An Obscure Drug Discount Program Stifles Use of Federal Lifeline by Rural Hospitals

Facing ongoing concerns about rural hospital closures, Capitol Hill lawmakers have introduced a spate of proposals to fix a federal program created to keep lifesaving services in small towns nationwide.

In Anamosa, Iowa — a town of fewer than 6,000 residents located more than 900 miles from the nation’s capital — rural hospital leader Eric Briesemeister is watching for Congress’ next move. The 22-bed hospital Briesemeister runs averages about seven inpatients each night, and its most recent federal filings show it earned just $95,445 in annual net income from serving patients.

Yet Briesemeister isn’t interested in converting the facility into a rural emergency hospital, which would mean getting millions of extra dollars each year from federal payments. In exchange for that financial support, hospitals that join the program keep their emergency departments open and give up inpatient beds.

“It wasn’t for us,” said Briesemeister, chief executive of UnityPoint Health-Jones Regional Medical Center. “I think that program is a little bit more designed for hospitals that might not be around without it.”

Nationwide, only about two dozen of the more than 1,500 eligible hospitals have become rural emergency hospitals since the program launched last year. At the same time, rural hospitals continue to close — 10 since the fix became available.

Federal lawmakers have introduced a handful of legislative solutions since March. In one bill, senators from Kansas and Minnesota list a myriad of tactics, including allowing older closed facilities to reopen.

Another proposal introduced in the House by two Michigan lawmakers is the Rural 340B Access Act. It would allow rural emergency hospitals to use the 340B federal drug discount program, which Congress created in 1992.

The 340B program, named after its federal statute, lets eligible hospitals and clinics buy drugs at a discount and then bill insurance companies, Medicare, or Medicaid at market rates. Hospitals get to keep the money they make from the difference.

Congress approved 340B as an indirect aid package to help struggling hospitals stay afloat. Many larger hospitals say the cash is used for community benefits and charity care, while many small hospitals depend on the drug discounts to help cover staffing and operational shortfalls.

Currently, emergency hospitals are not eligible for 340B discounts. According to a release from U.S. Rep. Jack Bergman (R-Mich.), the House proposal would “correct this oversight.” Backers of the House bill include the American Hospital Association and the National Rural Health Association.

Read more.