Hospitals profit from the 340B program but fail to improve care for vulnerable patients, research indicates

The 340B Drug Discount Program has made it possible for participating hospitals to reap financial benefits, but the hospitals do not appear to be using the additional revenue as the program intended, according to study results published online Jan. 24 by The New England Journal of Medicine.

The program requires drug manufacturers to provide outpatient drugs to eligible hospitals and clinics at significantly reduced prices—20 percent to 50 percent lower—but permits the hospitals and clinics to charge payers full price for the drugs.

The intent, when the program was created in 1992, was to give federally funded community health centers that served a high proportion of low-income patients a way to generate surplus revenue, which they could use to provide better care for underserved populations.

The program was expanded to include general acute care hospitals in 2003 and other categories of hospitals in 2010. By 2012, 42 percent of general acute care hospitals were program participants.

Researchers at Harvard Medical School and NYU School of Medicine used Medicare claims data to compare outcomes for acute care hospitals that were just above and below the program’s eligibility threshold. They focused on a few specialties that commonly administer outpatient intravenous and injectable drugs covered by the 340B program, such as chemotherapy treatments.

“We found no evidence of hospitals using the surplus monetary resources generated from administering discounted drugs to invest in safety-net providers, provide more inpatient care to low-income patients or enhance care for low-income groups in ways that would reduce mortality,” they noted.

What they did find was “evidence of hospitals behaving in ways that would generate profits, by building their outpatient capacity to administer drugs,” according to Sunita Desai, an assistant professor in the Department of Population Health at the NYU School of Medicine and first author of the study.

The program may have inadvertently led to provider consolidation, the researchers said, as participating hospitals “have incentives to employ physicians and acquire or open practices with physicians who frequently order parenteral drugs, to increase referrals and expand capacity for outpatient drug administration.”

“This form of consolidation has increased prices and spending without ostensibly improving quality,” they added.

The findings also suggest that the program “prompted eligible hospitals to treat more Medicare patients who are more likely to have private supplemental insurance to cover the 20 percent of Part B drug costs that is not covered by Medicare. The finding that patients served by eligible hospitals were less likely to have Medicaid, which reimburses hospitals less generously than other forms of supplemental coverage, is consistent with the financial incentives of hospitals and with evidence that 340B-participating hospitals have increasingly affiliated with hematology-oncology practices serving affluent communities,” the researchers remarked.

340B Health, a group that includes approximately 1,300 hospitals that participate in the program, said the study results are misleading because the analysis excluded roughly a third of 340B disproportionate share hospitals, particularly those that treat extremely high volumes of low-income patients.