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Avalere Finds Only One Cancer Hospital Likely Eligible for 340B Program Under Health Reform

Contact: Lindsey Spindle, 202.207.1337, lspindle@avalerehealth.net

05.04.10

Washington, DC – Out of eleven cancer hospitals that are currently exempt from the Medicare prospective payment system (PPS), only the City of Hope National Medical Center in Duarte, California, would likely qualify for the 340B drug discount program based on the new health reform law. 

The 340B program enables certain hospitals, clinics, and other entities to buy drugs that are used in outpatient settings at Medicaid-level prices.  Participants receive the discounts for all of their patients, regardless of whether they have health insurance.  The program helps eligible hospitals lower their operating costs by giving them access to Medicaid-level prices for prescription drugs.  By the same token, the program reduces revenues for pharmaceutical companies. 

The Affordable Care Act extends eligibility for the 340B drug program to cancer hospitals that are exempt from the Medicare PPS and meet two additional 340B requirements:

• They must be owned or operated by a state or local government, operate as a public or private non-profit organization with governmental status that has been granted by the state, or be a private non-profit hospital that has contracted with the state to provide healthcare to low-income individual, and
• They must have a disproportionate share hospital (DSH) adjustment percentage of 11.75 or higher. DSH adjustment percentages are calculated by Medicare for each hospital, and are designed to provide larger add-on payments to the hospitals with the highest low-income patient shares. 

Avalere’s analysis of Medicare cost report data and impact files from the Centers for Medicare & Medicaid Services suggest that only one of the eleven PPS-exempt cancer hospitals – City of Hope – would be eligible for the 340B program.  City of Hope is a voluntary non-profit hospital that currently has 150 patient beds and a DSH adjustment percentage of more than 14 percent.  

As for the other 10 cancer hospitals, the University of Miami Hospital appears to come closest to qualifying (its DSH adjustment percentage is 10.6 percent) and might become eligible in the future.  Out of the other nine cancer hospitals that are currently ineligible, one hospital does not qualify because it is proprietary.  The eight remaining hospitals have DSH adjustment percentages that are less than 5 percent.

“The 340B program is closely monitored by hospitals and pharmaceutical companies given the business implications associated with change,” said Ellen Lukens, a director with Avalere Health.  “Giving all cancer hospitals access to Medicaid-level prices would have a significant impact on the oncology sector, but the actual impact of the health reform law looks to be much more limited because the legislation includes these additional requirements that most cancer hospitals likely won’t meet.” 

The eleven cancer hospitals included in this analysis are:

• City of Hope National Medical Center (Duarte, CA)
• USC Kenneth Norris Jr. Cancer Hospital (Los Angeles, CA)
• Dana Farber Cancer Institute (Boston, MA)
• Memorial Hospital for Cancer and Allied Disease (New York, NY)
• Roswell Park Memorial Institute (Buffalo, NY)
• American Oncologic Hospital (Fox Chase) (Philadelphia, PA)
• The University of Texas M.D. Anderson Cancer Center (Houston, TX)
• Fred Hutchinson Cancer Research Center (Seattle, WA)
• Arthur G. James Cancer Center Hospital and Research Institute (Columbus, OH)
• University of Miami Hospital and Clinics (Miami, FL)
• H. Lee Moffitt Cancer and Research Institute Hospital, Inc. (Tampa, FL)

Avalere Health is an advisory services company whose core purpose is to create innovative solutions to complex healthcare problems. Based in Washington DC, the firm delivers research, analysis, insight, and strategy for leaders in healthcare business and policy. Avalere's experts span 125 staff drawn from the federal government (e.g., CMS, OMB, CBO, and the Congress), Fortune 500 healthcare companies, top consultancies, and nonprofits. The firm offers deep substance in areas ranging from healthcare coverage and financing to the changing role of evidence in healthcare decision-making. Its focus on strategy is supported by a rigorous, in-house analytic research group that uses public and private data to generate quantitative insight. Through events, publications, and interactive programs, Avalere also translates real-time healthcare developments into actionable information.

Learn more at www.avalerehealth.net.

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