Courts Put Guardrails on 340B Program, Aiding Reform Efforts to Ebb Abuse

By: Ranier Simons, ADAP Blog Guest Contributor

Since 1992, the 340B Drug Pricing Program has enabled eligible health care providers, referred to as covered entities, “to stretch scarce federal resources to reach more eligible patients or provide more comprehensive services.”[1] One of the most notable characteristics of the program is that it is not funded by the government. Since it requires drug manufacturers to sell medications to eligible entities at steep discounts, in essence, it is a legally mandated reallocation of financial resources from private industry to providers. As such, abuses of the program are especially egregious. The vast growth of the 340B Program over time has led to increased abuses in it as big hospital systems and mega service providers sought to enhance their profits over serving vulnerable patient populations. A tug-of-war among varied interests has generated many legal challenges in attempts at 340B reform. Recently, the pharmaceutical industry has achieved wins in its favor.

Photo Source: PharmaLive | Biospace

In May of this year, D.C. Circuit Court of Appeals ruled in favor of Novartis and United Therapeutics. Both companies separately sued the Health Resources and Services Administration (HRSA), which is the federal agency charged with overseeing the program. HRSA sent oversight enforcement letters stating the pharmaceutical manufacturers were in violation of the 340B statute because they imposed new restrictions on covered entities and limited their number of contract pharmacies.[2] The manufacturers had issued conditions on the usage of contract pharmacies 340B qualified entities utilized to purchase drugs they sold. Some of the conditions included requiring covered entities with in-house pharmacies to use those pharmacies to dispense 340B drugs and limiting entities without in-house pharmacies to only one contract pharmacy.[2]

HRSA claimed that the 340B statute allowed covered entities to utilize an unlimited number of contract pharmacies; thus, drug manufacturers were mandated to ship 340B drugs to wherever entities wanted. They issued enforcement letters threatening civil monetary penalties due to non-compliance.[2] The D.C. Circuit consolidated both companies' cases and ruled that the 340B statute did not explicitly forbid manufacturers from imposing conditions on the distribution of covered drugs to covered entities.[2] Additionally, the court quashed HRSA’s enforcement letters, stating that they were arbitrary and capricious under the Administrative Procedure Act (APA).[2] Thus, the manufacturers can continue to impose conditions.

Pharmaceutical companies have instituted conditions on contract pharmacies as one way to fight against abuses of the 340B program. Mounting evidence has demonstrated too many bad actors are taking advantage of the program, increasing profit instead of using the proceeds to benefit patients. Some hospitals have purchased 340B drugs and then sold them at full price or more to affluent, fully insured patients as well as uninsured patients.[3] This harms uninsured and vulnerable populations, cutting access when they cannot afford the pricing instead of helping those the program was meant to help. Another abuse is entities prescribing higher-cost medications when effective lower-cost drugs are available for the sole purpose of maximizing profit from the 340B discount spread.[4] Abuses like these are possible because the law in its present state does not specify drug discounts remain reserved only for those who are needy.[3] This is why manufacturers are trying to limit distribution to entities and pharmacies directly benefiting needy patients.

Photo Source: Fierce Healthcare

There is fierce opposition to the growing chorus calling for reforms to the 340B Program, that is actually anti-reform. Those fighting against 340B reform posit that those in support of 340B reform are attempting to gut the program and save themselves money by reducing the number of drugs they are discounting. The reality is the anti-reform movement is more concerned over what is seemingly an unlimited ATM with few strings attached, if any. For example, the American Hospital Association wrote a letter against H.R. 8574, the 340B Affording Care for Communities and Ensuring a Strong Safety-net (340B ACCESS) Act.[5] The act does several things, including creating updated eligibility requirements ensuring that authentic safety-net providers serving needy, underserved populations are the only entities benefiting from the program. It also establishes that federal grantees and their contract pharmacies must provide affordability assistance policies that ensure patients are not denied access to 340B medicines based on their ability to pay.[6]

The well-resourced forces who are against 340B reform are against it because reform prevents them from utilizing the 340B Program revenues as cash flows to expand services, acquire practices, and engage in other ventures that are not focused on safety-net population medical care. In June of this year, a study conducted as a combined effort of Appalachian Learning Initiative, ADAP Advocacy, and Community Access National Network highlights how large organizations use 340B funds.[7] The full text of the report can be found, here. 

