A Patient’s Guide to 340B: Why the Decline in Charity Care Matters to You
***This is the fourth report in a six-part series to educate patients about the 340B Drug Pricing Program***
A cornerstone argument in favor of the 340B Drug Pricing Program centers on so-called charity care rates of the participating Disproportionate Share Hospitals (DSH). Those covered entities, specifically DSHs, should be able to leverage their 340B dollars to extend care and out-patient medications to offset losses from uncompensated care. In the ideal, offsetting the costs associated with charity care to provide more care to low-income patients is noble and moral and just, and one society should support. The problem occurs when charity care is wrapped up or conflated with all “uncompensated, unreimbursed care” because a significant portion of uncompensated care is written off as bad debt, and that debt all too often gets reported to patients’ credit reports. Whereas charity care is care provided at no cost or debt to the patient. Moving forward, we must not confuse, conflate, or combine generalized uncompensated care with charity care.
The argument from the American Hospital Association is narrowly focused to present the rosiest picture, touting the totality of charity care provided by 340B DSH covered entities ($64 billion in of 2017, the latest available data as of the AHA’s statement). It ignores 340B participating hospitals have seen a steady decline in both charity care and uncompensated care, according to the Government Accountability Office’s 2018 report. The AHA’s own data reveals the same thing, despite exponential growth of the 340B program, largely attributed to hospitals and contract pharmacies. Unlike Federally Qualified Health Centers (FQHCs, a type of federal grantee entity in the 340B program), which are required provide care “regardless of ability to pay”, hospital systems, in large part, have a much more extensive debt collection program; they are not necessarily beholden to rules regarding debt collection practices. FQHCs, as an example, may be required to seek debt payments from internal billing specialists, but don’t generally have contracts to sell the bad debt to collections companies or report to credit bureaus. Furthermore, they are prohibited from doing so in certain circumstances.
While the Affordable Care Act (ACA) prohibited certain types of hospital-originated debt from being reported to credit bureaus, it doesn’t stop the hospital from selling the debt and then the collection company reporting the debt. Indeed, hospitals are notorious for reporting medical debt and sending bills to collections. If 340B dollars are meant to offset some of these expenses, with program growing about 23% per year, why does the Census Bureau report that about 20% of Americans are under some form of medical debt? Why has that medical debt grown from $81 billion in 2016 to $140 billion in 2019?
The ACA required non-profit hospitals to offer charity care programs, and the vast majority of hospitals across the country are non-profit hospitals. Adding insult to injury, that tax designation and the requirement to offer charity care hasn’t stopped these “non-profit” hospitals from chasing after low-income patients and further impoverishing them. A recent Kaiser Health News “An Arm and a Leg” podcast dove into just one state’s effort to tackle an epidemic of “non-profit” hospitals suing patients as a result of medical debt. The effort found a massive coalition of 60 entities, including a nurses’ union, and startling data supporting the need for Maryland’s now-passed “Medical debt Protection Act.”
Data included notation of almost 150,000 lawsuits against patients over the last 10 years, making almost $60 million from patients who would otherwise automatically qualify for charity care, and hospitals negotiating with for state funds to support charity care taking in $119 million than they actually gave out in charity care. And that’s just in one state. Indeed, according to information behind this report, Johns Hopkins – a 340B hospital – alone raked in $36 million more from this state-funded charity care support than they spent. While Maryland already had certain patient protections from these predatory practices on the books, too few patients knew about those protections and the state awarded these dollars without ever investigating the existing status of bad debt to charity care ratios. All the paper in the world written into the law is meaningless if affected people and corporations are not made to be transparent and held accountable.
Access to care, and freedom to access care, are two different things. Access to care being an open door, and freedom to access care is the freedom to walk through that door without fearing a dire financial consequence. While some special interests may argue the program is critical to hospitals extending access to care, their rhetoric lacks practical application when patients don’t have the freedom to access that care without fear of acquiring life-altering debt. The fear of medical debt keeps people away from seeking care. In fact, one of the most immediate and meaningful ways to tackle the country’s medical debt crisis would be for 340B covered entities to share the savings with patients. A patient’s medical debt reported to their personal credit file can, and does, perpetuate cycles of poverty; it is harming patients’ wealth, health, and overall well-being. If 340B dollars are supposed to be aimed at ensuring access to care, then concerns over medical financial toxicity shouldn’t be discounted.
