340B DSH Hospitals Provided $41B in Uncompensated Care in 2020

Despite experiencing negative operating margins, 340B disproportionate share (DSH) hospitals provided 67 percent of all uncompensated care in 2020, according to a report from 340B Health and Dobson|DaVanzo & Associates.

Researchers used FY 2019 and FY 2020 Medicare hospital cost reports to compare financial metrics of 340B DSH hospitals to those of acute care hospitals that did not participate in the 340B drug pricing program. The analysis focused on operating margins and the amount of uncompensated care the hospitals provided.

Hospitals experienced revenue losses when the COVID-19 pandemic hit as patients delayed non-urgent care and hospitalizations increased. 340B DSH hospitals saw a 74 percent decrease in operating margins between FY 2019 and FY 2020, going from -3.5 percent to -6.1 percent.

During the same period, operating margins for non-340B hospitals increased from 2.9 percent to 3.5 percent.

Researchers attributed operating margin changes to uncompensated care delivery, public payer shortfalls, and the provision of typically unprofitable services.

Although 340B DSH hospitals faced financial challenges, the facilities increased the share of uncompensated care they provided in 2020. Uncompensated and unreimbursed care for 340B DSH hospitals rose from $34.6 million per hospital in FY 2019 to $38.0 million in FY 2020, the report found.

Meanwhile, uncompensated care for non-340B hospitals was $14.3 million per hospital in FY 2019 and FY 2020.

340B DSH hospitals accounted for nearly 44 percent of hospitals but delivered 67.4 percent of all uncompensated and unreimbursed care. These hospitals provided a total of $41.6 billion in uncompensated and unreimbursed care in 2020 compared to $20.1 billion from non-340B hospitals.

“The historic COVID-19 public health emergency significantly hit 340B hospitals,” Maureen Testoni, president and chief executive officer of 340B Health, said in a press release. “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.”

Uncompensated care represents only a portion of the safety-net services that 340B hospitals provide, researchers pointed out. Additionally, the study results did not include services that do not generate a bill, including transportation and other programs that address social determinants of health.

The report highlighted the importance of the 340B program, as 340B DSH hospitals could not consistently provide essential services while experiencing financial losses without 340B program savings.

Under the 340B program, drug manufacturers must provide outpatient drugs to eligible healthcare organizations at discounted prices. Organizations are expected to use the savings they gain through the program to provide care to vulnerable populations.

Safety-net hospitals have experienced significant challenges regarding 340B program restrictions. A separate report from 340B Health revealed that hospitals faced losses of up to $9 million in 2021 due to drug companies limiting 340B discounts.

However, safety-net hospitals saw a win when the US Supreme Court recently ruled that the 340B Medicare reimbursement cuts that HHS implemented were unlawful.

Following this ruling, hospital groups, including the American Hospital Association (AHA), have urged HHS to ensure 340B hospitals receive timely repayment for the lost reimbursement.