One of the most notable findings involves CEO compensation. The study examined data on the entities studied, showing changes in activity before and after obtaining 340B eligibility. It was found that executive compensation increased by an average of 231.51%, and the provision of charity care as a percentage of annual hospital revenues decreased by 14.79%.[7] Additionally, they found that the overall yearly revenues of the entities studied increased by an average of 824.32%.[7] This would indicate that as revenues increased, the level of spending on charity care decreased. Charity care is not the only avenue available to covered entities to support their poor and underserved populations. However, if the purpose of the 340B program is to generate revenues to help those in need, one would expect to see an increase in charity care.

Photo Source: Drug Channels Institute | iStock Photos

The recent court ruling by the D.C. Court of Appeals, and other ones, is finally putting some guardrails on the 340B Program, which has ballooned to a record $66.3 billion in 2023.[8] In his recent analysis of the program’s growth, Dr. Adam J. Fein with the Drug Channels Institute summarized, “Lobbyists claim that manufacturers’ 340B contract pharmacy changes are 'stripping billions of dollars from the healthcare safety net.' But every year, the data tell a very different story. Only in the U.S. healthcare system can billions more in payments and spreads be considered a cut.”[8]

Whether it's using 340B eligibility to expand into financially prosperous communities for profit, structuring operations to maintain the bare minimum share of low-income patients required for 340B qualification, or other questionable actions, there is a demonstrated need for 340B reform.[9] The recent wins in the name of 340B reform achieved by pharmaceutical companies are steps in the right direction. Nevertheless, it is imperative that ongoing reform efforts reach a harmonious balance of weeding out bad actors, stabilizing the finances of covered entities acting in the best interests of their patient populations, and ensuring that pharmaceutical companies can continue to contribute without worrying about adverse effects to their operational finances.

[1] Health Resources & Services Administration. (2021). 340B drug pricing program. Retrieved from https://www.hrsa.gov/opa/index.html

[2] Grimm, D., Hethcoat, G., Trunk, S. (2024, June 27). The 340B ‘Saga’ Continued: HRSA, States, and Drug Manufacturers Contest 340B Contract Pharmacy Restrictions in Court. Retrieved from https://www.jdsupra.com/legalnews/the-340b-saga-continued-hrsa-states-and-9025687/

[3] Center for Medicine in the Public Interest. (2022, September 12). New Report Demonstrates How Hospitals, Pharmacies & PBMs Exploit the Federal 340B Drug Program to the Harm of Disadvantaged Patients

[4] Pitts, P., Popovian, R. (2022, September). 340B and the Warped Rhetoric of Healthcare Compassion. Retrieved from https://www.fdli.org/2022/09/340b-and-the-warped-rhetoric-of-healthcare-compassion/

[5] Hughes, S. (2024, July 26). AHA Comments Opposing the 340B ACCESS Act (H.R. 8574). Retrieved from https://www.aha.org/lettercomment/2024-07-26-aha-comments-opposing-340b-access-act-hr-8574

[6] ASAP340B. (2024, May 28). ASAP 340B Applauds Introduction of the 340B ACCESS Act. Retrieved from  https://www.asap340b.org/post/asap-340b-applauds-introduction-of-the-340b-access-act

[7] Hopkins, M. J., Macsata, B. M., & Laws, J. (2024, July). The 340B Drug Rebate Program and its potential impacts on annual revenues, executive compensation, and charity care provision in eligible covered entities. Nags Head, NC: ADAP Advocacy.

[8] Fein, Ph.D, Adam J. (2024, October 22) The 340B Program Reached $66 Billion in 2023—Up 23% vs. 2022: Analyzing the Numbers and HRSA’s Curious Actions. Drug Channels. Retrieved from https://www.drugchannels.net/2024/10/the-340b-program-reached-66-billion-in.html

[9] DiGiorgio, A. M., & Winegarden, W. (2024). Reforming 340B to Serve the Interests of Patients, Not Institutions. JAMA Health Forum, 5(7), e241356–e241356. https://doi.org/10.1001/jamahealthforum.2024.1356

Disclaimer: Guest blogs do not necessarily reflect the views of the ADAP Advocacy Association, but rather they provide a neutral platform whereby the author serves to promote open, honest discussion about public health-related issues and updates. 

HIV Advocates Worry About the Unintended Consequences of the Inflation Reduction Act

By: Marcus J. Hopkins, Executive Director, Appalachian Learning Initiative

Advocates across the HIV patient, provider, and pharmaceutical sectors are sounding the alarm about the potential for provisions within the Inflation Reduction Act of 2022 to have unintended consequences for people living with HIV/AIDS (PLWHA). Specifically, advocates, including ADAP Advocacy, are concerned that Sections 11001 and 11002—the sections that establish the Medicare Drug Price Negotiation Program that will give the Centers for Medicare and Medicaid Services (CMS) the ability to negotiate maximum fair prices (MFPs) for certain high expenditure, single source drugs and biologic products—will stifle innovation, limit the selection of antiretroviral (ARV) medications for PLWHA, and create new barriers for PLWHA attempting to access medications to treat other conditions as PLWHA continue to age while living with the disease.

