Spending double at hospitals with 340B program

An audit by the Government Accountability Office revealed Medicare's 340B Drug Pricing Program may be leading to the prescription of more drugs or more expensive drugs.

The audit found average spending was $144 per patient at 340B disproportionate share hospitals in 2012, more than double the $60 per patient spent in 2012 at non-340B DSH hospitals and $62 at other non-340B hospitals. For major teaching hospitals, the spending gap between 340B DSH and non-340B, non-DSH hospitals in 2012 was even greater — totaling $211 per patient and $105 per patient, respectively.

Overall program spending has also skyrocketed — increasing from $500 million in 2004 to $3.5 billion by 2013. This increased spending translates into higher Medicare copayments, the GAO said.

The 340B Drug Pricing Program launched in 1992 and about 40 percent of U.S. hospitals participate today. It provides hospitals with disproportionate populations of low-income patients with a discount of at least 22 percent on drugs, according to the report. Since 340B DSH hospitals are paid no matter how much they spend on drugs, it incentivizes them to prescribe pricier pharmaceuticals to get more money from the program.

The audit noted the high 340B price tags could not be "readily explained by hospital characteristics or patients' health status."

The American Hospital Association and HHS took issue with the GAO's conclusion, however. "Simply put, the GAO report misses the mark," wrote AHA Senior Vice President Tom Nickels in an AHA blogpost. Mr. Nickels said, "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."

He also noted the GAO report did not account for the negative 10 percent outpatient Medicare margins for 340B DSH hospitals in 2012 or the large amount of uncompensated care they provide.

Note: This article was updated July 8 with the response from the AHA.


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