Rena Conti and Peter Bach’s analysis of disproportionate share (DSH) hospitals in the 340B drug discount program — published in the October issue of Health Affairs — neglects an essential point: Compared to non-340B DSH hospitals, 340B DSH hospitals provide over twice as much care to Medicaid and low-income Medicare patients, and almost twice as much uncompensated care. 340B DSH hospitals across the board provide high levels of uncompensated care. For these and other reasons enumerated below, the article does not support the criticism that 340B DSH hospitals are no longer serving vulnerable patients.

First, Conti and Bach misconstrue the 340B program’s intent. 340B is not – and never was – a direct assistance program for the poor. According to the Government Accountability Office, “The 340B program allows certain providers within the U.S. health care safety-net to stretch federal resources to reach more eligible patients and provide more comprehensive services, and we found that the covered entities we interviewed reported using it for these purposes.”

For example, 340B savings help The Henry Ford Hospital fund four oncology clinics and related services in Detroit and surrounding townships. The program is also enabling Henry Ford to hire pharmacists and nurses to follow up with their patients to ensure they are taking their medicines properly and that the treatment is effective.

Second, hospital outpatient clinics are growing in number due to several widely documented trends. For example:

Conti and Bach failed to evaluate whether these trends are leading 340B DSH hospitals to establish more outpatient clinics than non-340B DSH hospitals. Without this comparison, there is no way to meaningfully determine whether 340B is driving an increase in hospital offsite locations.

Third, the authors did not look at whether the hospital outpatient clinics in their study were established before or after hospitals joined the 340B program. To conclude that 340B gives hospitals incentives to open such clinics, at the very least Conti and Bach must show that the clinics were added only after their respective hospitals enrolled in the program.

Fourth, the Census data they used does not measure the income of patients who are actually seen by hospitals at their clinics. Poverty and wealth can coexist in the same area and not be reflected in Census tract data. For this reason, policymakers use a geographic-based Health Professional Shortage Area designation as well as the Medically Underserved Population designation that transcends geographic boundaries to determine underserved communities. An important role of 340B DSH hospital clinics is that they do not turn away low-income patients, which is not the case when the clinics are owned privately.

Fifth, the authors use the Office of Pharmacy Affairs database to support the claim of exponential growth in outpatient clinics, but that database does not track growth in outpatient clinics. The database has been used for different purposes over time. (See Frequently Asked Questions by HRSA, dated 2005, 2011, 2012, and 2014, on file with author.) Initially, it tracked only those offsite locations that received shipments of 340B drugs. Later, it tracked offsite buildings where 340B drugs were being used, even if the drugs were shipped to a different location. Today, it tracks each service provided in an offsite location, even if all the services are part of a single clinic.

When the reporting rules changed most recently in 2011-2012, a single clinic may have needed to add 20 listings to the database to reflect each service it provides. This would have been true even if the clinic had made no changes in the number of services it offered or the volume of 340B drugs it used. These rule changes explain why the chart in Exhibit 1 shows a misleading spike in listings on the OPA database.

Sixth, the article accurately describes the 340B program as allowing providers to use discounted drugs for all outpatients, including those with insurance, but suggests that hospitals may be “profiting” from this activity.  In fact, Congress specifically designed the program to help 340B providers “stretch their scarce resources” and reach more patients. (See page 2.As explained by the Health Resources and Services Administration, the government office charged with overseeing the program, “[i]f the covered entities were not able to access resources freed up by the drug discounts when they … bill private health insurance, their programs would receive no assistance from the enactment of section 340B.” This is true for all 340B covered entities, not just hospitals.

Seventh, as readers can verify through HRSA’s covered entity database, as of the date of publication of this post, the number of DSH hospitals enrolled in the 340B program has actually declined since the Affordable Care Act became law in 2010. This supports the fact that the current 340B criteria serve as a meaningful limit on hospital participation in the program.

The fact remains that 340B DSH hospitals support heavy caseloads of Medicaid and low-income Medicare patients – regardless of where their outpatient clinics are located. Savings from the program are essential in helpings all safety-net hospitals treat vulnerable populations.