Relationship between initiation of 340B participation and hospital safety-net engagement

Abstract

Objective: The 340B program allows safety-net hospitals to acquire discounted outpatient drugs and charge payers full price. We examined whether 340B participation increases safety-net engagement.

Data sources: 340B participation data, Medicare hospital cost reports, American Hospital Association Survey, and Schedule 990 nonprofit hospital tax returns.

Study design: Quasi-experimental difference-in-differences design comparing 340B hospitals (the "treatment" group) before and after participating to changes over time to three alternative "control" groups: all other nonprofit and public hospitals, hospitals that are not participating during our study, and hospitals that were not-yet-participating but started after 2015. Outcome measures include a range of safety-net care measures that are alternatives to the standard uncompensated care: charity care, community benefit spending, charity care policies, and low-profit service-line provision.

Data extraction: We extracted data on all nonprofit and public hospitals from 2011 to 2015. We linked 340B participation data to Medicare hospital cost reports and American Hospital Association data using Medicare hospital identifiers. 990 Data was linked on name and address.

Principal findings: New 340B participation was not associated with a change in uncompensated care, but was associated with a 28.9 percent increase in charity care spending (SE = 8.8), or about $880,000 per hospital. However, total community benefit spending (including charity care) did not change. 340B was associated with an increase in the probability of offering discounted care (4.3 percentage points, SE = 1.6) from 84 to 88 percent and an increase in the income eligibility limit for discounted care (18.9 percentage points, SE = 5.6) from 294 to 313 percent. Participation was not associated with the probability of offering low-profit medical care services.

Conclusions: Alternative measures show that newly participating hospitals may increase charity care, potentially through offering more patients discounted care. However, increases appear to be fully offset by reductions in other community benefit programs.

Keywords: 340B; DSH Hospitals; community benefit spending; safety-net care; service provision.

Figure 1

Average difference in uncompensated care and charity care spending between 340B hospitals and a control group, before and after participation, 2011‐2015. Note: The figure presents average spending in uncompensated care (left panel) and charity care (right panel) among hospitals that begin participating in 340B over out study period relative to the average value of spending among nonparticipating hospitals. Each point represents the difference between the average for hospitals that begin participating and control group hospitals in the calendar year of observation, averaged across hospitals with differing start dates, and presented in event time where year −1 is the year before the hospital began participating in the program. The figure adjusts for time‐invariant hospital characteristics and common calendar trends by subtracting the hospital‐specific average and year‐specific average from each observation. The sample is limited to nonprofit and public general acute care hospitals that are observed in all 5 y of our sample. Uncompensated care comes from 2011 to 2015 Medicare Cost Report data and is defined as charity care and bad debt charges net of patient payments, deflated by the cost‐to‐charge ratio. Charity care comes from 2011 to 2015 Schedule H, Part 1 data, and is defined as the cost of providing charity care to patients through a written and publicized charity care policy, net of off‐setting revenues such as patient payments. Nonparticipants include hospitals that never participate in 340B as well as hospitals that eventually participate in 340B but have not yet done so

Figure 2

Average difference in charity care policy characteristics between 340B hospitals and control group, before and after participation, 2011‐2015. Note: The figure presents the upper income limit on free (left panel) and discounted (right panel) care among hospitals that begin participating in 340B over our study period relative to the average value of spending among nonparticipating hospitals. Each point represents the difference between the average for hospitals that begin participating and control group hospitals in the calendar year of observation, averaged across hospitals with differing start dates, and presented in event time where year −1 is the year before the hospital began participating in the program. The figure adjusts for time‐invariant hospital characteristics and common calendar trends by subtracting the hospital‐specific average and year‐specific average from each observation. The sample is limited to nonprofit and public general acute care hospitals that are observed in all 5 y of our sample. Data come from 2011 to 2015 Schedule H 990 sample. Nonparticipants are those that never participate in 340B as well as hospitals that eventually participate in 340B but have not yet done so during our sample