340B hospitals cost Medicare more than 50% more for cancer care

Hospitals have realized that the 340B discount drug program presents a huge source of potential profits, particularly in the delivery of cancer care, according to a new study.

A Practice Impact Report, from the Community Oncology Alliance (COA), shows the 340B program is significantly larger than previous estimates have shown. Much of the growth is concentrated in oncology drugs for which 340B hospitals cost Medicare and beneficiaries more than community oncology clinics.

Every year the COA publishes this report tracking the changing landscape of cancer care. For the study, researchers from the Berkeley Research Group (BRG) examined Medicare hospital outpatient data to get a better sense of its true size and impact of the 340B program. They utilized a combination of Medicare fee-for-service (FFS) hospital outpatient claims, Medicare FFS physician office claims, hospital cost reports, and Office of Pharmacy Affairs (OPA) data for the period from 2010 to 2013.

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Since 2008 the report has shown that 544 practices have been acquired by hospitals and 313 have closed. In just the past two years three in four of these acquisitions have been by hospitals participating in the 340B drug discount program.

There have been a lot of reports assessing the growth of the 340B program over the years, including a recent Government Accountability Office report that concluded “on average, beneficiaries at 340B DSH hospitals were either prescribed more drugs or more expensive drugs than beneficiaries at the other hospitals…”

“COA wanted to add to this body of knowledge and fill in some important gaps we have in the data on the scale of the 340B program,” Ted Okon, executive director of the Community Oncology Alliance, tells Managed Healthcare Executive. “In particular we wanted to get a better picture of its true cost beyond just aggregate drug sales numbers. There is tremendous consolidation taking place in the national healthcare landscape, particularly in cancer care.”

NEXT: 340B programs much larger than estimates

OkonThe study shows that the 340B program is much larger than previous estimates have ever shown and is experiencing consistent growth. The majority-58% -of all Medicare Part B hospital outpatient drug reimbursement in 2013 went to hospitals participating in the 340B program. For oncology drugs it was even higher at 60%.

“That is a double-digit growth in the program from just four years before, much of which is being driven by hospitals new to the program,” Okon says. “This growth is also costing Medicare and patients a lot more for cancer care.”

The average reimbursement for Part B oncology drugs is 52% higher in 340B hospitals than in community cancer clinics. And during the study period 340B hospitals saw a 123% increase in total reimbursements for oncology drugs. That is nearly four times the increase at non-340B hospitals (31%) while community oncology clinics saw a 5 percent decrease during the same time.

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“The growth and cost of the 340B program should be a concern to managed care executives,” Okon says. “The discounts that participating hospitals receive on drugs are applied to all patients regardless of whether they are on Medicare or private insurance. Ultimately, these costs are passed along to all users of our healthcare system, and are a big part of the increase in cancer care costs we have seen in America.”

Based on this study, Okon offers four takeaways:

• The 340B program is a lot larger than previously understood.

• The 340B program has grown tremendously in recent years and that is poised to continue.

• The cost of providing cancer care in 340B hospitals is higher than in the community oncology setting.

• The 340B program has precipitated a consolidation in the healthcare marketplace, particularly in cancer care.