Understanding 340B Pricing: Eligibility Criteria For Hospitals

The 340B Drug Pricing Program has been providing financial help to hospitals serving vulnerable communities for over 30 years. The program enables hospitals to buy outpatient drugs at discounted prices, allowing them to stretch limited federal resources and provide more comprehensive services to their communities. To qualify for 340B pricing, hospitals must generally meet specific criteria, such as treating a minimum percentage of low-income Medicare and Medicaid patients. However, during the COVID-19 pandemic, some hospitals were granted exceptions to this requirement. The 340B program has faced criticism and efforts to scale back its benefits, but it remains a vital source of support for hospitals serving underserved populations.

Hospitals must be owned/operated by state or local government

The 340B Drug Pricing Program has been providing financial help to hospitals serving vulnerable communities for over 30 years. The program enables hospitals to manage rising prescription drug costs and expand health services to the patients and communities they serve.

For hospitals to qualify for the 340B program, they must meet three requirements. The first of these is the government ownership or government control requirement. This mandates that the qualifying hospital is owned or operated by a unit of state or local government. This includes hospitals that are formally granted governmental powers by a unit of state or local government.

The second criterion requires that the hospital has a sufficient Medicare disproportionate share hospital (DSH) adjustment percentage. DSH hospitals must have an adjustment percentage greater than 11.75% for the most recent cost reporting period ending before the calendar quarter involved. SCHs and RRCs must have an adjustment percentage of greater than 8%. The magnitude of a hospital's DSH adjustment depends on the number of inpatient days of its Medicaid and Supplemental Security Income (SSI) patients.

The third criterion applies to DSH hospitals, children's hospitals, and free-standing cancer hospitals that meet the first two criteria. These hospitals are eligible to participate in the 340B program if they sign a written certification stating that they will not obtain covered outpatient drugs through a group purchasing organization (GPO) or other group purchasing arrangement.

The 340B program is a small but impactful initiative. In 2020, 340B hospitals provided nearly $85 billion in benefits to their communities, a 25% increase from the previous year. The program has grown over time, driven by decisions made by drug companies to increase drug prices and introduce new drugs at record-high prices.

Must be a public/private non-profit corporation

The 340B Drug Pricing Program has provided financial help to hospitals serving vulnerable communities and managing rising prescription drug costs for over 30 years. The program allows eligible hospitals to stretch their resources and provide additional benefits and services to underserved populations, including children, cancer patients, and those in rural communities.

To qualify for 340B pricing, hospitals must meet specific criteria as defined by the program. One of the key requirements is that eligible hospitals must be public or private non-profit corporations. Specifically, they must be formally granted governmental powers by the state or local government. Alternatively, they can be private non-profit organizations that have a contract with a state or local government to provide care to low-income individuals who do not qualify for Medicaid or Medicare. This requirement ensures that the benefits of the program reach those who need it most and that the hospitals are committed to serving underserved communities.

Non-profit hospitals play a crucial role in providing care to those who might otherwise lack access to essential healthcare services. By partnering with government initiatives like the 340B program, these hospitals can expand their resources and offer more comprehensive services to their patients. This collaboration between non-profit organizations and government programs helps bridge the gap between healthcare needs and accessibility, especially for vulnerable and underserved populations.

The definition of "covered entities" under the 340B program includes six categories of hospitals: disproportionate share hospitals (DSHs), children's hospitals, cancer hospitals exempt from the Medicare prospective payment system, sole community hospitals, rural referral centers, and critical access hospitals. Each of these hospital categories must meet specific criteria to demonstrate their commitment to serving underserved communities and their ability to provide essential care.

In addition to the non-profit status requirement, hospitals must also meet payer-mix criteria related to the Medicare DSH program, except for critical access hospitals. This ensures that the hospitals are actively serving a significant number of low-income patients and are dedicated to improving access to healthcare for those who need it most. The 340B program's focus on non-profit hospitals and payer-mix criteria helps direct resources where they are needed most and ensures the program's benefits reach the intended communities.

Must have a contract with the state/local government to provide care to low-income individuals

The 340B Drug Pricing Program has been providing financial help to hospitals serving vulnerable communities for over 30 years. The program is designed to enable hospitals to stretch limited federal resources to reduce the price of outpatient pharmaceuticals for patients and expand health services to the patients and communities they serve.

To qualify for the 340B program, hospitals must meet three requirements. The first of these is the government ownership or government control requirement. This requires that the hospital be owned or operated by a unit of state or local government, be a public or private non-profit corporation that has been formally granted governmental powers by a unit of state or local government, or be a private non-profit organization with a contract with a state or local government to provide care to low-income individuals.

