GAO finds 340B hospitals are mostly rural or qualify for DSH payments

A new Government Accountability Office report has found that the hospitals most likely to benefit from the 340B drug discount program are those it set out to target: rural hospitals and those that serve larger numbers of low-income patients.

The GAO report, which comes amid increased scrutiny of the 340B drug discount program, offers a look into the characteristics of hospitals in the program.

For instance, the report found that the 340B program has grown significantly in concert with the Affordable Care Act's Medicaid expansions. The number of participating hospitals increased by 60% between 2011 and 2016, from 1,465 to 2,399. While GAO found that 340B participation by eligible acute care hospitals increased between 2012 and 2016 in expansion states, it didn't increase in nonexpansion states. 

  • Nearly half (45%) of 340B-eligible facilities are critical access hospitals, according to GAO.
  • An additional 45% are traditional acute care facilities that qualify as disproportionate share hospitals, meaning they treat significant numbers of low-income or Medicaid patients.
  • The majority of hospitals eligible for 340B discounts are in rural areas, the GAO found; 62% of 340B hospitals are rural and 38% are urban. 

RELATED: 340B overhaul at the top of Congress, Azar's mind 

  • 340B hospitals provide similar amounts of charity care as non-340B hospitals and provide significantly more uncompensated care, the report found. 340B hospitals in expansion states provided less uncompensated and charity care compared to those in nonexpansion states. 

"The increase in 340B participation and decrease in charity care and uncompensated care may suggest that in expansion states, hospitals experienced an increase in the number of patients covered by insurance, such as Medicaid," GAO said in the report. 

The 340B program has been on the hot seat of late, as lawmakers puzzle out ways to lower drug costs. Critics argue that the program has grown beyond its intent and have called for more stringent eligibility requirements and greater transparency. 

GAO was asked by legislators to dig more into the demographics of the program's participants amid that debate. The agency also recently weighed in on the program through a series of guidelines issued to the Health Resources and Service Administration (HRSA). 

RELATED: Watchdog officials say ambiguity, lack of transparency plagues 340B program 

In those guidelines, GAO suggested that HRSA increase oversight through additional compliance guidance and ensuring that noncompliant providers follow corrective action plans. 

The Trump administration has taken aim at the program by proposing significant cuts—to the tune of $1.6 billion—to the 340B discounts and further delaying a final rule that would set price ceilings in the program. Hospitals that participate in the program argue that the discounts are crucial to ensuring that safety-net hospitals stay afloat and can provide care to low-income patients. Hospital groups sued to block the administration's cuts to 340B, but a federal appeals court ruled against them this week.