On June 18, the United States Government Accountability Office (GAO) released a report on the 340B program, entitled “Drug Discount Program: Characteristics of Hospitals Participating and Not Participating in the 340B Program.” The 340B Drug Discount Program requires drug manufacturers to provide discounts on outpatient drugs to certain categories of eligible hospitals. Hospitals that serve a certain percentage of low income patients as measured by the disproportionate share hospital (DSH) adjustment percentage are eligible to participate in the 340B program.

In recent months, legislators have expressed disagreement over the future of the 340B program, as previously summarized in the Health Law Pulse. Critics of the program argue that the 340B program no longer ensures that only hospitals serving a large population of low-income patients qualify to participate in the program, and that there is a lack of oversight by the Health Resources and Services Administration (HRSA) over the program. The GAO conducted the study to answer legislators’ questions regarding the rapid growth in the number of hospitals participating in the 340B program, which increased from 1,465 in 2011 to 2,399 in 2016, and the impact of Medicaid expansion on the 340B program following the enactment of the Patient Protection and Affordable Care Act (ACA) in 2010. More specifically, the GAO was asked to examine the characteristics of 340B and non-340B participating hospitals, and whether any of these characteristics changed following the expansion of Medicaid coverage.

The GAO focused its analysis on three out of the six hospital types that participate in the program, critical access hospitals (CAH), sole community hospitals (SCH), and general acute care hospitals, because these hospital types accounted for approximately 95 percent of the hospitals participating in the program in 2016. The GAO also used data from 2012 to 2016 for purposes of examining hospital characteristics before and after most states expanded Medicaid under the ACA.

In its report, the GAO found that in 2016, 340B hospitals had fewer inpatient beds than non-340B hospitals, and that more 340B hospitals were teaching hospitals than non-340B hospitals. However, these characteristics varied across the different hospital types that the GAO reviewed. For example, 340B general acute care hospitals had more inpatient beds than their non-340B counterparts, but 340B and non-340B CAHs were similar in size in terms of the number of inpatient beds. For teaching hospitals, 340B and non-340B SCHs had a similar percentage of teaching hospitals, whereas 340B general acute care hospitals had a higher percentage of teaching hospitals than their non-340B counterparts.

The GAO also found that more 340B hospitals are located in rural areas than non-340B hospitals. Specifically, in 2016, the GAO found that 62 percent of 340B hospitals were located in rural areas, whereas 38 percent were in urban areas. The GAO also found that 340B and non-340B hospitals provided similar amounts of charity care and uncompensated care in 2016. The GAO stated that there was some variation in terms of the different hospital types and the amounts of charity care and uncompensated care that they provided. For instance, while the amount of charity care provided by 340B and non-340B CAHs was similar, the amounts of charity care provided by 340B SCHs and general acute care hospitals were much higher than their non-340B counterparts.

Finally, from 2012 to 2016, the GAO found that participation in the 340B program by general acute care hospitals increased in Medicaid expansion states, but remained relatively unchanged in non-expansion states. The GAO also found that the amounts of charity care and uncompensated care provided by hospitals in Medicaid expansion states decreased more than it did for hospitals in non-expansion states. The GAO suggests that the increase in participation in the 340B program and decrease in charity care and uncompensated care in Medicaid expansion states may reflect the fact that the number of patients covered by insurance increased since the implementation of the ACA.

*Many thanks to Summer Associate Hayley White in preparing a draft of this blog post.