Nearly three years have passed since Congress approved legislation adding children’s hospitals to the 340B drug discount program. To this day, however, the Health Resources and Services Administration (HRSA) has yet to publish final guidelines allowing such hospitals to take advantage of the program. Children’s hospitals are growing increasingly impatient with the lengthy delay, as they continue to lose out on 340B savings opportunities. The hold-up also presents a striking contrast to the 1993 implementation of the 340B program for disproportionate-share (DSH) hospitals, which only had to wait four months from the passage of the law to begin enrollment.
“Denying children’s hospitals access to the drug discounts provided under 340B presents another economic challenge to these safety-net providers as they struggle with an increasing number of underinsured patients,” said James Kaufman, vice president of public policy at the National Association of Children’s Hospitals and Related Institutions (NACHRI), an organization representing more than 200 members in the United States and abroad.
NACHRI estimates that the absence of final guidelines has deprived children’s hospitals an average annual savings of about $1 million per hospital. Such savings “would provide a tremendous financial assistance during these difficult economic times,” Kaufman said.
Congress Extends Program to Children’s Hospitals
Prior to the Deficit Reduction Act of 2005 (DRA), only hospitals that participated in the Medicare Prospective Payment System, which is based on projected fixed costs for future procedures, could enroll in 340B. Many children’s hospitals are exempt from the program, which, in turn, makes them ineligible for 340B. These institutions are often described as “freestanding” hospitals. So Congress included a provision allowing “free standing” children’s hospitals to participate if they have a Medicaid inpatient payer mix similar to, or greater than, the minimum levels required for 340B disproportionate-share hospitals.
Under 340B, hospitals must be either public or private nonprofit hospitals. Private non-profit hospitals are required to either have governmental powers granted by state or local government, or have a contract with a state or local government, to provide health care services to uninsured, low-income patients. Children’s hospitals, which serve three million poor children annually, would have to meet the same 340B standards. So Congress decided to let them join the program help them reduce the cost of outpatient care.
Proposed Guidelines Offered Hope
Children’s hospitals had a brief glimmer of hope in the summer of 2007, when HRSA finally issued proposed guidelines. But prospects dimmed when it became clear that the final guidelines were not going to be published during the Bush administration. When the proposed guidelines were published, at least eight children’s hospitals had already submitted 340B applications. They will all likely have to reapply once the final guidelines are published.
To meet HRSA’s requirements, children’s hospitals will also have to show that they treat a payer mix similar to DSH hospitals. They would be eligible for 340B pricing discounts retroactive to Feb. 8, 2006, once they’re admitted to the program. That was the day former President George Bush signed the DRA into law.
But a hospital is only eligible for the retroactive discounts if it has satisfied all the participation requirements since the day from which discounts are requested. Some hospitals fear they’ll be disqualified because they buy outpatient drugs through a group purchasing organization, which is not allowed under the 340B program.
HRSA waived this stipulation for DSH hospitals that sought retroactive discounts during the early months of the program, but it’s unclear whether children’s hospitals will get the same relief. The delay also frustrates congressional intent at a time of economic crisis, while unfairly penalizing children’s hospitals, Kaufman and other advocates say.
Children’s hospitals not the only ones waiting
Another pending HRSA guideline – one that would allow 340B providers to contract with multiple pharmacies – has also been in limbo. So has HRSA’s proposal to narrow the definition of patient in the 340B program. While there has been widespread support among 340B providers for relaxing the contract pharmacy rules, they have strongly opposed the patient definition proposal.
With the transition of power in Washington, all three guidelines will likely be scrutinized by the new administration before any further action is taken. The Monitor will be covering this in upcoming issues.