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CMS Cut to Outpatient Drugs Will Hit Some 340B Hospitals Hard

By Gregory A. Freeman  
   November 13, 2017

"Right now, the hospitals make a big margin on these drugs they're purchasing and can use that money how they want," Macmillan says. "The intent of the program is commendable, to help safety net hospitals that care for our most vulnerable population, treating the uninsured and the most Medicare and Medicaid patients. The biggest failure of the 340B program has been a total lack of transparency and accountability on the dollars that flow through this program."

Researchers from the National Institutes of Health have reported that the 340B program is used to improve profits as well as to serve the needy. The 2014 study found that some hospitals and hospital-affiliated clinics served communities that were wealthier and had high rates of health insurance. "Our findings support the criticism that the 340B program is being converted from one that serves vulnerable patient populations to one that enriches hospitals and their affiliated clinics," they wrote.

"You've got hospitals that are abusing this and really shouldn't be getting these discounts. The money is supposed to go back and better serve their patient population but there's no accounting on where that margin goes," Macmillan says. "CMS has realized this and is taking this step to correct that."

Unfortunately, the cut is a blunt instrument approach to fixing the problem, Macmillan says, hurting the true safety net hospitals that need the 340B program to serve their populations instead. CMS should have crafted a more refined approach that held hospitals accountable for the money and fulfilled the intent of the program without cutting funds to all participants, she suggests.

"This will have a serious impact on some hospitals, and mostly on the ones least able to absorb it," she says. "Some of these drugs, like cancer medications, are extremely expensive. We're likely to see hospitals saying they can't provide certain services to their communities any more without this discount."

Some services could be moved to physician practices or ambulatory surgery centers, settings other than the hospital outpatient department, Macmillan says.

"Chemotherapy and other drug infusion, for instance, don't necessarily need to be provided in a hospital setting, and this may be a driver to move these services to a more cost-effective setting," she says. "There is support among some parts of the healthcare community for encouraging the move of these services away from a hospital setting. This cut could also benefit patients because it will lower their copays, so the hospital's loss is not the only effect from the CMS cuts."

Gregory A. Freeman is a contributing writer for HealthLeaders.

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