Is it time to finish 340B? – Healthcare Economist2 min read
A Well being Affiairs Forefront article by DiGiorgio (2023) argues the 340B has outlived its functions. He writes:
By mandating that drug corporations give a big low cost to coated entities, the vast majority of that are hospitals with disproportionate share or vital entry designations, the 340B program was supposed to supply a monetary buffer for establishments such because the one the place I work. Nonetheless, the 340B program has change into gamed by massive firms to extend income. It’s now not serving its unique intent.
This system has grown quickly amongst hospitals that serve wealthier affected person populations. 340B hospitals are increasing into more affluent neighborhoods, and they’re conscious of payer combine as they transfer into areas with fewer publicly insured patients. 340B establishments usually tend to keep away from counties with lower income levels and more uninsured patients. Whereas Rep. Waxman argues that these revenues are getting used to extend service traces for low-income sufferers, the proof recommend that 340B hospitals did not increase care for underserved populations or increase their rates of uncompensated care. There are numerous reforms that might protect safety-net funding whereas curbing abuses of the 340B system
One key piece of proof DiGriogio cites is a paper by Mulligan et al. (2021). This research discover strategic habits amongst hospitals. Hospitals that recieve disproportionate share hospitals (DSH) funds are eligible for 340B if their DSH adjustment–a measure that identifies hospitals that deal with a disproportionate share of low earnings Medicare or Medicaid sufferers–is above 11.75%. Mulligan and co-authors used information from Healthcare Price Report Data System (HCRIS) to look at if hospitals are adjusting their DSH to realize eligibility. As a result of investor-owned hospitals usually are not eliigble for 340B, one would count on no strategic habits from these hospitals. The authors use a McCrary density exams to evaluate whether or not the noticed distinction in density of hospitals slightly below and above the 11.75% threshold was considerably bigger than what could be anticipated by probability alone. The authors discover that:
In 2014–2016, the variety of hospitals will increase by 41% simply above the 340B eligibility threshold. McCrary density exams discovered this enhance to be statistically vital throughout a variety of bandwidths in 2014–2016 (p < 0.01)…We discovered no comparable change amongst hospitals ineligible for the 340B program. These information are in step with the speculation that some hospitals alter their DSH to realize 340B eligibility.
You may learn the total Mulligan et al. (2021) paper here.