Acquisitions by 340B Hospitals Drive Up Healthcare Costs

As the 340B drug discount program has ballooned in size over the last several years, some hospitals are getting creative about how to make the program work for their own financial gain. Of course, this comes at the expense of the uninsured or vulnerable patients the program was created to help.

One of the latest trends is an increase in acquisitions of independent physician practices by 340B-participating hospitals. According to a new report from Avalere Health, 340B hospitals make up a disproportionate fraction of U.S. hospitals acquiring physician practices.¹ Nearly two thirds of the hospitals acquiring a physician practice are 340B hospitals, even though 340B hospitals make up just 45% of hospitals studied. Other researchers have pointed out that 340B hospitals may profit more from the program with these consolidations because medicines prescribed by physicians in the acquired practice may become eligible for 340B discounts following the merger. In turn, hospitals are able to capture the difference between the 340B discounted rate and the price the patient or insurer pays.

The new report also suggests cancer patients could be the most impacted by the consolidation of 340B hospitals and physician practices as they make up the largest share of patients receiving physician-administered drugs at these facilities. The overall cost of care may increase as treatment shifts from physicians’ offices to more complex and costly hospital outpatient departments, which often have higher reimbursement rates.

A study in The Journal of the American Medical Association (JAMA), from academics at the University of Chicago and Memorial Sloan Kettering Cancer Center, identified similar cost increases following the acquisition of community-based oncology practices.² Namely, treatment in larger-hospital-based infusion suites was more expensive than the smaller community setting, which created a higher cost burden for patients.

Further, an analysis from Berkeley Research Group found the acquisition trend has resulted in higher costs within Medicare, given the differences in payment for services provided in community cancer clinics compared to hospital outpatient departments.³ Specifically, 86 340B hospitals acquired at least 1 community cancer practice, leading to a significant increase (more than 20%) in chemotherapy claims, resulting in an estimated $167 million in additional Medicare payments between 2009 and 2012.

340B Hospitals Do Most Acquisitions

Out of 4,865 hospitals included in this analysis by Avalere, 143 were identified as possibly acquiring at least one physician practice between 2009 and 2013.

When it comes to physician practice acquisitions, policymakers should take a closer look at whether the opportunity to profit from the 340B program is fueling this growing trend, which may negatively impact the overall cost of health care. Unfortunately, this is just one of the many challenges facing 340B after years of accelerated growth and a lack of transparency and accountability among program beneficiaries. We all need to work together to reform the 340B program to ensure it’s working as Congress originally intended—to help patients in need, not to generate profits for hospitals or increase financial burdens on the health care system.

Stephanie Silverman is the spokesperson for the Alliance for Integrity and Reform of 340B.

References

1. Young J. Hospital acquisitions of physician practices and the 340B program. Avalere. http://avalere.com/expertise/life-sciences/insights/avalere-white-paper-hospital-acquisitions-of-physician-practices-and-the-34 Published June 8, 2015.
2. Conti RM, Bach PB. Cost consequences of the 340B drug discount program. JAMA. 2013;309(19):1995-6. http://jama.jamanetwork.com/article.aspx?articleid=1680369
3. Vandervelde A, Miller A, Younts J. Impact on Medicare payments of shift in site of care for chemotherapy administration. Berkeley Research Group. http://www.communityoncology.org/UserFiles/BRG_340B_SiteofCare_ReportF_6-9-14.pdf Published June 2014.