Essential hospitals have a mission of caring for low-income working families, the uninsured, and other vulnerable people. But this mission comes at a high cost, and essential hospitals provide substantial uncompensated and unreimbursed care. This means they operate with the narrowest of margins—about one-fifth that of all U.S. hospitals, on average.
The 340B Drug Pricing Program is key to the patchwork of federal support essential hospitals rely on to fulfill their safety-net mission. Congress established 340B to enable covered entities “to stretch scarce Federal resources as far as possible, reaching more eligible patients and providing more comprehensive services.” Simply put, 340B affords essential hospitals the financial flexibility to tailor services and programs to their community’s unique challenges at nearly no cost to taxpayers:
- 340B savings allow University of Illinois Health to offer housing assistance and care managers for chronically homeless emergency department users, reducing their care costs by 42 percent.
- A majority of more than 800,000 outpatient prescriptions annually at Grady Health System, in Atlanta, go to uninsured patients. Thanks to the 340B program, their out-of-pocket costs are $5 or less.
- In Des Moines, Iowa, Broadlawns Medical Center uses 340B savings to offset the costs of outpatient medications for low-income residents in the state’s public health insurance program, which does not cover these drugs.
- 340B savings help Einstein Healthcare Network, in Philadelphia, maintain its Medication REACH program, which provides patients with post-discharge counseling, reduces barriers to care, and educates patients.
Current threats to 340B began in 2018 when the Centers for Medicare & Medicaid Services (CMS) cut Medicare Part B drug payments to 340B hospitals by 27 percent. This damaging policy will continue in 2019 and 2020. America’s Essential Hospitals and other hospital plaintiffs challenged the policy in federal court, which ruled CMS exceeded its statutory authority, calling the cuts unlawful. But CMS ignored the ruling, continuing to implement the cuts this year, and has yet to identify and implement a remedy for the 2018 and 2019 cuts.
Harmful policy changes also are on the horizon in the form of provisions in the House-passed prescription drug pricing bill, H.R. 3; competing Republican legislation, H.R. 19; and bipartisan Senate Committee on Finance legislation, S. 2543, that would eliminate critical funding for safety-net providers. If this change becomes law, it would negate the benefits of 340B for Medicaid managed care drugs and threaten essential hospitals’ ability to innovate and respond to the unique care challenges of their vulnerable patients.