St. Elizabeth Healthcare in Ft. Thomas, Ky., is one of three hospitals known to have withdrawn from the 340B program because changes in patient mix linked to the COVID-19 pandemic caused them to lose their eligibility. More are expected to lose eligibility soon.

HRSA Says at Least Three Hospitals Have Lost 340B Eligibility So Far Due to COVID-19 Patient Mix Changes

The U.S. Health Resources and Services Administration (HRSA) said yesterday it knows of three hospitals that have withdrawn from the 340B program because changes in patient mix linked to the COVID-19 pandemic caused them to lose their eligibility. There could be more, HRSA said.

The hospitals are:

  • St. Elizabeth Healthcare, Ft. Thomas, Ky. (withdrew Oct. 1, 2021)
  • Bayhealth Medical Center, Milford, Del. (withdrew Oct. 1, 2021)
  • Athens Limestone Hospital, Athens, Ala. (withdrew Nov. 30, 2021)

All three are disproportionate share (DSH) hospitals. DSH, sole community hospitals (SCH), and rural referral centers (RRC) must have a specified Medicare DSH adjustment percentage to qualify for 340B (greater than 11.75 percent for DSH hospitals and greater than 8 percent for SCHs and RRCs). Children’s hospitals and free-standing cancer hospitals must have a payer mix that would give them a DSH percentage above 11.75 percent.

The DSH percentage is based on a hospital’s volumes of inpatient Medicaid and Medicare SSI patients, as reported on the hospital’s most recently filed Medicare cost report. The 11.75 percent figure translates into close to a 30 percent indigent population. The American Hospital Association (AHA) and others have warned that the COVID-19 pandemic has disrupted normal inpatient service patterns to the point that some hospitals are bound to see their DSH percentage falling below the level needed to qualify for 340B.

That appears to have been true for the three hospitals.

340B OPAIS, the 340B program database, includes an optional comment field for covered entities that end their enrollment in 340B.

“Due to the Covid 19 emergency we have had long Covid stays and less Medicaid eligible stays which has dropped our percent below 11.75,” Athens Limestone Hospital said in an entry in 340B OPAIS. “In 15 years we have never dropped below and believe it will go back above once the pandemic is over.”

“Due to COVID19 drastically changing our CY2020 Inpatient population to include more Medicare patients, it caused our Medicaid population to drop and thus our allowable DSH percentage to drop from 17.4% to 11.36%,” St. Elizabeth Healthcare said.

“Pandemic materially affected utilization,” Bayhealth Medical Center said.

HRSA noted that “hospitals are not required to include termination comments” when they exit 340B. Hospitals in addition to Athens Limestone, St. Elizabeth, and Bayhealth could have quit 340B due to a COVID-19 related drop in their DSH percentage without noting so in 340B OPAIS.

“Some might call three a small number,” a lawyer who represents 340B covered entities said. “I think it’s a travesty that any hospital has lost its 340B eligibility through no fault of its own because of COVID.” Some financial experts expect the number of hospitals that lose eligibility will grow over the coming months.

Bills have been introduced in the U.S. House and Senate to ensure that hospitals that were participating in 340B at the start of the COVID-19 public health emergency, and that have experienced changes to their DSH percentage due to the pandemic, retain their 340B eligibility.

The AHA also is urging the Biden administration to give hospitals the same protection through the Medicaid section 1135 waiver process.

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