340B HOSPITAL OPERATING MARGINS DROPPED SHARPLY IN FY 2020
Despite Financial Stresses, Safety-Net Hospitals Increased Provision of Uncompensated Care
WASHINGTON, D.C., JULY 20, 2022— Hospitals participating in the 340B drug pricing program were battered financially as the COVID-19 pandemic unfolded in 2020, yet they still increased their provision of uncompensated and unreimbursed care to patients in need. A research brief that 340B Health released today shows 340B disproportionate share (DSH) hospitals saw their average operating margin drop 74% from fiscal year 2019 to FY 2020. At the same time, the share of all uncompensated and unreimbursed care in the U.S. that 340B DSH hospitals provided increased to 67% despite them making up only 44% of all hospitals.
The onset of the pandemic significantly reduced the provision of non-COVID-related inpatient and outpatient care, reducing the amounts of revenue that hospitals brought in. But the new report by Dobson | DaVanzo & Associates demonstrates that the pandemic had a worse effect on the financial health of safety-net hospitals. Non-340B hospitals saw their average operating margin rise from FY 2019 to FY 2020.
The report confirms 340B DSH hospitals continue to provide the lion’s share of care in the U.S. for which hospitals receive no payment or for which Medicaid and similar programs do not cover the full cost of delivering the care. In FY 2019, those hospitals provided $38.2 billion of this uncompensated and unreimbursed care, accounting for 64.1% of the total. In FY 2020, this amount rose nearly 10% to $41.6 billion, which made up two-thirds of all such care in the country. Such care remained flat during this period for non-340B hospitals.
“The historic COVID-19 public health emergency significantly hit 340B hospitals,” said 340B Health President and CEO Maureen Testoni. “Yet, true to their mission, these safety-net hospitals stepped forward to provide care to those who could not afford it. This report is the latest demonstration that 340B savings are going toward care for patients living with low incomes, as Congress intended.”
Congress created 340B in 1992 to support the health care safety net. To qualify for 340B drug discounts, hospitals must be public or nonprofit facilities and show that they provide a disproportionate share of care to patients with low incomes who are enrolled in Medicaid and Medicare. More than 1,200 small, rural hospitals also are eligible for 340B. Hospitals participating in 340B can purchase outpatient prescription drugs from drug companies at a discount and use the savings to stretch their resources to care for more patients and offer more comprehensive services.
Read the full research brief to learn more.
Contact: Richard Sorian at richard.sorian@340bhealth.org or 202-536-2285.