Photo Rights Purchased via iStock

Aside from restricting access to medications, there are other concerns. One of the primary arguments being made is that the setting of MFPs for ARV medications may inadvertently have a negative impact on AIDS Drug Assistance Program (ADAP) revenues generated by the 340B Drug Pricing Program.

For the uninitiated, 340B is a federal pricing program that requires pharmaceutical companies to sell drugs to covered entities—including ADAPs—at the lowest possible price. Pharmacies then sell those drugs to outpatients and receive rebates for the difference between the drug’s list price and the lowest possible price. The rebates are considered “revenues,” and are used to sustain operations by many AIDS Service Organizations’ and HIV clinics. (Editor's Note: Learn more about the 340B Program)

When MFPs are set, these rebates may, depending upon the medications in questions, leave pharmacies purchasing drugs at significantly lower “best prices” or even “penny prices,” where the total 340B discounts are greater than the MFP set for the drug and pharmacies are required to purchase the drugs for $0.01. This means that the rebate amount for those drugs would actually end up costing the pharmacy money to sell the medications, thus disincentivizing them from carrying the drugs, at all (Newton, 2024).

Right now, the MFPs would only apply to drugs covered by the Medicare program, and it is unknown how or if MFPs would have any direct impacts on ADAPs. However, as PLWHA continue to live relatively healthy lives into their later years, they will become eligible for Medicare. Once ADAP recipients become eligible for Medicare, they must enroll in Medicare Part D, and ADAPs can help clients with Part D plan-related co-pays, deductibles, and premiums.

A secondary concern related to MFPs is that placing price controls (in this case, MFPs) will disincentivize drugmakers from continuing to innovate (i.e., develop new treatments, potential vaccines, and potential cures) by limiting the profits they can make from their products. There is evidence to suggest it is already happening.

Section 11001 also instituted Prescription Drug Inflation Rebates, a mechanism by which drug manufacturers are required to issue rebates to CMS for brand name drugs without generic equivalents that cost $100 or more per year per patient and for which those manufacturers increase the prices of those drugs faster than the rate of inflation. Section 11002 goes further, requiring manufacturers that fail to comply with civil penalties (i.e., financial fines).

The issue with attempting to convince consumers that these provisions of the IRA will have negative impacts on the pharmaceutical market—and thus for patients—is that these provisions are broadly popular across the political spectrum. A majority of consumers have consistently been in favor of multiple approaches to lowering drug prices, with the Kaiser Family Foundation finding that 88% of respondents supporting the institution of price increase caps and 88% being in favor of forcing drug manufacturers to negotiate drug prices with the government for Medicare (Figure 1). In fact, majorities of patients across the political spectrum have reported being in favor of expanding these provisions beyond Medicare (Figure 2).

Figure 1 - Before the Inflation Reduction Act, There Was Broad Support to Many Approaches to Lowering Drug Costs

Photo Source: KFF

(Source: Sparks, Kirzinger, Montero, Valdes, & Hamel, 2024)

Figure 2 - Majorities of Voters Across Partisanship Support Proposals to Expand IRA Provisions Beyond Those With Medicare

Photo Source: KFF

(Source: Sparks, Kirzinger, Montero, Valdes, & Hamel, 2024)

Drug manufacturers and other experts across the healthcare industry, however, have consistently argued that the financial impacts of these types of measures are not conducive to continuing their investments in research and development for new drugs, and will force them to reevaluate their expenditures in continuing to innovate and bring new drugs to the market, as well as force them to make tough choices about which medications to continue making (Chen, 2024).

Part of what makes these arguments difficult to explain is the significant opacity as it relates to exactly how manufacturers determine the list prices of their medications in the United States and what percentage of that list price is actually paid by providers, insurers, and patients.

In general, American consumers are broadly unaware of how the United States healthcare system actually works. From the consumer perspective, the only concerns they tend to take into account are if and when they can see their doctors, whether or not the medications prescribed to them will work, and whether or not they can afford the costs of healthcare services and their prescription drugs. While this may seem like simple concerns, each of these steps along the way is fraught with multiple complex cost considerations behind the scenes.

From determining which physicians are “in-network” vs. “out-of-network,” to which services are covered, to whether or not a drug is included on a formulary, and what the out-of-pocket costs are to patients, every step includes complex price negotiations between public and private insurers, the providers, and drug manufacturers to which patients are both unaware and unallowed to evaluate due to trade secrets laws that protect how list prices and negotiated prices are determined.

