Hospitals welcome billions in 340B payments, but decry ‘claw back’ of funds

From the perspective of hospitals, it’s about time for some relief.

Rick Pollack, president and CEO of the American Hospital Association, welcomes long-awaited payments from the 340B drug program. But hospitals don't want to see cuts in future years. (Photo: AHA)

The Department of Health and Human Services says hospitals will soon receive long-awaited payments following a bitter dispute related to the federal government’s 340B drug discount program. Hospitals are going to receive lump-sum payments for the program in the near future, possibly by early next year.

The Centers for Medicare & Medicaid Services, a division of HHS, said Thursday that it plans to pay out $9 billion to 1,700 affected hospitals. The 340B program offers discounts on some outpatient drugs for hospitals that serve a high percentage of patients with low incomes and those in underserved communities.

However, health systems are protesting the government’s plans to recoup funds elsewhere. The department has cited budget neutrality provisions in federal spending, requiring federal agencies to offset increases with reductions in the coming years.

Organizations representing hospitals expressed thanks for the expected payments, which come at a time when many hospitals continue to struggle financially. But they didn’t hide their displeasure over the prospect of future reductions in other areas.

Hospitals had implored the CMS to reconsider plans to recoup money to make up for the payments, said Rick Pollack, president and CEO of the American Hospital Association.

“The one-time, lump-sum repayment hospitals will soon receive will help them to continue providing high-quality care to their patients and communities,” Pollack said in a statement Thursday.

“However, HHS made a grievous mistake in choosing to claw back billions of dollars from America’s hospitals, especially those that serve rural, low-income, and other vulnerable communities,” he said. “HHS decided to ignore hundreds of comments from hospitals and other providers explaining why this Medicare cut is both illegal and unwise.”

Pollack said the hospital association will review the government’s plans and “consider all available options going forward.”

Beth Feldpush, senior vice president of policy and advocacy for America’s Essential Hospitals, said the overdue 340B payments will help safety net hospitals. But she also denounced the government’s plans to offset those payments.

“With essential hospitals’ ongoing high labor costs and other financial challenges, final action on a plan to make repayments by early next year comes as welcome news—especially given the long delay in the proposed rule following court rulings on repayment,” Feldpush said in a statement.

“However, we continue to disagree with the position of the Centers for Medicare & Medicaid Services (CMS) that it must recoup repayments in the name of budget neutrality,” she said. “This will unnecessarily blunt the impact of the remedy by ensuring years of future underpayments.”

Safety net hospitals are relieved that reductions won’t begin until 2026, she said. But Feldpush added, “We continue to urge the agency to reconsider its position.”

Soumi Saha, senior vice president of government affairs at Premier, welcomed the one-time payment to 340B hospitals. But Saha criticized the government's plan to reduce aid down the road.

"Premier had hoped CMS would own up to the fact that clawing back these payments over 16 years is inconsistent with the law and CMS’ longstanding past precedent regarding application of budget neutrality adjustments," Saha said in a statement. "Premier will continue to press CMS to hold hospitals harmless from policy deemed unlawful to preserve patient access to high-quality pharmaceuticals."

Hospitals and the government have engaged in a years-long dispute over Medicare reimbursements in the 340B drug pricing program.

Former President Trump’s administration implemented cuts of nearly 30% in drug payment rates in 2018, and President Biden’s administration sought to continue the policy. The government argued it needed to use resources more judiciously and sought to offer more aid to hospitals that weren’t participating in the 340B program.

The U.S. Supreme Court unanimously struck down the 340B program cuts to hospitals and health systems in a June 2022 decision. The case revolved around $1.6 billion in annual Medicare payments.

Since winning the Supreme Court decision, hospitals have been anxious to receive funds and bristled over delays in getting the money. They argue the government never should have lowered payments and said the 340B program helps health systems provide essential services to patients in need in cities and rural communities.

However, critics say the 340B program has grown far beyond its stated mission of aiding hospitals that serve a large number of vulnerable patients. Some say hospitals are not passing on sufficient discounts to patients. The Alliance for Integrity and Reform of 340B has also said some 340B hospitals are not providing enough charity care.

Hospitals in the 340B program say they have faced another challenge, as some major pharmaceutical companies have been restricting some discounts in recent years.

The advocacy group 340B Health, which represents hospitals participating in the program, says more than two dozen drug companies have imposed pricing restrictions.