Since 2010, 107 rural hospitals have shut their doors, and many are eager to point the finger at a flawed drug savings program. But healthcare advocacy and public policy groups say it isn’t that simple.
The 340B drug savings program, signed into law in 1992, is a safety net to stretch limited resources for rural hospitals that care for Medicaid enrollees and those who are unable to pay for coverage. It offers discounts on expensive outpatient drugs, allowing the savings to be used to improve access to care.
An organization that represents about 1,300 hospitals, 340B Health, released a survey in January that showed the extent of hospitals’ reliance on 340B. A staggering 93% of rural hospitals attributed their ability to stay open to savings under the program.
The survey reported that participating hospitals nationwide save an average of $11.8 million annually due to 340B.
Melinda Hatton, the American Hospital Association’s general counsel, told the Washington Examiner that the program is integral to stretching scarce hospital resources to provide life-saving prescription medications and make up for uncompensated care.
“Many of these important programs and services would otherwise be unavailable without the 340B program,” Hatton said. “As the skyrocketing costs of prescription drugs continue to present major challenges to rural hospitals, the 340B program is as crucial as ever in providing some important financial relief from the high price of pharmaceuticals.”
Hatton is quick to point out that the 340B program is not funded by taxpayer dollars but rather discounts from drug manufacturers.
Without these savings, health systems have trouble continuing to operate. For instance, Takoma Regional Hospital in rural Tennessee was forced last year to merge with Ballad Health, a healthcare system based in Tennessee and Virginia, becoming the Greenville Community Hospital.
But the string of rural closures shouldn’t be blamed on inadequacies in the 340B program when it is only one piece of a much bigger puzzle, according to Maureen Testoni, CEO of 340B Health. She told the Washington Examiner that the larger picture includes low Medicaid reimbursement rates and the burden of covering those without the means to cover their own expenses.
Testoni notes that the 340B program was never meant to prevent closures. It was meant initially to help hospitals in low-income areas stretch their already thin resources, in order to provide care for people who wouldn’t otherwise have access to it.
Another factor in rural closures is Medicaid expansion disparities. Since the Affordable Care Act went into effect, 31 states and the District of Columbia have expanded Medicaid. The Commonwealth Fund found that from 2013 to 2015, the burden on hospitals to make up for uncompensated care decreased by almost 2%, totaling about $6.2 billion in savings for hospitals in those states.
On the other hand, local health system advocates, including the National Association of Counties, which represents 3,069 county governments, point to the excess of beds in low-population areas as the quintessential problem rather than blaming their states’ decisions to not extend Medicaid coverage to all residents.
Associate Legislative Director of the association Blaire Bryant says lower discounts on drugs and savings for hospitals cannot hold the sole responsibility for hospital closures in rural regions.
The problem, Bryant told the Washington Examiner, isn’t the programs that are there to extend resources. It’s that most hospital systems rely on the populations they serve. With more beds and more people, hospitals thrive. The root problem of the closures boils down to not having enough residents, she says.