Moreover, insurers, pharmacy benefit managers (PBMs), and manufacturers are not forthcoming with how these prices are established. This leaves both consumers and legislators to attempt to figure out these issues without being provided with a full picture of the greater healthcare ecosystem.

The MFPs and penalties for price increases above inflation, while popular with consumers and many legislators, may ultimately end up making the costs associated with developing, testing, branding, getting approval for, marketing to consumers, and selling prescription medications so cost prohibitive that manufacturers will simply decide to slow down the pace of innovation or to exit the market entirely.

An example of this can be directly seen in the decision by Novo Nordisk to discontinue Levemir (insulin detemir) in the United States. Levemir is basal insulin product that is widely used by some patients with Type 2 diabetes and Type 1 patients who are teens, athletes, or pregnant due to its short-lasting effects and the ability of patients to adjust their dosages to meet their insulin needs (Chen, 2024).

The IRA specifically set out-of-pocket price caps on insulin at $35 for patient on Medicare. While Novo Nordisk initially indicated that they would cut the prices of their insulin products by 75% for NovoLog and 65% for Novolin and Levemir (Silverman, 2023), the decision to discontinue this product for American consumers has left patients scrambling to find scrambling to find either new medications to treat their diabetes or new sources for Levemir, which may drive them to attempt to purchase the drug from other countries, and thus open them to the risk of counterfeit medications that could potentially kill them.

Additionally, this decision has exposed a key gap between the intention of these provisions and the reality of a relatively open market for drug manufacturers: even if officials can force manufacturers to lower their prices, those companies can simply pull the drugs off the markets without guaranteeing that other manufacturers will continue to make the compound (Chen, 2024).

This, again, goes back to why transparency in pricing and price negotiations is such a vital piece of information for both consumers and legislators. Without access to these details, pushes to make drugs more affordable to patients come up against the financial realities that drive the for-profit healthcare industry, as for-profit drug manufacturers are essentially the only entities developing, testing, and bringing medications to market.

Finally, one of the key arguments being made by advocates and drug manufacturers is that the voices of the patients who are impacted by healthcare laws and policies need to be more regularly and publicly included during the crafting of legislation and administrative rules.

Over the past forty years, patients and other consumers have become increasingly vocal about the healthcare services we receive, particularly in chronic disease spaces, like HIV. It is hard to argue the impacts that early HIV/AIDS groups, such as ACT UP New York, have had on several facets of the drug development and healthcare delivery arenas. Their very public, disruptive, and vocal protests and demonstrations during the 1980s and 90s forced the the U.S. Food & Drug Administration to shorten wait times during the development of key HIV medications during the early day of the epidemic (Neus, 2023).

While this type of patient activism has largely fallen out of favor, these actions paved the way for legislators and government agencies to establish patient and community advisory bodies. As part of the creation of those bodies, the processes through which patients could have a direct say in the decisions that impact them were formalized, and heavy emphases have been placed on civility and “right time; right place” expectations that have left many advocates hesitant to participate in formalized settings with which they’re unfamiliar and for which the rules of engagement are both unspoken and unclear.

Essentially, the fire and ire tactics used in the 1980s and 90s no longer fly in the 2020s, as politicians and administrative officials simply refuse to tolerate them. That isn't to say protests don't happen, because they do but their effectiveness is hard to measure. This means that public comment periods and other opportunities for patients to speak to these officials have become increasingly inaccessible over time, often requiring significant financial and time investments from those patients to attend oddly scheduled and poorly advertised in-person sessions, as well as submit written public comments through labyrinthine pathways that are made purposely difficult to navigate.

What ended up replacing those early protests were patient advocacy groups run by people who are more familiar with these processes and rules, and who work very diligently to craft specific messaging that, in their experiences, are more likely to move officials to go in directions that they believe most beneficial to patients. This has resulted in fewer realistic opportunities for patients to engage with the people who are making decisions that directly impact their lives.

Beyond those advocacy groups, drug and device manufacturers make significant financial investments in patient-level advocacy efforts. These efforts are almost always not specific to any one medication, instead focusing on specific disease states (e.g., HIV/AIDS, breast cancer, and other chronic conditions) where patients are both dependent upon the medications used to treat those conditions and have the most to lose if they lose access to them.

