GAO: Remove financial incentives from 340B program

A new Government Accountability Office (GAO) report recommends that the Centers for Medicare & Medicaid Services (CMS) curtail the financial incentives offered to safety-net hospitals that participate in the 340B drug discount program.

The program's current structure likely encourages unnecessary spending on hospital patients enrolled in the Medicare program, according to the GAO. Based on 2012 Medicare data, the GAO had concluded that drug spending per Medicare enrollee at participating 340B hospitals was $144, versus $60 at non-340B hospitals. The GAO concluded that the current formula that CMS uses for setting payments for drugs is at fixed rates and does not take into account what the hospital spends to acquire the drugs.

"Therefore, there is a financial incentive at hospitals participating in the 340B program to prescribe more drugs or more expensive drugs to Medicare beneficiaries," the GAO concluded. "Unnecessary spending has negative implications, not just for the Medicare program, but for Medicare beneficiaries as well, who would be financially liable for larger copayments as a result of receiving more drugs or more expensive drugs."

The GAO recommended that Congress pass legislation that would eliminate any potential financial incentive to potentially promote the use of 340B drugs.

The report has not been well received in some quarters. America's Essential Hospitals, formerly the National Association of Public Hospitals and Health Systems, was concerned at suggestions that providers would ignore a patient's specific needs for the bottom line, according to Healthcare Finance News. "We are particularly troubled by the GAO's unfounded conclusion that hospitals that serve our nation's most vulnerable patients inappropriately prescribe medications to Medicare beneficiaries for financial gain," Executive Director Bruce Siegel, M.D., told the publication. 

The 340B program has come under fire from some lawmakers. Sen. Charles Grassley, an Iowa Republican, has criticized 340B participants for reselling the drugs they purchase at a discount and then reselling them to insured patients at much higher prices. A report issued by the Alliance for Integrity also criticized 340B participants for allegedly allocating fewer resources for charity care than other hospitals. A significant revamp to the program is expected in the coming months through new guidance from the federal government. 

To learn more:
- here's the GAO report (.pdf)
- check out the Healthcare Finance News article

Suggested Articles

We take a look back at health insurers' financial performance, including soaring profits, in Q2.

Employment growth in the healthcare industry cooled off in July as the sector added fewer jobs than in June as COVID-19 continues to spread.

Employers are making adjustments to their health benefits in the wake of COVID-19, but workers may not take the time to consider these new options.