Democratic Rep. Joe Morelle of New York (left) asked HHS Secretary Xavier Becerra (right) during a House Education and Labor Committee hearing yesterday if he would commit to temporarily waive an eligibility requirement for 340B hospitals during the COVID-19 pandemic.

Congressman Asks Becerra to Commit to Pause 340B Hospitals’ DSH Percentage Requirement

A congressman from New York asked U.S. Health and Human Services Xavier Becerra during a hearing yesterday if he will use his existing authority to protect hospitals from losing eligibility for 340B drug discounts due to changes in patient mix during the COVID-19 pandemic. Becerra did not provide tremendous clarity in his response, but said that he looked forward to working with him.

U.S. Rep. Joe Morelle (D-N.Y.) raised the issue during a June 16 hearing on HHS’s fiscal 2022 budget request before the House Education and Labor Committee—an unexpected forum for 340B to come up. The program isn’t under the committee’s jurisdiction. Morelle represents Rochester, N.Y., and most of the surrounding county. His district has about 10 hospitals enrolled in 340B.

Five of the six types of hospitals eligible for 340B must serve a sufficiently high proportion of patients with low-incomes and/or disabilities to qualify. The measurement used—the Medicare disproportionate share (DSH) adjustment percentage—is based on inpatient admissions.

Critical access hospitals, small rural hospitals located in remote areas, do not have an indigent patient requirement. 

During the pandemic, especially during its early phase, virtually all hospitals stopped non-essential inpatient care. 340B hospitals are worried that their pandemic-necessitated service disruptions will skew their DSH percentages, possibly causing them to lose 340B eligibility through no fault of their own.

Hospitals typically report their DSH percentage to the government annually when they file their Medicare cost reports. According to a 340B Prime Vendor FAQ, if a hospital’s DSH percentage falls below the requirement for 340B program eligibility, the hospital must cease purchasing and using 340B drugs on the date it files its cost report.

Bipartisan bills have been introduced in this and the last session of Congress to suspend the DSH percentage requirement for 340B hospital eligibility for the duration of the pandemic, but none of them have advanced.

Morelle opened his question to Becerra by pointing out that about 100 of his state’s hospitals participate in 340B. He noted that he was an organizer of a May 1, 2020 bipartisan letter from 23 of New York’s U.S. representatives to then-HHS Secretary Alex Azar urging him “to hold hospitals harmless and recertify current 340B entities that are still eligible, even if they have seen temporary changes to their patient mix during this pandemic.”

“I don’t know if the issue’s been resolved, and I don’t believe it’s too late,” Morelle said. He asked Becerra for his commitment to use his authority under Section 1135 of the Social Security Act to temporarily waive the DSH percentage requirement. Section 1135 authorizes the HHS secretary to waive or modify certain statutory requirements for providers of services to Medicare and Medicaid beneficiaries during major disasters or public health emergencies.

 “We look forward to working with you, congressman,” Becerra answered.

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