Hospitals can profit from outpatient specialty drugs, but it's risky, Moody's says

With profit margins on core services shrinking, nonprofit hospitals will rely more heavily on income from outpatient specialty drugs, but that strategy poses risks, according to a new report from Moody's Investors Service.

The report found that while turning to income from outpatient specialty drugs "will help boost margins, its sustainability will be uncertain," especially given the increased effort by legislators, regulators and commercial insurers to rein in specialty drug spending.

"Recent regulatory and legislative proposals, if adopted, would put downward pressure on drug prices and potentially reduce hospitals' income from the purchase of outpatient specialty drugs," Moody's wrote.

Moody's said that hospitals eligible for the 340B drug discount program will receive the most benefit from purchasing and generating income from outpatient specialty drugs, because they "receive much larger discounts on the price of eligible outpatient drugs purchased for all patients, regardless of how they are insured."

However, this also places 340B-eligible hospitals, which would depend more heavily on income from the drugs, most at-risk, according to the report.

Moody's also found that an increasing number of 340B hospitals will expand or build in-house specialty pharmacies to dispense drugs and add to income growth.

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