Healthcare Revenue Cycle Management, ICD-10, Claims Reimbursement, Medicare, Medicaid

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Prescription Drug Spending Higher at 340B Hospitals, Study Finds

New research shows 63 percent of 340B hospitals had a growth rate for prescription drug spending at least two percentage points higher than non-340B facilities.

Prescription drug spending and 340B hospitals

Source: Thinkstock

By Jacqueline LaPointe

- Per-patient prescription drug spending increased by 32.4 percent at hospitals that recently enrolled in the 340B Drug Pricing Program, revealed a new Berkeley Research Group (BRG) study funded by the Pharmaceutical Research and Manufacturers of America (PhRMA).

In comparison, prescription drug spending per patient at non-340B hospitals increased by just 13.4 percent during the same time.

Researchers also found that per-patient, per-date-of-service drug spending rose by 20.6 percent for 340B hospitals in the first year of enrollment compared to the year prior. Meanwhile, non-340B hospitals decreased their prescription drug spending by 4.7 percent during the same period.

“The results of this suggest a behavior change in the prescribing of physician-administered drugs after a hospital enrolls in the 340B program,” researchers from the global consulting firm stated.

The BRG study is the latest in the recent 340B debate among hospitals, pharmaceutical companies, and policymakers.

The 340B Drug Pricing Program offers prescription drug discounts to disproportionate share hospitals (DSH). Policymakers intended for the discounts on certain outpatient drugs to help hospitals that treat more low-income and uninsured patients to “stretch scarce federal resources as far as possible, reaching more eligible patients and providing more comprehensive services,” the Health Resources & Services Administration explains.

The program has significantly increased in recent years, with 340B covered entities purchasing over $19 billion in drugs at the 340B discounted price, representing 114 percent growth since 2014.

And as the program continues to expand, stakeholders have started to scrutinize the 340B program.

A June 2015 report by the Government Accountability Office (GAO) showed that per-beneficiary spending at 340B DSH hospitals was higher compared to spending at non-340B hospitals by a wide margin.

The GAO stated that the difference between the Medicare reimbursement and the drug acquisition of 340B drugs created a “financial incentive at hospitals participating in the 340B program to prescribe more drugs or more expensive drugs to Medicare beneficiaries.”

A March 2018 analysis added to the GAO’s findings, showing per-patient pharmacy spending at 340B hospitals exceeding the spending at non-340 hospitals within the commercially insured population.

The recent BRG study contributes to the growing research showing 340B hospitals prescribe more to maximize their profits under the program.

In its new study, researchers analyzed the Medicare fee-for-service hospital outpatient claims and HRSA Office of Pharmacy Affairs data for 379 DSH hospitals enrolling in the 340B program between January 2009 and January 2016.

The data revealed that not all enrolling 340B DSH hospitals increased their prescription drug spending at a faster rate than non-340B hospitals, but most hospitals in the program did. Of the enrolling 340B DSH hospitals, 63 percent had a growth rate at least two percentage points higher than the control group.

In light of growing program expenses and recent research, the Trump Administration has prioritized 340B program reforms. The most notable was a $1.6 billion cut to hospitals participating in the program in 2018.

CMS finalized the decrease in hospital reimbursement under the 340B program to “address recent trends of increasing drug prices, for which some of the cost burden falls to Medicare beneficiaries.”

However, hospital groups called the drastic cuts unlawful. The American Hospital Association (AHA), America’s Essential Hospitals, Association of American Medical Colleges (AAMC), and several hospitals sued CMS’ parent organization HHS over the nearly 30 percent reduction in hospital payments that year.

CMS’ decision “to cut Medicare payments to hospitals for drugs covered under the 340B program will dramatically threaten access to healthcare for many patients, including uninsured and other vulnerable populations,” wrote the AHA. “It is not based on sound policy and punishes hospitals and patients for participation in a program outside of CMS’s jurisdiction.”

A district judge recently ruled in favor of the associations, vacating the billions of dollars in hospital reimbursement cuts. He argued the significant payment reductions violated HHS’ authority to adjust hospital payments under the Outpatient Prospective Payment System (OPPS), which governs 340B payments to hospitals.

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