Eastern Maine Healthcare Systems of Brewer has joined major hospital industry groups in a lawsuit against the federal Department of Health and Human Services over a drug discounting program.
The legal action, filed Nov. 13 in U.S. District Court for the District of Columbia, aims to derail a pending 28 percent reduction in Medicare reimbursements for expensive outpatient medications hospitals purchase at a discount and use to treat patients with cancer, renal failure, heart disease, stroke and other life-threatening conditions.
The Centers for Medicare and Medicaid Services drug-discount program, known as 340B, allows qualified “safety net” hospitals that disproportionately serve low-income, underinsured and other disadvantaged populations to purchase certain drugs from manufacturers at a considerable discount — typically 25 to 50 percent lower than the average sale price. Then Medicare reimburses the hospitals at a higher rate for the medicines. The extra revenue generated is intended to help hospitals expand patient services.
The change, due to take effect Jan. 1, will decrease the reimbursement rate, taking an estimated $1.6 billion bite out of hospital revenues nationwide.
In a fact sheet posted online on Nov. 1, CMS says the impact will be “budget neutral” and offset by a redistribution of funds to help hospitals pay for non-drug items and services. But hospitals say the reduction will cripple their ability to provide high-level patient care.
“We will always take care of our patients,” Allen L’Italien, executive director at Eastern Maine Medical Center Cancer Care in Brewer, said in a phone interview Tuesday.
But pricey drugs for treating melanoma and other deadly forms of cancer can cost the hospital as much as $30,000 for a single course of treatment, he said, even when purchased with the 340B discount. The decreased reimbursement won’t affect the cancer center’s commitment to providing needed medications for low-income and uninsured patients, he said, but will impact support services such as social workers, telephone nursing care and physician recruitment. Longer term, he said, the impact could be more critical.
“Take, for example, pediatric oncology,” L’Italien said. “It is highly subsidized by 340B [revenues] from the adult cancer side.”
Absent those revenues, he said, the program that serves Maine families from across the northern half of the state could be imperilled.
Dr. James Jarvis, chief medical officer at EMMC, said the cuts would sap $3.7 million a year from EMMC and about $5.2 million systemwide from its parent organization EMHS. Those losses could affect the availability of critical services, such as dialysis, in more rural areas of Maine, as well as hospitals’ ability to provide free care to indigent patients, Jarvis said. EMHS hospitals provide approximately $29 million in uncompensated care each year.
“EMMC and EMHS have committed to taking care of the population we serve,” he said. “But the downstream effects [of the 340B change] concern us.”
In addition to EMMC, the hospitals in the EMHS system most directly affected by the cuts are The Aroostook Medical Center in Presque Isle and Inland Hospital in Waterville.
The 20-year-old 340B program has been under scrutiny for months. According to a June Kaiser Health News story, expansion in the program, related to provisions of the embattled Affordable Care Act, has sparked criticism among pharmaceutical manufacturers and members of Congress that revenues are not consistently used to improve patient care and that some participating hospitals do not serve a primarily disadvantaged patient base.
The story reveals sharp tensions and traded allegations of profiteering from the program between hospitals and the drug industry.
The American Hospital Association lawsuit is joined by the Association of American Medical Colleges and America’s Essential Hospitals, along with hospital plaintiffs EMHS in Brewer, the Henry Ford Health System in Detroit and Park Ridge Health in Hendersonville, North Carolina.
At the Maine Hospital Association on Tuesday, president Steven Michaud said that while no other Maine hospital systems have joined the lawsuit, all of the state’s hospitals will be affected by the pending loss of revenues.
“The 340B program is a huge cost-saver for hospitals as well as patients,” Michaud said.
Allegations that hospitals direct revenues away from patient care, he said, are unfounded.