340B Drug Discount Program: Information about Hospitals That Received an Eligibility Exception as a Result of COVID-19
Fast Facts
The 340B Program allows certain hospitals to buy outpatient drugs at discounted prices. To be eligible for the program, hospitals generally must treat a minimum percentage of low-income Medicare and Medicaid patients. In 2022, Congress passed a law allowing hospitals to request an exception to this requirement if they were unable to meet it due to the COVID-19 pandemic.
The Health Resources and Services Administration approved 53 of the 61 hospitals that requested an exception, as of May 31, 2022. This Q&A includes information about how the agency managed the exception process and provides information on hospitals that received an exception.
Highlights
What GAO Found
The 340B Drug Pricing Program (340B Program) requires drug manufacturers to sell outpatient drugs at discounted prices to covered entities (including certain types of hospitals) for the manufacturers' drugs to be covered by Medicaid. More than 2,600 hospitals were participating in the 340B Program as of January 2023. To be eligible for the program, hospitals must meet various criteria, which may include treating disproportionate numbers of low-income Medicare and Medicaid patients, as measured by each hospital's disproportionate share hospital (DSH) adjustment percentage.
In March 2022, a law was enacted that allowed certain hospitals to request temporary exceptions to the 340B Program's DSH percentage eligibility requirement if they were unable to meet the requirement because of factors related to the COVID-19 public health emergency ("pandemic"). The exception applied to DSH percentages from hospital cost-reporting periods that began during fiscal year 2020 (or a subsequent fiscal year) and that ended no later than December 31, 2022, which would allow some hospitals to request exceptions in 2023.
In administering and overseeing the 340B Program, the Health Resources and Services Administration (HRSA) has been responsible for developing and implementing the process through which hospitals could request exceptions. According to HRSA officials, within days of the provision becoming law, the agency developed and implemented an attestation form for hospitals to use to request exceptions, developed a standard operating procedure to guide the exception review and approval process, and shared information about the provision with potentially eligible hospitals and 340B stakeholder groups, among other actions. The attestation form required each requesting hospital to describe how the COVID-19 pandemic affected its ability to meet its required DSH percentage for 340B participation.
Of the 61 hospitals that requested exceptions as of May 31, 2022, 53 were subsequently approved—referred to as "excepted hospitals." GAO found that:
- The excepted hospitals were geographically dispersed among 27 states. Most (35) were rural, and most (31) had 100 or fewer beds.
- The DSH percentages of excepted hospitals ranged from 0.2 to 9.0 percentage points below their required DSH percentage thresholds.
- Excepted hospitals' explanations regarding the impact that the COVID-19 pandemic had on their ability to meet the DSH percentage requirement for participating in the 340B Program varied. Some hospitals noted that their states issued moratoriums to delay certain elective procedures to allow hospitals to focus their limited resources and staff on treating COVID-19 patients. According to these hospitals, delaying elective procedures disproportionately affected Medicaid patients, which may have led to decreases in the total number of days Medicaid patients were in their hospitals, and in turn, decreases in those hospitals' DSH percentages.
Why GAO Did This Study
Enacted in March 2022, the Consolidated Appropriations Act, 2022, allowed certain hospitals to request temporary exceptions and continue participating in the 340B Program if they were unable to meet their 340B DSH percentage requirements because of factors related to the COVID-19 pandemic.
GAO was asked to review the exception process and provide information on hospitals that received exceptions. This report answers a series of questions generally related to HRSA's administration of the 340B DSH percentage eligibility exception process and information about the hospitals that received eligibility exceptions.
GAO reviewed documents related to the exception process and HRSA oversight activities, as well as data from HRSA and the Centers for Medicare & Medicaid Services related to the excepted hospitals.
The Department of Health and Human Services provided technical comments on a draft of this report, which GAO incorporated as appropriate.
For more information, contact Michelle B. Rosenberg at (202) 512-7114 or rosenbergm@gao.gov.