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An obscure drug discount program is hampering rural hospitals’ use of the federal lifeline. • Source New Mexico

Faced with ongoing concerns about the closure of rural hospitals, Capitol Hill lawmakers have introduced a series of proposals to create a federal program designed to maintain life-saving services in small rural towns.

In Anamosa, Iowa — a town of fewer than 6,000 people more than 900 miles from the nation’s capital — rural hospital leader Eric Briesemeister awaits Congress’ next move. The 22-bed Briesemeister Hospital averages about seven inpatients per night, and its most recent federal filings show it earned just $95,445 in net revenue annually from serving patients.

Still, Briesemeister isn’t interested in converting the facility into a rural emergency hospital, which would mean getting millions of extra dollars each year from federal payments. In exchange for that financial support, hospitals that join the program keep their emergency departments open and give up hospital beds.

“It wasn’t for us,” said Briesemeister, CEO of UnityPoint Health-Jones Regional Medical Center. “I think this program is designed a little more for hospitals that might not be there without this program.”

Nationally, only about two dozen of more than 1,500 eligible hospitals have become rural emergency hospitals since the program started last year. At the same time, rural hospitals continue to close – ten since the solution became available.

Federal lawmakers have introduced a handful of legislative solutions since March. In one bill, senators from Kansas and Minnesota list a host of tactics, including reopening older closed facilities.

Another proposal introduced in the House of Representatives by two Michigan lawmakers is the Rural 340B Access Act. It would allow emergency hospitals in rural areas to take advantage of the federal drug rebate program 340B, which Congress created in 1992.

The 340B program, named for the federal statute, allows eligible hospitals and clinics to purchase drugs at a discount and then bill insurance companies, Medicare or Medicaid at market rates. Hospitals get to keep the money they make from the difference.

Congress passed 340B as an indirect relief package to help struggling hospitals stay afloat. Many larger hospitals say the money is used for community benefits and charity care, while many small hospitals rely on the drug rebates to help cover staffing and operational shortfalls.

Currently, emergency hospitals are not eligible for 340 billion discounts. According to a press release from U.S. Rep. Jack Bergman (R-Mich.), the House of Representatives proposal would “correct this oversight.” Supporters of the bill include the American Hospital Association and the National Rural Health Association.

In Iowa, Briesemeister said the federal drug rebate program 340B “can be used for a tremendous amount of good.” The small city hospital uses the money it makes from 340B to subsidize emergency services and uninsured and underinsured patients who visit the emergency department, he said.

Iowa Republican Senator Chuck Grassley signed the Rural Emergency Hospital program into law. His spokesperson, Gillie Maddox, did not immediately respond to questions about why the federal law establishing rural emergency hospitals left out the 340B program. Instead, Maddox said the appointment was a “product of bipartisan negotiations.”

A survey conducted by health analytics and consulting firm Chartis, along with the National Rural Health Association, found that nearly 80% of rural hospitals had participated in 340B and nearly 40% said they get $750,000 or more annually from the program.

Sanford Health, a largely rural health care system headquartered in Sioux Falls, South Dakota, was considering converting a handful of smaller critical access hospitals into rural emergency hospitals.

Martha Leclerc, vice president of corporate contracting at Sanford, said the system analyzed how much revenue would be lost by closing hospital beds, which is also a requirement of the emergency hospital program, and by not being able to apply for drug rebates.

Ultimately, she said, switching “didn’t make much sense.”

While many rural hospitals are pushing for the addition of the 340B facility to the national emergency hospital program, opponents say 340B could be a cash cow for hospitals that don’t serve enough vulnerable patients.

Nicole Longo is deputy vice president of public affairs for the Pharmaceutical Research and Manufacturers of America, the nation’s largest and most influential pharmaceutical lobbying group. She wrote in a recent blog post that hospital systems and chain pharmacies are “exploiting the program” and said patients have not benefited from the program’s growth.

In an interview, Longo said PhRMA supports rural emergency hospitals to access 340B because they treat “vulnerable patients in underserved communities” and are “true safety net providers.”

PhRMA, she said, wants to encourage a thoughtful conversation about “what types of hospitals should be in the program.” Last year, PhRMA made an unlikely pact with community health centers to create the Alliance to Save America’s 340B Program, or ASAP 340B.

Vacheria Keys, associate vice president of policy and regulation at the National Association of Community Health Centers, said, “It’s a new day of openness, from all parties.”

Use of the drug discount program skyrocketed after provisions in the Patient Protection and Affordable Care Act, passed in 2010, allowed hospitals and clinics to contract with an unlimited number of pharmacies, such as Walgreens and CVS, that receive compensation to provide the drugs. discounted medicines.

Adam J. Fein, president of the industry research organization Drug Channels Institute, reports that the 340B program is the second-largest federal drug program, after Medicare Part D. The flow of drugs purchased under the 340B program amounted to 2022 $53.7 billion, about $9.8 billion more than 2021.

In response to the explosive use of contract pharmacies, pharmaceutical manufacturers have restricted the drugs they offer at discounted prices through pharmacies. That restriction affects rural hospitals like Labette Health, a Kansas hospital whose president asked President Joe Biden for help dealing with the drug companies.

Rena Conti, an associate professor of markets, public policy and law at Boston University’s Questrom School of Business, has studied drug rebates for years and said she has “major concerns about the expansion” of the 340B program.

“There’s a lot of money being generated from this program, but we really can’t understand exactly how much that really is and who exactly is benefiting from it,” Conti said.

At the same time, says Conti, a health care economist, it makes sense to give rural hospitals access to the federal drug rebates because they are hospitals that serve particularly vulnerable patient populations.

KFF Health News is a national newsroom that produces in-depth journalism on health issues and is one of its core operating programs KFF – the independent source for research, polls and journalism in the field of health policy.

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