The Decline of Community Oncology Practices with 340B

Changes needed to ensure the program offering prescriptions at discounted prices continues to serve vulnerable and uninsured patients.

The 340B Drug Pricing Program is increasing the cost of cancer care by encouraging enrolled hospitals to acquire independent community oncology practices, which cost less than hospital outpatient treatment. The discount drug program needs to be updated to best serve patients and our health care system.

Given the dollars involved with 340B pricing, hospitals are very motivated to woo community oncologists.

There’s no doubt that 340B is a major driver in the cost of cancer care ,” Bruce J. Gould, medical director of Northwest Georgia Oncology Centers and president of the Community Oncology Alliance, said. “Given the dollars involved with 340B pricing, hospitals are very motivated to woo community oncologists.”

In 1993, Congress established the 340B program to allow hospitals and clinics that provide care for vulnerable and uninsured patients to buy medicines at reduced prices. These providers are then allowed to charge full price to insurers and government payers like Medicare and Medicaid, allowing them to recoup some of the costs of charity care in their communities.

Although intended to be a relatively small program, 340B has expanded dramatically since its passing. While the original law referenced only about 90 eligible hospitals, by 2011, 1,673 hospitals were enrolled, representing about a third of all U.S. hospitals.

340B Has Increased Significantly Over the Past Decade

But many of these hospitals are simply profiting from the program rather than giving back to the community. According to one analysis, only 4 percent of 340B hospitals provide significant charity care (defined as 10 percent or more of their overall patient costs). And less than a third are providing more charity than the average for all U.S. hospitals combined – including for-profits. Meaning few are carrying the load: about 20 percent of 340B hospitals provide 80 percent of the charity care delivered by these hospitals.

Few 340B Hospitals Provide Significant Charity Care

No one knows what hospitals do with their 340B profits. While 340B community clinics have to report their service to poor and uninsured patients to federal agencies, hospitals do not. The metrics that hospitals report are only based on their inpatient services, which fails to account for the increasingly massive number of outpatients who are buying medicines from them.

“There’s this glaring loophole in the program,” Rena Conti, a health economist at the University of Chicago, said. “The hospitals serving the poor patients in 1993 [when the program was designed] and hospital systems in 2015 are totally different creatures.”

In addition to sending money where it isn’t helping those in need, 340B has also resulted in the loss of community oncology clinics. To boost profits, hospitals have been scooping up these practices to sell more medicines. Over the past two years, 75 percent of community oncology practice acquisitions were by 340B hospitals. Without changes, the health care system stands to lose these relatively inexpensive practices.

340B Hospitals Are Responsible for Most Community Oncology Practice Acquisitions

“340B sweetens the pot for mergers and acquisitions,” Conti said. “It’s clearly a revenue-generating arrangement.”

Although these mergers and acquisitions are increasing cancer care costs, many are quick to protest changes to the program. Resistance comes from both the hospitals who are profiting and the true safety-net providers, who are worried that maybe the baby will be thrown out with the bathwater. Indeed, meaningful change will have to protect the original intent of the program.

“We want the safety net hospitals to use 340B pricing for the benefit of the indigent and poor patients,” said Gould. “We just don’t want this program to be abused.”

Of course, getting the program back on track will require Congressional action. Earlier this year, a Congressional hearing revealed that today’s 340B program is in need of increased transparency and enforcement. Now Congress needs to act.

“Hospitals should be required to report their 340B revenues,” Conti said. “They should also show how that revenue is used to ensure continuity of care for the uninsured or to meet community needs.” If they can’t, Conti argues, then they should share the savings with insurers and Medicare.