American Hospital Association seal on office wall
The American Hospital Association wants HHS to waive a requirement that it says is forcing hospitals out of the 340B program due to COVID-19-related changes in payer mix.

AHA Asks Becerra Again to Waive DSH Percentage Eligibility Requirement for 340B Hospitals During Pandemic

The American Hospital Association has asked U.S. Health and Human Services Secretary Xavier Becerra again to waive a requirement that it says is forcing hospitals out of the 340B program due to COVID-19-related changes in payer mix.

AHA President and CEO Rick Pollack asked Becerra in a March 2 letter  to pause during the COVID public health emergency hospitals’ need to maintain a given Medicare disproportionate share hospital (DSH) adjustment percentage to stay eligible for 340B drug discounts. Disproportionate share (DSH), children’s, and free-standing cancer hospitals must have a Medicare DSH percentage greater than 11.75% to qualify for 340B pricing. Sole community hospitals and rural referral centers must have a DSH percentage equal to or greater than 8%.

AHA and others have warned for months that COVID disrupted normal admission patterns to the point that many hospitals’ DSH percentages have dropped below the level needed to stay in 340B. AHA told 340B Report last month that more hospitals will likely lose their eligibility for 340B as they begin to finalize their most recent Medicare cost reports. Hospitals whose last fiscal year ended on Sept. 30 had to file new cost reports by Feb. 28. Those whose last fiscal year ended on Dec. 31 have May 31 due dates.

“Losing access to 340B discounted drugs and program savings could jeopardize the ability of these hospitals to provide critical services for the patients and communities they serve, which would be particularly catastrophic at a time when they remain on the front lines of the ongoing pandemic,” Pollack told Becerra in the letter.

No one seems to know exactly how many hospitals have had to quit 340B for this reason. Hospitals don’t have to say that they left 340B because their DSH percentage fell too low for reasons related to COVID. There is a space in 340B OPAIS, the federal 340B program database, where hospitals voluntarily can say so when they disenroll. But many seem to be unaware of the option or say that the disenrollment process is hard enough as is.

Last summer, a Modern Healthcare analysis of hospital Medicare cost reports for 2019 and 2020 projected that about one out of four 340B disproportionate share (DSH) hospitals could lose their eligibility due to COVID-19 pandemic-related changes in patient mix. DSH hospitals collectively are the biggest purchasers of 340B discounted drugs.

Bipartisan bills have been introduced in the House and Senate to waive the DSH minimum percentage requirement for hospitals that began participating in 340B before or during the COVID-19 emergency. Neither bill has advanced, though.

Pollack told Becerra in the March 2 letter that since AHA’s last letter to him on the issue roughly one year ago, “some of our member 340B hospitals have reported that they have either already lost their 340B eligibility or fear that they will lose their eligibility when their next Medicare cost reports are due to be filed.”

“Absent the COVID-19 pandemic, these hospitals would have continued to be eligible for the 340B program,” Pollack said. “As such, these hospitals and their patients should not be penalized by losing access to the 340B program as a result of the COVID-19 pandemic, especially at a time when a program like 340B is critical to maintaining patient care.”

“We believe not only that HHS has the requisite authority to exercise such a waiver in this case but also that not exercising such a waiver would seriously jeopardize the ability of some 340B hospitals to continue to provide critical services and programs for the vulnerable patients and communities they serve,” Pollack said.

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