On July 2, a bipartisan group of six senators introduced legislation to waive 340B eligibility requirements for hospitals participating in the program during the COVID-19 pandemic. S. 4160 permits hospitals that are 340B-eligible based on their disproportionate share (“DSH”) adjustment percentage to maintain eligibility even if their DSH adjustment percentage falls below the requisite threshold.

Background

In general, hospitals must establish and maintain a minimum DSH adjustment percentage to qualify for 340B. The DSH adjustment percentage reflects the volume of low-income patients treated at the hospital. It is calculated as the proportion of inpatient care rendered to Medicaid patients and patients who qualify for both Medicare and Supplemental Security Income (i.e., disability benefits).

The COVID-19 pandemic has changed hospital patient and payor mixes. States have prohibited and hospitals have canceled elective procedures. Hospitals have altered admission protocols, shifted care to outpatient settings, and increased bed counts. COVID-19 has also transformed patient demographics. As a result, some hospitals are at risk of falling below the minimum DSH adjustment percentage and losing 340B eligibility. The sudden loss of 340B savings during the public health emergency, as some hospitals face an unprecedented demand for services, would be financially devastating for many facilities.

As we discussed in a prior blog post, HRSA published guidance regarding the evolving impact of COVID-19 on 340B stakeholders. However, that guidance offers little substantive relief for hospitals. HRSA lacks regulatory authority to relieve covered entities from program requirements, even temporarily. Meaningful changes to 340B require congressional action.

S. 4160

The introduced legislation protects DSH hospitals, cancer hospitals, children’s hospitals, sole community hospitals, and rural referral centers from losing 340B eligibility for reductions in DSH adjustment percentage that occur during the public health emergency. Hospital covered entities that fail to meet their applicable DSH adjustment percentage requirement on a cost report that covers any part of the public health emergency will retain 340B eligibility. The bill will continue to protect a hospital until it files a cost-report for a time period entirely outside the public health emergency. S. 4160 does not relieve hospitals of any other 340B program requirements, all of which hospitals must continue to meet to maintain eligibility.

Key Takeaways

In the present political climate, this bill stands out as a genuine bipartisan effort that meets an immediate need.  Thus, unlike other 340B proposals, it stands a chance of passing in this Congress.  S. 4160 has been referred to the Senate Committee on Health, Education, Labor, and Pensions, on which the bill's co-sponsor, Senator Tammy Baldwin, sits. We will continue to monitor the status of S. 4160 as it moves through committee and is potentially included in future COVID-19 supplemental legislation.