How hospitals can safeguard 340B program eligibility

Hospitals and health systems across the country are grappling with changes in Medicaid eligibility brought on by recent industry shifts, including regulatory changes, the end of the public health emergency (PHE), Medicaid redetermination, and the halt of continuous enrollment.

These seismic shifts have created a significant financial crisis for many health organizations: the loss of 340B Drug Pricing Program (340B) eligibility and access to beneficial drug pricing under the 340B program.

The 340B loss is costing organizations tens-of-millions of dollars in savings — for larger systems it can be in the hundreds of millions of dollars, annually. Health systems already suffering negative or thin margins can face bankruptcy.

Safeguard access to 340B pricing — as well as solve other challenges — with the following insights into actionable strategies.

Background

Many safety-net healthcare organizations rely on savings generated from participation in the 340B program to stretch federal funding and other resources, reach more eligible patients, and provide more comprehensive services to their communities.

For hospitals, the ability to access the beneficial 340B drug pricing is based on the Medicare DSH calculation comprised of the ratio of inpatient services provided to Medicaid patients as compared to all patients, and the latest available Social Security Income (SSI) ratio comparing the patients at the hospital who are Medicare Part A or C and SSI eligible compared to all Medicare Part A and C eligible patients treated in the hospital.

To be eligible for the 340B Drug Pricing Program, a hospital must meet a certain DSH patient percentage threshold. The specific threshold for eligibility is to be greater than 11.75% with the exception of hospitals classified as sole community or a rural referral center. Sole community or rural referral center hospital classes have a DSH percentage threshold of 8.00% to qualify for 340B with the incentive to have DSH percentage greater than 11.75% for orphan drug discounts.

This means that a hospital must have a minimum of 8.00% or above 11.75% of its patient population coming from low-income or Medicaid-eligible individuals — which is reflected in the DSH calculation — to participate in the 340B program based on the hospital classification.

Some hospitals, such as children’s hospitals and freestanding cancer hospitals, may have different requirements or may be exempt from this threshold if they meet other eligibility criteria.