Flaws in Understanding Intent of 340B Program Lead to Incomplete Conclusions in Study


340B Informed

January 25, 2018—A recent study published in the New England Journal of Medicine (NEJM)[i] suggests that hospital use of the 340B program is “contrary to the goals of the program,” relying on a finding that there is no evidence of hospitals using 340B savings to expand care or lower mortality among low-income patients. This finding is inconsistent with existing research that demonstrates 340B hospitals treat high volumes of low-income patients and provide high levels of uncompensated care and specialized services to care for low-income patients. 340B hospitals are using the program in many ways that are consistent with its intended purpose to support care to low-income and rural patients with such conditions as HIV/AIDS, cancer, diabetes, and other chronic conditions.

The study’s implications of improper program use are misleading for several reasons. First, the study excluded 340B hospitals with a disproportionate share hospital (DSH) adjustment percentage greater than 21.75 percent. According to data from 2015 Medicare cost reports, this narrow study population excludes roughly one-third of 340B DSH hospitals, including many large institutions that treat very high volumes of low-income patients.

The suggestion of improper use of 340B is also problematic because the study is based on a flawed understanding of the 340B drug pricing program’s purpose and intent. As Congress stated upon enactment, the intent of the program is “to stretch scarce federal resources as far as possible, reaching more eligible patients and providing more comprehensive services.”[ii] Yet the authors evaluated whether 340B hospitals are using their savings to invest in safety-net providers through integration of federally qualified health centers (FQHCs), provision of more inpatient care to low-income patients, and a reduction of mortality among low-income patients. The metrics used in the study to evaluate 340B hospitals do not fully measure the many ways hospitals use their savings to treat low-income patients through the provision of uncompensated care and unreimbursed services. In a 2016 survey of 340B hospitals, administrators reported utilizing savings for a variety of patient services including medication therapy management, discharge planning, and patient assistance and counseling programs.[iii]

Research shows that 340B DSH hospitals make up 36 percent of all acute care hospitals, but provide 60 percent of the nation’s uncompensated care and are more likely to provide specialized services that are critical to low-income patients but are often underpaid, such as HIV/AIDS, cancer, trauma, and neonatal services.[iv]  340B hospitals also use their savings consistent with the program purpose to fund preventative services and pharmacy programs that improve outcomes and ensure access to care. The study failed to examine whether 340B hospitals are more likely to provide these services.

In addition, the study’s findings fail to recognize other market trends at play causing consolidation of care. For example, previous research published in Health Affairs pointed to market trends unrelated to the 340B program as the primary driver of consolidation between oncology practices and hospitals.[v] Moreover, data suggests 340B hospitals are not seeking out cancer patients in affluent areas, given that 340B hospitals continue to treat more low-income cancer patients than non-340B providers, with 340B DSH hospitals treating over 60 percent more low-income cancer drug users in both 2013 and 2014.[vi]

340B hospitals continue to use their program savings to support care to their low-income and rural patient populations, just as Congress intended when it created the program. Since 2012, the Health Resources and Services Administration (HRSA) has put in place a rigorous program to audit hospitals and other covered entities in the program, totaling nearly 800 audits, 77 percent of which were of hospitals. As policymakers evaluate the 340B program, it is important to recognize the many, diverse ways hospitals use the 340B benefit to support patient care.

[i] Consequences of the 340B Drug Pricing Program.  McWilliams and Desai. New England Journal of Medicine. January 24, 2018. http://www.nejm.org/doi/full/10.1056/NEJMsa1706475?query=recirc_curatedRelated_article

[ii] H. R. No. 102-384, Part II, Pg. 12, 102nd Congress, Second Session.

[iii] 340B Health, 340b Program Helps Hospitals Provide Services to Vulnerable Patients: Results From A Survey Of 340b Health Members, https://www.340bhealth.org/files/Savings_Survey_Report.pdf (2016)

[iv] Dobson Davanzo & Associates, Update to a 2012 Analysis of 340B Disproportionate Share Hospital Services Delivered to Vulnerable Patient Populations Eligibility Criteria for 340B DSH Hospitals Continue to Appropriately Target Safety Net Hospitals (Nov. 15, 2016), http://www.340bhealth.org/files/Update_Report_FINAL_11.15.16.pdf.

[v] Jacobson, Hsi, and Alpert. Evaluating The Role Of Payment Policy In Driving Vertical Integration In The Oncology Market. April 2017 Health Affairs

[vi] Dobson Davanzo & Associates, Analysis of the Proportion of 340B DSH Hospital Services Delivered to Low-Income Oncology Drug Recipients Compared to Non-340B Providers (2016), http://www.340bhealth.org/files/LowIncomeOncology.pdf