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GAO Report Misses Mark on 340B Program

By Tom Nickels
July 7, 2015

A July 6 Government Accountability Office (GAO) report examining Medicare Part B spending at hospitals participating in the 340B Drug Pricing Program draws unsubstantiated conclusions about a program that has a proven track record of improving access to care for poor patients and vulnerable communities. Simply put, the GAO report misses the mark.

The AHA, along with the Department of Health and Human Services (HHS), has expressed concerns about the methodology GAO used to conclude that financial incentives were driving 340B Medicare Disproportionate Share Hospitals (DSH) to prescribe more drugs or more expensive drugs to treat Medicare Part B patients. We also believe that the report does not appropriately account for certain differentiating factors and characteristics of 340B DSH hospitals.

In the report, GAO acknowledges that 340B DSH hospitals treat sicker, more complex patients. However, when examining Medicare Part B spending per beneficiary at 340B DSH hospitals, GAO does not adequately account for differences in patients’ health status or outcomes – a point underscored by HHS in its comments on the report. In addition, GAO says that 340B DSH hospitals had lower outpatient Medicare margins compared with other hospitals; in 2012 the outpatient Medicare margin was negative 10% for 340B DSH hospitals. 

Meanwhile, according to the report, in 2012, 340B DSH hospitals provided uncompensated care that was about 95 percent higher than other hospitals, as a percent of their revenue. Many of the hospitals participating in the 340B program treat an increasing amount of low-income patients and already face cuts to the DSH program. Restricting eligibility for the 340B program on top of existing cuts would contribute to a lack of financial predictability for hospitals, and could have serious negative consequences for patients and communities.  

When Congress created the 340B program more than 20 years ago, it stated the purpose of the program was to permit providers that care for a high number of low-income and uninsured patients “to stretch scarce Federal resources as far as possible, reaching more eligible patients and providing more comprehensive services.” Given the increasingly high-cost of pharmaceuticals, the 340B program is crucial to helping provide low-cost pharmacy services to vulnerable patients, and it remains a critical component of helping safety-net health care providers create healthier communities.

Find more facts on how the 340B program helps communities on the AHA website.

Topic: Access and Coverage
Tags: 340B, Drug Pricing Program, access

Tom Nickels is the American Hospital Association Executive Vice President of Government Relations and Public Policy.

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