October 31, 2019— A new study by academic researchers demonstrates that savings from 340B drug discounts make only a relatively small contribution toward safety-net hospital revenues and the total costs to hospitals of uncompensated care. But while small, these resources are critical to 340B hospital patients living with low incomes and those living in rural areas.
Researchers at Boston University and Vanderbilt University published the study on Oct. 30 in the Journal of the American Medical Association (JAMA). They conclude that for the median hospital, 340B savings represent less than one percent of net operating revenue and less than 10 percent of uncompensated care even without considering billions in unreimbursed care for Medicaid patients. The findings are based on 340B savings generated on Medicare Part B drugs in 2016, so they do not account for the payment rate cut that went into effect on Jan. 1, 2018. That means the relatively small percentages cited in the report likely are even smaller now. (Note: The study’s authors incorrectly state that Congress has delayed these cuts.)
The 340B picture becomes clearer when considering that measuring hospital savings against uncompensated care costs is only one of several key metrics. 340B hospitals not only treat high volumes of patients with low incomes and provide high levels of uncompensated care (i.e., charity care and bad debt), they also offer specialized services for patient populations in need. In a 2018 survey of 340B hospitals, respondents reported using savings in a variety of such ways. They include offering discounted drugs and other services, supporting medication management, providing free naloxone to patients at risk of overdose, and offering case management for chronically ill patients.
Additional prior research shows that 340B DSH hospitals make up only 38 percent of all acute care hospitals but provide 60 percent of the nation’s uncompensated care. These hospitals are more likely to provide specialized services that are critical to patients in need but are often underpaid, such as HIV/AIDS, cancer, trauma, and neonatal services. These hospitals also use their savings to fund preventive services and pharmacy programs that increase access to needed care and improve patient health outcomes. The JAMA study does not consider how 340B hospitals stretch program savings to meet myriad community needs.
This study highlights again the relatively modest resources associated with a program that substantially contributes to the health care safety net. Protecting this program and the services it supports is critical to ensuring those contributions stay strong.