Investments in patient advocacy groups, such as ADAP Advocacy, are often used to craft educational campaigns designed to make patients aware of disease statistics and policies that may impact patient access to life-saving medications. Industry groups representing hospitals, PBMs, and insurers often use these investments as “evidence” to discount patient perspectives, both implying and directly stating that any advocacy efforts funded, either in part or in whole, by drug manufacturers cannot be trusted because they are being influenced by those manufacturers. It amounts to nothing more than a cheap shot, designed to further dismiss the patient perspective. (Editor's Note: Read ADAP Advocacy's transparency statement)

Photo Rights Purchased via iStock

As with every aspect of healthcare in the United States, including patients can be tricky. As tensions between political parties in this country have become more fraught over the past two decades, legislators in particular are more likely to treat public testimonies during hearings not as opportunities to hear from patients, but to cross examine “witnesses.” Example of this can be seen at all levels of government, particularly when the legislation being discussed relates to the provision of healthcare services that certain segments of the population have turned into “moral” issues (e.g., the sale of contraception, the provision of abortion services, and the dispensing of Pre-Exposure Prophylaxis [PrEP] to prevent the transmission of HIV). During these hearings, some legislators will use their time to not just ask questions of the patients and medical experts giving testimony, but to call into question their experiences and expertise, accuse them of being “funded” by nefarious sources (e.g., “You’re being funded by George Soros!”), and make openly defamatory and bigoted statements about the patients who need access to medications and services, such as contraceptives, in-vitro fertilization, abortions, and PrEP, making statements that imply that the fact that they need those services and medications is a moral failing on their part.

This adversarial atmosphere has convinced many patients that their voices are neither welcomed nor actually considered when laws and rules are made that directly impact their lives. This makes including the patient voice all the more vital to ensure that laws like the IRA are crafted with all of the stakeholders in mind and that careful consideration is given to the potential downstream consequences.

The inclusion of patient voices is invaluable. It affords elected officials and policy-makers to consider perspectives they may not otherwise think to includes; to take into account the real-world impacts of their policies that they may not see because those officials often have the best healthcare coverage tax dollars can buy, while patients—particularly those living with chronic conditions—are often just scraping by to survive.

The long-term impacts of the IRA can, just two years after its passage, only be predicted. While some short-term impacts are being felt, we don’t actually have good data to definitively state that certain outcomes will come to pass. We can only make our best guesses given the information we have at hand and the environments in which we work. We will continue to monitor the impacts of the IRA as the years progress, as well as any other developments that will directly impact patients.

Disclaimer: Guest blogs do not necessarily reflect the views of the ADAP Advocacy Association, but rather they provide a neutral platform whereby the author serves to promote open, honest discussion about public health-related issues and updates.

Putting Politics Ahead of Public Health is Spelling Trouble for Tennessee

By: Ranier Simons, ADAP Blog Guest Contributor

In 2023, Tennessee Governor Bill Lee, rejected nine million dollars in federal HIV funding from the Centers for Disease Control & Prevention (CDC). This meant that the pass-through grant contracts associated with the Integrated HIV Programs for Health Departments to Support Ending the Epidemic in the United States CDC-RFA-PS20-2010 grant and the Tennessee Integrated HIV Surveillance and Prevention Programs for Health Departments CDC-RFA-PS18-1802 grant ended in May of 2023.[1] The decision meant a significant cut in funding for HIV prevention, education, and treatment for public health centers and many community-based organizations. The adverse effects of the decision are materializing, and experts continue to sound the alarm about how devastating the outcomes will impact the state.

Photo Source: The Tennessee Conservative

The governor stated he refused the funds to decrease dependence on federal funds and be more independent as a state. He also expressed that the move was to make it easier for organizations and public health departments to access funding without having to deal with bureaucratic red tape.[2] However, analysis shows that the decision was politically motivated. Lee is on public record expressing disapproval of two organizations that were HIV grant recipients, Planned Parenthood and a task force on transgender health issues.[3] Refusing CDC funding means that the state is no longer required to distribute funding based on science, evidence-based data, and research. The goal of the state was to replace the CDC funds with state funding.

In response to Tennessee’s refusal of funding, the CDC decided to try and circumvent the legislature. It decided to directly provide four million dollars in funding to United Way of Greater Nashville.[4] This would allow United Way to distribute funds to nonprofit organizations, such as Planned Parenthood, to continue their HIV prevention efforts. However, four million dollars is only half of the nine million dollars refused.

When the state government replaced the lost CDC funding with state funding, it was mainly local health departments that were guaranteed funding to make up for the cuts.[4] This meant the state health departments could make decisions concerning funding distribution that did not require alignment with CDC requirements. This was eventually followed by an announcement to reallocate funding away from the most at-risk priority communities, such as men who have sex with men, to new groups. The new groups are first responders, pregnant women, and survivors of sex trafficking. Studies are showing that this will result in unnecessary deaths and poor health outcomes because this group is not where the need resides.