Hospitals, in large part, though not universally, have seen a significant decrease in uncompensated care due to the ACA’s expansion of Medicaid. With more patients qualifying for Medicaid, meaning an ability for providers to be reimbursed where none previously existed, hospitals should be able to shift their uncompensated care burden from bad debt to patient financial assistance and charity care programs.
On the other end of decreases in charity care provided by 340B hospitals, are truly magnificent non-profit hospital chief executive officer compensation. In a 2019 hearing, CEOs admitted to having salaries in the millions of dollars per year range – that’s before bonuses. They also admitted to holding more money in reserves than they generally need in order to operate safely or not run the risk of running out of funding. Other instances of concern from this hearing include a hospital group using their 340B dollars to acquire a stand-alone oncology center. Typically, when these types of purchases are made, patients experience an increase in costs of care and sometimes experience a reduction in ability to access care due to an increase in patient load without subsequent staffing support or their provider’s office is physically moved as part of the consolidation effort, reducing a patient’s ability to physically get to and from office visits.
In addressing potential reforms that would benefit patient experiences, increase the sense of freedom patients feel to access care, and improve program efficacy, policy and law makers should both distinguish between generalized uncompensated care and charity care in annual financial reporting and 340B related audits and require a threshold of charity care for hospitals seeking to qualify for the 340B program. If hospitals are dissatisfied with their Medicare or Medicaid reimbursement rates and what that means for boosting their bottom line, they would do well to send their lobbyists after reimbursement dollars rather than disingenuously justifying their pilfer effort to rob 340B of its noble cause. Either way, it’s time these entities see requirements tied to their dollars, including rules around charging off debt against low-income patients.
For more information on the issues facing the 340B Program, you can access the Community Access National Network’s 340B Commission final report and reform recommendations here.
Sources:
American Hospital Association (September 2020). 340B Hospital Community Benefit Analysis. Retrieved online at https://www.aha.org/guidesreports/2020-09-10-340b-hospital-community-benefit-analysis.
American Hospital Association (December 2017). UNCOMPENSATED HOSPITAL CARE COST FACT SHEET. Retrieved online at https://www.aha.org/system/files/2018-01/2017-uncompensated-care-factsheet.pdf.
Bennett, N., Eggleston, J., Mykyta, L., & Sullivan, B. (2021, April 7). 19% of U.S. Households Could Not Afford to Pay for Medical Care Right Away. U.S. Census Bureau. Retrieved online at https://www.census.gov/library/stories/2021/04/who-had-medical-debt-in-united-states.html.
Community Access National Network (February 2019). 340B DRUG DISCOUNT PROGRAM: The Issues Spurring Discussion, Stakeholder Stances and Possible Resolutions. 340B Commission Final Report. Retrieved online at https://docs.google.com/gview?url=http://www.tiicann.org/pdf-docs/2019_CANN_340B_Commission_Final-Report-v5_03-07-19.pdf&embedded=true
Committee on Energy and Commerce, Subcommittee on Oversight & Investigations (2017, October 11). EXAMINING HOW COVERED ENTITIES UTILIZE THE 340B DRUG PRICING PROGRAM. U.S. House of Representatives. Retrieved online at https://www.govinfo.gov/content/pkg/CHRG-115hhrg27577/html/CHRG-115hhrg27577.htm.
Kliff, S. & Sanger-Katz, M. (2021, July 20). Americans’ Medical Debts Are Bigger Than Was Known, Totaling $140 Billion. The New York Times. Retrieved online at https://www.nytimes.com/2021/07/20/upshot/medical-debt-americans-medicaid.html.
U.S. Government Accountability Office (2018, June 18). Drug Discount Program: Characteristics of Hospitals Participating and Not Participating in the 340B Program. GAO-18-521R. Retrieved online at https://www.gao.gov/assets/gao-18-521r.pdf.
Weissmann, Dan (2021, October 7). PODCASTS – ‘An Arm and a Leg’: How One State Protects Patients From Hospital Lawsuits. Kaiser Health News. Retrieved online at https://khn.org/news/article/podcast-an-arm-and-a-leg-how-one-state-protects-patients-from-hospital-lawsuits/?utm_campaign=KHN%3A%20First%20Edition&utm_medium=email&_hsmi=168013149&_hsenc=p2ANqtz-_sXa4onkYlNPYAtzOv-Hn4b_y9OgQhBcwhnxYvtugSLuAXK1sYZ1_OWiArpRr29-YxGGpHZCZ9t4IhZVASXKpQZ-lS5A&utm_content=168013149&utm_source=hs_email.
