Hospitals not using 340B discounts to help low-income patients

The 340B program was intended to expand resources for hospitals which serve low-income patients by offering discounts on outpatient drugs, but according to researchers from New York University and Harvard Medical School, the financial gains enjoyed by hospitals aren’t resulting in expanded care or improved outcomes for that patient population.

The study, funded by the Agency for Healthcare Research and Quality (AHRQ) and published in the New England Journal of Medicine, comes as hospitals are fighting to reverse $1.6 billion in cuts to the 340B program which went into effect at the beginning of 2018.

Comparing outcomes of Medicare beneficiaries at hospitals just above and below the eligibility threshold for the program, researchers found there was an increase in the use of the covered drugs. They also found evidence 340B eligibility spurred physician employment or acquisition of practices. 340-eligible hospitals were far more likely to employ hematology-oncology physicians (230 percent more likely) and ophthalmologists (900 percent more likely), two specialties which were the most likely to prescribe treatments covered by the program.

“We found evidence of hospitals behaving in ways that would generate profits, by building their outpatient capacity to administer drugs,” study author Sunita Desai, PhD, an assistant professor in the Department of Population Health at the NYU School of Medicine, said in a press release. “But we did not see any evidence that hospitals are investing those profits in safety net clinics, expanding access to care for low-income Medicare patients or improving mortality in their local communities as the program intends.”

Desai added that this matches the typical results of consolidation among healthcare organizations: prices and spending increase, but quality of care doesn’t improve.

While there was no evidence in the research that hospitals used their financial windfalls from 340B discounts to help low-income patients as intended, they did leave open the possibility that changes occurred at critical access hospitals (which weren’t included in the study) or some general hospitals which serve a large proportion of low-income patients.

“This is a case of incentives dominating intentions,” study author J. Michael McWilliams, MD, PhD, professor of health care policy at Harvard Medical School and a practicing general internist at Brigham and Women's Hospital, said in a press release. “Expanding resources to care for the underserved is a laudable goal. We need policies that achieve that goal more directly, without distorting incentives to provide drugs and without relying on hospitals to subsidize care for low-income patients when they are given no incentive to do so.”

Hospitals which are suing over the cuts, however, painted the study as flawed and incomplete.

“They look exclusively at Medicare data to identify whether the program contributes to changes in mortality,” Tom Nickels, executive vice president of government relations and public policy at the American Hospital Association, told POLITICO. “The study also fails to acknowledge the benefits of the program,” such as offering additional uncompensated care.