Photo Source: Clinical Infectious Diseases

A study published in July of this year in the journal Clinical Infectious Diseases spells out the negative ramifications of Tennessee’s state resource allocation. Men who have sex with men, transgender women, and heterosexual Black women are the evidenced-based identified priority demographic most affected by HIV in Tennessee.[5] The study projected conservative estimates the Tennessee decision would mean 166 preventable HIV transmissions, 190 additional deaths, and 843 life-years lost over 10 years. The study’s more pessimistic or worst-case scenario projections were 1359 preventable HIV transmissions, 712 additional deaths, and 2,778 life-years lost over 10 years.[5] 

Comparatively, this means the reallocation in funding would be prohibitively damaging to the original priority group with negligible benefit for the new priority pivot. “Under Reallocation, MSM would comprise most of the HIV transmissions (77%), followed by TGW (8.6%) and HSBW (6.8%). First responders would contribute 0.5%, pregnant people 0.2%, and SST 6.9% to the total HIV transmissions over 10 years.”[5] The newly suggested priority populations only comprise %1 of all Tennesseans living with HIV compared to the CDC-defined priority populations, which comprise %99 percent.[6]

Funding losses have already begun to negatively affect agencies serving vulnerable populations. Before the change, CDC grant money provided stability for HIV programming for five years at a time. The new state-provided funds happen on a one-year cycle. The one-year budget rides on the auspices of the state legislature, which votes on it each year.[7] Reduced funding means loss of staff for many organizations. According to Amna Osman, CEO of Nashville CARES, “There’s no sustainable grant funding to support these positions…Employees really want some stability.”[7]

Moreover, the new funding plan routes money mainly to metro state health departments and groups associated with them. This translates into a drastic cut to resources for those in rural areas in addition to groups who, under the new reallocation priorities, would not be able to garner funding from the state. 

Photo Source: The New York Times

The motivation behind the original CDC funding was to concentrate efforts on HIV prevention, education, and treatment for those most in need in Tennessee. Prevention requires testing, surveillance, access to PrEP, and more. Before the funding reallocation, a third of those most in need of PrEP did not know where they could access it. Now, issues of access have worsened. Osman states she has heard from community members who say, “Well, I’m hearing there’s no dollars for prevention education for HIV. Then, that means ‘I think there’s no money for me to get a service,”[7] Memphis, Tennessee is second in the nation regarding the rate of new HIV cases. Over 7,500 people in Shelby County alone are living with HIV or AIDS.[8] That number is second only to Miami, Florida.[8]

HIV prevention and testing is not just about HIV. Testing involves STI testing. STI testing benefits the entire community as a public health safeguard as well as a tool in the fight to prevent HIV transmission. People living with HIV do not live in a vacuum, nor do those living with STIs. Effectively focusing funding and infrastructure on the populations that science and health professionals have identified as significantly at risk is the only way to reverse the tide in all of Tennessee’s communities. Only time will tell if voting and continued public and professional outcry, in combination with pressure from the medical community, will result in the legislature changing its course.

[1] Talley, P. (2023, January 17). Dear Colleagues Letter. Retrieved from https://wpln.org/wp-content/uploads/sites/7/2023/01/Notification-HIV-Funding-Changes.pdf

[2] Stillman, J. (2023, April 22). Tennessee Rejected HIV Funds From Feds, But The State Was Just Outsmarted. Retrieved from https://www.hivplusmag.com/politics/tennessee-rejected-hiv-funds-from-feds-but-the-state-was-just-outsmarted

[3] Cha, A., Nirallil, F. (2023, Januery 26). HIV at center of latest culture war after Tennessee rejects federal funds. Retrieved from https://www.washingtonpost.com/health/2023/01/26/tennessee-federal-hiv-funding/

[4] Watts, M. (2023, April 17). Federal HIV funding rerouted to nonprofits, bypasses Tennessee health department entirely. Retrieved from https://www.tennessean.com/story/news/local/2023/04/17/hiv-federal-funds-will-reroute-to-tennessee-nonprofits-state-cut-out/70116510007/

[5] Borre, E. D., Ahonkhai, A. A., Chi, K. K., Osman, A., Thayer, K., Person, A. K., Weddle, A., Flanagan, C. F., Pettit, A. C., Closs, D., Cotton, M., Agwu, A. L., Cespedes, M. S., Ciaranello, A. L., Gonsalves, G., Hyle, E. P., Paltiel, A. D., Freedberg, K. A., & Neilan, A. M. (2024). Projecting the potential clinical and economic impact of human immunodeficiency virus prevention resource reallocation in Tennessee. Clinical Infectious Diseases. https://doi.org/10.1093/cid/ciae243

