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HomeEconomyIs it time to end the 340B? – Healthcare Economist

Is it time to end the 340B? – Healthcare Economist

A Frontiers in Health Affairs article author DiGeorge (2023) The 340B is considered to have exceeded its purpose. He wrote:

By mandating that pharmaceutical companies offer deep discounts to covered entities, most of which are hospitals with disproportionate share or critical access designations, 340B procedure Designed to provide a financial cushion for institutions like the one I work for. However, the 340B program has become a revenue-generating game for large companies. It no longer serves its original purpose.
The program has grown rapidly in hospitals serving wealthier patient populations. 340B Hospital is expanding more affluent neighborhoodand they pay attention to payer combinations when entering Areas with fewer public insurance patients.340B institutions are more likely to avoid Lower income levels and more uninsured patients. While Rep. Waxman argues that these revenues are being used to increase service lines for low-income patients, the evidence shows that 340B hospitals No increase in care for underserved populations or Increase their rate of unpaid care. There are many reforms to preserve safety net funds while curbing abuse of the 340B system

A key piece of evidence cited by DiGriogio is a paper Marrigan et al. (2021). This study uncovered strategic behavior among hospitals. Hospitals that receive Disproportionate Share of Hospital (DSH) payments are eligible for 340B if the DSH adjustment (a measure that identifies hospitals that treat disproportionately low-income Medicare or Medicaid patients) is above 11.75%. Mulligan and coauthors used data from the Healthcare Cost Reporting Information System (Human Resource Information System) to check if the hospital is adjusting their DSH to qualify. Since investor-owned hospitals do not qualify for 340B, no strategic moves are expected from these hospitals. The authors used McCrary’s density test to assess whether the observed difference in hospital density below and above the 11.75% threshold was significantly larger than would be expected by chance. The authors found that:

From 2014-2016, the number of hospitals increased by 41%, just above the 340B eligibility threshold. McCrary’s density test found this increase to be statistically significant (p < 0.01) across a range of bandwidths from 2014-2016...we found no comparable change among hospitals not eligible for the 340B program. These data are consistent with the assumption that some hospitals adjust their DSH for 340B eligibility.

You can read the full Mulligan et al. (2021) Papers here.

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