity care levels — or the amount of free or discounted care to low-income individuals — at 340B DSH hospitals found nearly 2 out of 3 of these hospitals are consistently providing below-average rates of charity care. Furthermore, the findings reveal that 29 percent of 340B DSH hospitals provide charity care that represents less than 1 percent of their total patient costs.

In some cases, hospital bad actors are taking advantage of the program by exploiting loopholes, such as lenient hospital eligibility requirements and financial incentives to acquire independent physician practices, in order to increase the revenue they generate through the 340B program. There is evidence that leads experts to believe many of these hospitals charge patients the undiscounted price and pocket the savings rather than expanding care to the patients the program was created to help.

Lawmakers on Capitol Hill are heavily focused on health care-related policies, but there is a significant omission from the current conversation: the 340B drug discount program. Results from the report confirm that action is needed to increase accountability for hospitals participating in the 340B program. Further, Congress and the Trump administration must take a hard look at the current eligibility requirements for hospitals and how 340B hospitals are reinvesting in patient care.

Our leaders in Washington, D.C., should ask themselves: Who is truly benefiting from the program? If the answer is hospitals, and not patients, then improving 340B needs to be part of the broader health care debate.


Former Congressman Bob Dold is a spokesperson for the Alliance for Integrity and Reform of 340B (AIR340B), a coalition of patient advocacy groups, clinical care providers and biopharmaceutical innovators dedicated to reforming and strengthening the 340B program.

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