[6] Ridings, M. (2024, July 11). Study Finds That Tennessee’s Shift in HIV Prevention Funding Will Lead to Poorer Health Outcomes for its Residents. Retrieved from https://www.massgeneral.org/news/press-release/tennessee-shift-in-hiv-policy-will-lead-to-poorer-outcomes

[7] Sweeney, C. (2024, October 22). Tennessee replaced its federal HIV funding with state money. Public health experts say the change is causing damage. Retrieved from https://www.wkms.org/health/2024-10-22/tennessee-replaced-its-federal-hiv-funding-with-state-money-public-health-experts-say-the-change-is-causing-damage

[8] Paul, A. (2024, August 13). Memphis ranks second in the nation in highest number of new HIV cases. Retrieved from https://wreg.com/news/memphis-ranks-second-in-the-nation-in-highest-number-of-new-hiv-cases/l

Disclaimer: Guest blogs do not necessarily reflect the views of the ADAP Advocacy Association, but rather they provide a neutral platform whereby the author serves to promote open, honest discussion about public health-related issues and updates. 

Kidney Transplants Between Donors and Recipients with HIV is Safe; Study

By: Ranier Simons, ADAP Blog Guest Contributor

Every eight minutes, a person is added to the U.S. organ transplant waiting list.[1] Although names are added and removed daily, as of October 21st, there are 104,360 candidates on the list.[2] Daily, around seventeen people die waiting for an organ.[1] The organ transplantation landscape for people who are HIV-positive is more dire because they face a higher likelihood of dying while on the waitlist in addition to lesser access to transplants than those living without HIV.[3] This is why the resulting conclusion of a study published last week in The New England Journal of Medicine is promising news. The study data proved that kidney transplantation between donors and recipients with HIV is safe.[4]

Photo Source: The Bioethics Project

Prior to 2013, using organs from HIV-positive donors was prohibited, even If the recipient was also living with HIV. In November of 2013, the HIV Organ Policy Equity Act (HOPE Act) was passed. Its implementation began in November of 2015.[5] The HOPE Act allowed the utilization of organs from HIV-positive donors for transplantation into HIV-positive recipients for research purposes. The goal was to gather data on the safety, efficacy, and feasibility of those transplants. These types of transplants are only allowed at approved facilities observing specific research protocols developed by the National Institutes of Health (NIH).[5] The guidelines specify clinical and safety guidelines as well as study team experience and facility prerequisites.[5] The initial 2015 policy permitted kidney and liver transplants, and in 2020, it was updated to allow the utilization of all organs.

As of November 2022, 358 organs have been successfully transplanted under the HOPE Act. The organs were retrieved from a mixture of live and deceased donors. The recent study published in The New England Journal of Medicine, led by Dr. Christine Durand, is significant because it is the first of its kind to statistically prove that kidney transplantation from HIV-positive donors to HIV-positive recipients is non-inferior to transplantation from donors without HIV.[4] A non-inferior study aims to prove that one treatment is just as good as another and is not worse than what it is being compared to by a pre-determined amount. 

The study is an observational study of 198 candidates where 99 people received a kidney from an HIV-positive donor and 99 received one from a donor without HIV.[4] Its purpose was to measure the non-inferiority of the transplants as well as the risks of HIV breakthrough infection, HIV superinfection, and post-transplantation complications.[4] The primary outcome measure was a safety event defined as a composite of death from any cause, graft loss, serious adverse event, HIV breakthrough infection, persistent failure of HIV treatment, or opportunistic infection.[4] The primary outcome is the one investigators of a study consider the most important to measure. The adjusted hazard ratio for the composite primary outcome was 1.00.[4] The adjusted hazard ratio is a measure of the frequency of an event occurrence in one group compared to another. An adjusted hazard ratio of 1.00 means that occurrences or risks are the same. 

Other secondary outcomes were also similar. Regardless of the HIV status of the donor, overall survival at one year was 94% vs. 95%, survival at 3 years was 85% vs. 87%, and survival without graft loss after one year was 93% vs. 90%.[4] HIV breakthrough infection was higher among the recipients of organs from HIV-positive donors. However, that outcome was attributed to medication non-adherence and was corrected with proper medication administration. The reversion from undetectable status was not enduring. 

