Rural hospitals and community health centers are lifelines to the communities they serve. They keep small towns healthy and well, both physically and economically. In New Hampshire alone, hospitals provide more than 81,000 jobs, pay $6.4 billion in wages and benefits and contribute nearly $600 million in community benefits each year. For many towns, they are the only place to get emergency, primary and specialty care.
But, these healthcare providers are under serious pressure. Squeezed by thinning budgets,
workforce shortages, potential federal funding cuts for vital rural programs and costs of care that exceed reimbursement, small hospitals and clinics are having to make difficult decisions: trim services or close entirely.
For decades, one bright spot in the financial picture for small hospitals and clinics has been the federal 340B Drug Pricing Program, which provides essential savings on outpatient drugs for providers serving low-income or uninsured patients. Since 1992, 340B has made medications more affordable for vulnerable patients and provided savings to small providers that are critical to maintaining operations and essential services. Furthermore, cash-strapped hospitals and clinics get a discount at time of purchase, enabling them to maintain an inventory that would be challenging to pay for up front. Perhaps most importantly, 340B savings are used directly to maintain services for these vulnerable populations.
In New Hampshire, 16 hospitals participate in the 340B program. The program has enabled small rural hospitals to provide affordable meds to their low-income patients and to help close the gap between the cost of providing services and the actual reimbursement they receive. That has helped some keep their doors open.
Over the years, however, the 340B program has been co-opted by some larger urban hospitals as an income generator, drifting gradually from its original intent as a safety net program. This has understandably caused the program to come under intense scrutiny. In some corners there have even been calls to eliminate the program entirely. This would be devastating.
Does the 340B program need to be updated? Yes. But it needs to be done carefully, with an appreciation of the nuances of the program, its positive impacts and the misuses that have evolved.
Here are some of the important themes to consider in revising 340B:
Protect rural access to care: Let’s preserve the original intent of the 340B Program – to stretch scarce federal resources to benefit vulnerable patients and the small providers that treat them. The 340B program must continue as a lifeline to help rural safety net providers survive and furnish critical services for rural patients.
Prohibit PBM discrimination: Pharmacy Benefit Managers are powerful third-party companies that administer prescription drug benefits for insurers and government programs by managing drug formularies, processing claims and negotiating prices with drug manufacturers and pharmacies. PBMs create drug lists (formularies), negotiate rebates and discounts from drug makers and determine which pharmacies are in a plan’s network. PBMs have been widely criticized for lack of transparency. PBMs have increasingly discriminated against 340B patients and covered entities. We need clear statutory restrictions on PBMs’s ability to treat 340B participants differently, especially in rural areas where PBMs restrict patient choice of pharmacy or location to receive infusion therapy.
Efficient reporting to ensure transparency: Transparency is critical. It is also critical to bear in mind that small rural clinics and hospitals are struggling with staffing to meet all of their current reporting requirements. They do not have the capacity enjoyed by larger hospitals to dedicate IT and quality improvement resources to continually create new reports. Fortunately, rural hospitals and FQHCs already collect and report extensive data for many federal programs. Let’s leverage existing data that entities are already reporting for other federal programs, and not penalize smaller providers who don’t have the economies of scale that larger providers do.
Up-front discounts: Most small rural hospitals and health centers are operating on wafer-thin margins. Some measure their cash on hand in days or weeks. There have been calls to change 340B to provide rebates after the fact rather than allow purchasing at the discounted price. This would be untenable for small rural providers and force them to make further decisions about how to stay viable. It would ultimately penalize their patients
What is at stake? Plenty. One rural FQHC in New Hampshire stated, “We have incurred an
approximate 60% erosion in 340B savings resulting in a loss of $531,720 per year … The most severe impact of this loss is the closure of one of our oral health centers.”
The 340B Drug Pricing Program benefits small rural providers and the patients that depend on them, but it needs responsible reform to reduce “mission creep” and ensure continuation of its original intent as a safety net program. Our small rural hospitals and clinics need that help to remain a viable, vital heart of their communities.
Andy Lowe is the executive Director of New England Rural Health Association and is an instructor at UMass Chan Medical School Dept. of Family Medicine and Community Health.