The contract must be in writing and signed by authorized representatives of the hospital and the state or local government. It must specify the hospital's obligation to provide healthcare services to low-income persons. The contract should be in effect prior to registering for the 340B program and should remain current throughout the hospital's participation in the program.

The six categories of hospitals that qualify as "covered entities" under the 340B program include disproportionate share hospitals (DSHs), children's hospitals, and cancer hospitals exempt from the Medicare prospective payment system, sole community hospitals, rural referral centers, and critical access hospitals.

The 340B program has been a lifeline for communities in need, providing nearly $85 billion in benefits in 2020 alone. The program allows eligible hospitals to stretch their resources and provide additional benefits and services to underserved populations, including children, cancer patients, and those living in rural communities.

Must treat a minimum percentage of low-income Medicare and Medicaid patients

The 340B Drug Pricing Program is a federal program that has been in place for over 30 years. It is designed to provide financial assistance to hospitals serving vulnerable communities and to help them manage the rising costs of prescription drugs. The program is targeted at hospitals that treat a significant share of underserved populations, including children, cancer patients, and those living in rural areas.

To qualify for 340B pricing, hospitals must meet specific criteria, including treating a minimum percentage of low-income Medicare and Medicaid patients. This requirement ensures that the program's benefits reach those who need them the most. The minimum percentage is measured by each hospital's disproportionate share hospital (DSH) adjustment percentage.

The DSH adjustment percentage is a metric that reflects the number of low-income patients a hospital serves relative to the overall patient population. Hospitals with a higher DSH percentage treat a larger proportion of low-income patients and are therefore more likely to qualify for the 340B program. This metric is used to identify hospitals that are serving a disproportionate number of low-income individuals and to allocate resources accordingly.

During the COVID-19 pandemic, some hospitals faced challenges in meeting the minimum percentage requirement due to delays in elective procedures, which disproportionately affected Medicaid patients. Recognizing this challenge, Congress passed legislation in March 2022, allowing hospitals to request temporary exceptions to the DSH percentage eligibility requirement if they were unable to meet it due to the pandemic. This provision ensured that hospitals could continue providing essential care to low-income patients without losing access to the financial benefits of the 340B program.

The 340B program has been instrumental in helping eligible hospitals stretch their resources, reduce the price of outpatient pharmaceuticals, and expand health services for their patients and communities. It has generated valuable resources for hospitals to maintain, improve, and expand access to programs that enhance the health and well-being of underserved populations.

Must meet payer-mix criteria related to the Medicare DSH program

The 340B Drug Pricing Program is a US federal government program that was created in 1992. It requires pharmaceutical manufacturers to provide outpatient drugs to eligible healthcare organizations and covered entities at significantly discounted prices. The program aims to help hospitals serving vulnerable communities to manage rising prescription drug costs.

To qualify for 340B pricing, hospitals must meet specific criteria, including being a disproportionate share hospital (DSH). DSH hospitals are those that serve a disproportionate number of low-income and uninsured patients. The Medicare DSH program provides additional payments to hospitals that serve a large number of Medicaid beneficiaries and the uninsured. These payments are intended to offset the hospitals' uncompensated care costs and improve access for Medicaid and uninsured patients.

The payer-mix criteria related to the Medicare DSH program are important for hospitals to meet to qualify for 340B pricing. Except for critical access hospitals, hospitals must meet these criteria. The DSH adjustment percentage is used as an indicator of the level of uncompensated care hospitals are providing to patients without receiving payment. Hospitals with a higher DSH adjustment percentage are more likely to receive higher cash payments from the federal government under Medicare's Inpatient Prospective Payment System.

The DSH adjustment percentage was implemented as part of the Medicare program in 1986. This was done to ensure that hospitals with a high number of low-income patients could receive higher payments to cover the increased costs of treating these patients. In 1994, the Health Resources and Services Administration (HRSA) issued guidance clarifying that hospital outpatient facilities whose costs are listed on a reimbursable line of the hospital's Medicare cost report are eligible to use 340B discounted drugs.

In 2003, Congress enacted a law that allowed more rural and small urban hospitals to become eligible for the 340B program by meeting the DSH percentage threshold. Additionally, HRSA has provided guidance on the criteria that hospitals that are not publicly owned or operated must meet to be eligible for the program. This guidance helps to ensure that the program is targeted towards hospitals serving vulnerable, uninsured patients.

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