A new federal law to help financially distressed rural hospitals stay open in a reduced capacity would not preserve the hospitals’ eligibility for 340B drug discounts.

Distressed Critical Access Hospitals that Devolve to Stay Open Would Lose 340B Eligibility

A new federal law to help financially distressed rural hospitals stay open in a reduced capacity would not preserve the hospitals’ eligibility for 340B drug discounts.

Federal spending legislation that President Trump signed into law last Dec. 27 included a version of U.S. Rep. Jodey Arrington’s (R-Texas) Save Rural Communities Act. As introduced in February 2020, Arrington’s bill would have let critical access hospitals (CAHs) at risk of closure scale back into outpatient-only, 24-hour rural emergency access centers (REACs). Those that became REACs would have kept their 340B eligibility under Arrington’s bill. That is not the case under the appropriations bill that became law, which uses the term rural emergency hospital (REH) instead of REAC.

CAHs can downshift and become REHs beginning in October 2022.

“The authorizing language in the [appropriations bill] doesn’t explicitly state that a REH is a covered entity under 340B,” said Josh Jorgenson, government affairs and policy manager for the National Rural Health Association.

“Unless a fix is in place, the new model does not seem eligible,” said Lynn Barr, Founder and Executive Chair of Caravan Health, a consulting firm that helps health systems, particularly those with rural hospitals, create and manage value-based payment systems.

Barr believes that fewer than 5% of CAHs would change into REHs, and only if they are on the cusp of closing.

NRHA is keeping its eye on the issue.

“We’re sure that REHs will want to continue their [340B] contract pharmacy relationships post-conversion as part of their service offering to the community,” Jorgenson said. “NRHA will continue to monitor the development of regulations surrounding the newly created designation.”

Last month in its hospital outpatient prospective payment system (OPPS) proposed rule, the Centers for Medicare & Medicaid Services (CMS) solicited public comments “on the health and safety standards, quality measures and reporting requirements, and payment policies” for REHs. It did not seek comment, however, about REHs 340B eligibility.