May 23, 2018—A new report published in the Journal of the American Medical Association (JAMA) Internal Medicine finds that 340B hospitals have a higher uncompensated care burden than non-340B hospitals and operate at lower margins. This new study echoes the findings of a recent report by L&M Policy Research, which found 340B hospitals provide 60 percent of all uncompensated care in the U.S. while representing only 38 percent of acute care hospitals in the country. The data demonstrates that proposals intended to limit hospital access to 340B savings would take away resources from hospitals that provide high levels of care to low-income patients, thereby affecting their ability to serve these populations.
Researchers at the Pew Charitable Trusts highlight this point in a JAMA commentary accompanying the new study, cautioning that “any narrowing of 340B eligibility to a smaller set of qualifying institutions would transfer the corresponding share of government payment for drugs from the hospital or the clinic to the manufacturer.” In other words, limiting the program would result in shifting money away from hospitals that treat high levels of low-income patients to pharmaceutical companies. In addition, the Pew researchers noted that the study did not account for how much lower operating margins would be without access to 340B savings. Pew also confirms research showing that 340B is a small share of the market, finding that 340B resulted in a 1.9 percent net reduction in manufacturer revenues in 2015.
The new JAMA study looked at 340B hospitals that entered the program at different periods of time and found that, regardless of when they registered for 340B, all 340B hospitals have a higher uncompensated care burden than non-340B hospitals. However, the authors note that more recent entrants into the program provide less uncompensated care and are more financially stable than earlier entrants, and more recent entrants are not more likely to provide “low profit” services than non-340B hospitals.
Based on these findings, the authors conclude that reimbursement cuts to 340B hospitals could be targeted to subsets of 340B hospitals to avoid harming hospitals “that provide a large amount of charitable medical care and operate at a substantial loss.” However, this conclusion is not supported by the facts. Regardless of how hospitals that entered 340B in later years compare to earlier 340B hospitals, the later entrants nevertheless provide more uncompensated care and operated at greater financial losses compared with non-340B hospitals. Targeting later entrant 340B hospitals for reimbursement cuts would harm hospitals that still provide high levels of care to low-income patients.
The study’s comparison of later entrant 340B hospitals to other 340B hospitals is also flawed and misleading because the study fails to take hospital size into account. It is not appropriate to compare a 100-bed 340B hospital to an 800-bed 340B hospital, given the dramatic differences in their resources and ability to treat low-income patients. The study also did not account for services that 340B hospitals provide to low-income patients beyond charity care and bad debt – the substantial underpayments from Medicaid and other state and local payers that 340B hospitals incur treating low-income patients.
Finally, the study’s finding that 340B hospitals are no more likely to offer “low profit” services is based on an extremely narrow definition of “low profit” services – the authors looked only at the existence of a burn care unit or an inpatient psychiatric facility. An analysis by L&M Policy Research reviewed 39 different specialized services that are often underpaid, including HIV/AIDS treatment, trauma care, and drug abuse treatment, and found that 340B hospitals are more likely to provide those services than their non-340B counterparts.
Ultimately, the JAMA study’s finding that 340B DSH hospitals provide a higher level of care to low-income patients than non-340B hospitals provides helpful new data as policymakers debate questions about the 340B program and consider program changes. This new study further demonstrates the commitment 340B hospitals have to serving low-income patients and confirms that restricting access to 340B savings would affect hospitals that serve high volumes of low-income patients and harm their ability to treat these populations.