GAO wants financial incentives removed from 340B drug program, cites abuse

The Government Accountability Office believes Congress should slash the financial incentives the government pays hospitals in the 340B drug program, it said in a new report, over concerns that disproportionate share hospitals are prescribing more than other facilities.

The Government Accountability Office believes Congress should slash the financial incentives the government pays hospitals in the 340B drug program, it said in a new report, over concerns that disproportionate share hospitals are prescribing more than other facilities.

The 340B program currently gives incentives for healthcare providers to prescribe more drugs and more expensive drugs to treat Medicare Part B beneficiaries.

The GAO study found that in both 2008 and 2012, per beneficiary Medicare Part B drug spending, including oncology drug spending, was substantially higher at 340B disproportionate share hospitals hospitals than at non-340B hospitals.

The issue is the Centers for Medicare & Medicaid Services uses a formula to pay hospitals for drugs at set rates regardless of hospitals' costs for acquiring the drugs, which could be leading facilities to prescribe more drugs or more expensive drugs to Medicare beneficiaries.

This also raises potential concerns about whether hospitals are driven by the incentives over quality of care.

Bruce Siegel, MD, CEO and president of America’s Essential Hospitals, criticized the report’s conclusion that physicians would ignore a patient’s needs to enrich hospitals.

“We are particularly troubled by the GAO's unfounded conclusion that hospitals that serve our nation's most vulnerable patients inappropriately prescribe medications to Medicare beneficiaries for financial gain,” Siegel said Monday.

Officials at the Department of Health and Human Services also voiced concern with the GAO's conclusions, suggesting further analysis was needed to examine patient outcomes and differences in health status.

According to the GAO report, in 2012, the average per beneficiary spending at 340B DSH hospitals was $144, compared to approximately $60 at non-340B hospitals.

[Also: Healthcare providers score in challenge to DSH recalculations]

The overall financial margins for 340B DSH hospitals, which often tend to lower-income patients, tend to be lower compared with non-340B hospitals, which could be due to 340B DSH hospitals providing more uncompensated and charity care, according to the GAO.

However, 12 percent of 340B DSH hospitals provide low amounts of charity care, the report stated.

The differences do not appear to be explained by hospital characteristics or patients' health status, according to the GAO.

Siegel said the GAO brushes aside the complex questions of how socioeconomic factors affect health and healthcare and how to adjust quality measures and payments to reflect these differences. The GAO also dismissed other possible explanations for the differences in spending, including better quality and outcomes and different settings for drugs, he said. For example, the likelihood that patients of non-340B hospitals more frequently receive drugs in non-hospital settings for a reduction in inpatient spending, Siegel said.

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Instead, he said, “The GAO … leaps to the unsupported conclusion that financial incentives fully explain the differences in spending.”

The GAO was asked to review hospitals' participation in the 340B and Medicare programs.

Stakeholders have questioned the increase in hospital participation in the program, and the implications for Medicare and its beneficiaries, especially regarding cancer care, according to the GAO.

Certain providers, including hospitals that serve a disproportionate number of low-income patients, have access to discounted prices on outpatient drugs through the 340B. But officials have limited their ability to counter the financial incentives because the 340B statute does not restrict covered entities from using drugs purchased at the discounted price and the Medicare statute does not limit CMS reimbursement for such drugs, the GAO stated.

About 40 percent of all U.S. hospitals participate in the 340B Drug Pricing Program, and the majority of 340B discounted drugs are sold to hospitals. In 2012, these 340B disproportionate share hospitals were generally larger and more likely to be teaching hospitals compared with non-340B hospitals.

Twitter: @SusanMorseHFN