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340B hospitals provide more low-profit services

Hospitals that participate in the 340B program offer more low-profit service lines than nonparticipants, according to research published in JAMA Internal Medicine.

“Effective January 2018, [CMS] reduced Medicare reimbursement to physicians administering discounted drugs acquired by most 340B hospital participants,” Sayeh Nikpay, PhD, MPH, from Vanderbilt University School of Medicine, and colleagues wrote. “Opponents of reform contend that 340B revenues finance safety-net services, whereas supporters contend that most participants do not direct revenue back to safety-net care.”

In 2015, Nikpay and colleagues analyzed data to determine if there were differences in uncompensated care, provision of low-profit services and financial stability between nonprofit and public hospital 340B participants and nonparticipants.

The researchers found that fewer than 200 hospitals participated in the 340B program prior to 2004. From 2004 to 2010, the number of participating hospitals increased to 927. After 2010, the number rose to 1,046 hospitals, which represented 41.8% of all nonprofit and public general acute care hospitals in 2015.

In 2015, 60% of hospital outpatient drug spending, or $14 billion, was from 340B participants. Hospitals that participated in 340B before 2004 had more beds (439 vs. 338), were vastly public (51.4% vs. 11%) and academic (67.9% vs. 18.2%) and located in low-income counties (18% vs. 15%) and in places with high levels of uninsured patients (14% vs. 12%), compared with those that participated after 2004.

In 2015, hospitals participating in the 340B program demonstrated less financial stability (–2.11% vs. –1.74%) and modestly higher uncompensated care burden (4.1% vs. 3.13%) than nonparticipants. Participants were 48.18% likely to offer low-profit services, while nonparticipants were 36.88% likely.

Hospitals that participated in the 340B program prior to 2004 spent more on uncompensated care (5.94% vs. 3.13%) and offered low-profit services more often than nonparticipants (62.89% vs 36.88%).

Modestly more uncompensated care was offered by hospitals that participated in the 340B program between 2004 and 2010 (3.59% vs. 3.13%) and after 2010 (3.31% vs. 3.13%), compared with nonparticipants despite worse financial situations. Additionally, hospitals that participated in the 340B program between 2004 and 2010 (44.89% vs. 36.88%) and after 2010 (39.53% vs. 36.88%) offered similar rates of low-profit services despite worse finances.

“Recent reimbursement reforms will likely have different effects across 340B participants,” Nikpay and colleagues concluded. “Targeting cuts might mitigate potential adverse effects on participants that provide a large amount of charitable medical care and operate at a substantial loss.”

In an accompanying editorial, Allan J. Coukell, BSCPharm, and Sean Dickson, JD, MPH, both from the Pew Charitable Trusts, wrote that the findings by Nikpay and colleagues identify differences between 340B participating hospitals and nonparticipating hospitals.

“However, the public and policy makers would be well served by greater transparency on hospitals’ use of 340B revenues, as suggested by lawmakers,” they wrote. “Because any reduction in 340B eligibility increases manufacturer revenues, increased transparency will help policy makers characterize the benefits to patients when considering tradeoffs between hospital and manufacturer revenues from any changes to the program.” – by Alaina Tedesco

Disclosure: Coukell reports no relevant financial disclosures. Dickson reported being employed at the National Alliance of State and Territorial AIDS Directors from 2015 to 2017 and at Sidley Austin, LLP, from 2012 to 2015. Nikpay and colleagues report no relevant financial disclosures.