March Madness: How health care providers are gaming the system
Written on March 23, 2014 by Policy Wonk Steve
When I think about the month of March a few things spring to mind. Hanging up the skis/snowboard for the season, salt/sand encrusted roads, seemingly endless toggles of the windshield-washer fluid lever, putting away the snow shovel and scolding it to stay in place until next year, shamrocks, green beer, and last but definitely not least; March Madness – the media’s commonly used name for the NCAA Basketball Tournament.
What is it about March Madness that captivates large audiences every year? In part, it’s the single-elimination nature of the tournament. “One and done”. If you lose one game, your team is sent back to the hotel to pack your bags and head back to campus. However, the genius lies in the diversity of the teams that compete. Who doesn’t love an underdog story? March Madness is full of them year after year. Sixty-eight schools from all across the country – small, medium, and large – compete to be crowned champion. The possibility of a Virginia Commonwealth University (VCU) going toe-to-toe with or perhaps even upsetting a perennial powerhouse like Kansas University (as they did in 2011) forever keeps fans on the edge of their seat.
I know you didn’t come here to read about sports. What’s my point? There’s another variety of madness occurring in our healthcare system. It involves a program designed to provide opportunity for underdogs but is currently being abused by the perennial powerhouses.
I’m referring to the 340B drug discount program. Congress created the 340B program in 1992 to help uninsured, low-income patients (underdogs) gain better access to prescription medicines. To achieve that goal, Congress created a program that requires pharmaceutical manufacturers to provide discounts on outpatient prescription drugs to entities that serve high numbers of uninsured indigent patients. This program, as originated, provided discounts to outpatient facilities, such as hospitals (perennial powerhouses), so they could serve this population.
The 340B program is important because it directly supports access to prescription drugs, providing opportunity for the underdogs every month of the year, not just March. However, there is evidence that it goes beyond this mandate, providing windfall profits to hospitals and increasing the healthcare cost burden on everyone. For instance:
- There is no current requirement of oversight for how revenues generated by 340B discounts are used by hospitals.
- There are increasing opportunities for drug diversion within the program, shifting 340B-discounted therapies to ineligible patients.
- Anecdotal evidence exists suggesting that clinical decision-making may be skewed by efforts to take advantage of the 340B program. This occurs when there is a shift of those in need of inpatient care to an outpatient setting to achieve the 340B discounts and reduce costs.
The original intent of the 340B program was to help low-income, uninsured patients get access to prescription drugs. Instead it’s become a source of revenue for many health care providers. A quick look at the growing number of providers that have joined the 340B program shows hospitals are jumping on the bandwagon and cashing in. The number of hospitals participating has grown from 591 in 2005 to 1,673 in 2011 according to the General Accountability Office (GAO).
How exactly are the powerhouses gaming the system? To keep it short and sweet, the 340B program allows hospitals to dispense discounted drugs purchased through 340B to their patients. These patients may or may not have their own private insurance coverage. The hospital then turns around and pockets the difference between their deeply discounted purchase price (20-50%) and the amount that a health plan reimburses for the drugs.
Congress, the GAO, and Health Resources and Services Administration (HRSA) have commented and investigated this issue. All have established that there is a clear need for reform, transparency, accountability and oversight to ensure that the program meets its original public health objective. The irreplaceable final stakeholder that has not weighed in yet are the patients themselves. Frankly, patients and more generally – the public – need to be aware of how this system is being gamed at the expense of the individuals it was designed to support. They must let their voices be heard.
At GHLF we are ever vigilant for the underdogs navigating the madness. If we don’t fix the 340B program soon, and return it to its original intent, the valuable services it provides cannot be sustained. As NCAA March Madness consumes the airwaves over the next few weeks, everyone will be in search of the next “Cinderella Story”. The underdog team that rises to challenge the perennial powerhouses. In that spirit, we need patients to rise and challenge the health care providers abusing the 340B program. How can Cinderella make it to the dance if she never gets an opportunity to find out if the slipper fits?