Additionally, organ rejection rates are lower with more modern HIV antiretroviral medications. They have fewer adverse interactions with transplantation-required immunosuppressive drugs than older HIV medications. Previous positive outcomes from studies in South Africa were the evidence used to support the idea of kidney transplantation between HIV-positive donors and recipients as a viable option. HIV-positive patients on dialysis have a higher risk of death and less access to kidney transplantation. Due to health conditions, HIV-positive patients waiting for kidneys have lower odds of remaining active on the waiting list as well as a lower likelihood of living donor kidney transplantation.[6]

The Durand study supports expanding the availability of these types of transplants. Dr. Durand states, “allowing transplant centers to do these transplants as clinical care, outside of HOPE Act studies, will broaden the impact of this life-saving therapy.”[7] Presently, there are about 30 centers that allow HOPE Act transplants compared to a total of over 250 transplant centers nationwide.[7] Furthermore, a 2023 study showed that the wait time for an HIV-positive kidney was 10.8 months compared to 60.8 months for a non-HOPE Act transplant.[8]

Photo Source: Clinical Advisor

Based on research such as this study, the Biden Administration proposed a new rule in September 2024, entitled: Organ Procurement and Transplantation: Implementation of the HIV Organ Policy Equity (HOPE) Act.[9] The proposed rule, if approved, will expand the number of centers eligible to offer transplantation between HIV-positive donors and recipients. It removes the clinical research and institutional review board requirements currently under the HOPE Act, specifically for kidney and liver transplants.[9] This is because those two organs are the only two with an abundance of data supporting their usage. The NIH also plans to put together a group to study the criteria for other organs under the HOPE Act with the goal of strengthening data on the utilization of other organs besides kidneys and livers. HHS stated in their press release that “HHS expects this rule will allow a larger number of transplant centers to conduct HOPE Act kidney and liver transplants and will help reduce the stigma and health disparities associated with HIV.”[9]

People living with HIV/AIDS face multiple barriers to achieving health equity. In synergy with evidence-based policy responses such as the Biden-Harris proposed rule change, studies such as these are steps towards judicious improvements of the status quo. Increasing the availability of organs from HIV-positive donors not only increases the available organ pool for HIV-positive candidates but potentially increases the availability of organs for transplant candidates without HIV from donors who are not HIV-positive.

[1] Health Resources and Services Administration. (2024, October). Organ Donation Statistics. Retrieved from https://www.organdonor.gov/learn/organ-donation-statistics 

[2] Organ Procurement and Transplantation Network. (2024, October 21). National Data. Retrieved from https://optn.transplant.hrsa.gov/data/view-data-reports/national-data/#

[3] National Institutes of Health. (2024, October 16). Kidney transplantation between donors and recipients with HIV is safe. Retrieved from https://www.nih.gov/news-events/news-releases/kidney-transplantation-between-donors-recipients-hiv-safe#:~:text=Kidney%20transplants%20offer%20a%20survival,transplants%20than%20people%20without%20HIV.

[4] Durand, C. M., Massie, A., Florman, S., Liang, T., Rana, M. M., Friedman-Moraco, R., Gilbert, A., Stock, P., Mehta, S. A., Mehta, S., Stosor, V., Pereira, M. R., Morris, M. I., Hand, J., Aslam, S., Malinis, M., Haidar, G., Small, C. B., Santos, C. A. Q., … Segev, D. L. (2024). Safety of kidney transplantation from donors with HIV. New England Journal of Medicine, 391(15), 1390–1401. https://doi.org/10.1056/nejmoa2403733

[5] Organ Procurement and Transplantation Network. (2020, April). HOPE Act. Retrieved from https://optn.transplant.hrsa.gov/professionals/by-topic/hope-act/

[6] Locke, J. E., Mehta, S., Sawinski, D., Gustafson, S., Shelton, B. A., Reed, R. D., MacLennan, P., Bolch, C., Durand, C., Massie, A., Mannon, R. B., Gaston, R., Saag, M., Overton, T., & Segev, D. L. (2017). Access to Kidney Transplantation among HIV-Infected Waitlist Candidates. Clinical Journal of the American Society of Nephrology: CJASN, 12(3), 467–475. https://doi.org/10.2215/CJN.07460716

[7] Melville, N. (2024, October 17). HIV-Positive Donors Safe for Kidney Transplants. Retrieved from https://www.medscape.com/viewarticle/hiv-positive-donors-safe-kidney-transplants-2024a1000izf?form=fpf

[8] Motter, J. D., Hussain, S., Brown, D. M., Florman, S., Rana, M. M., Friedman-Moraco, R., Gilbert, A. J., Stock, P., Mehta, S., Mehta, S. A., Stosor, V., Elias, N., Pereira, M. R., Haidar, G., Malinis, M., Morris, M. I., Hand, J., Aslam, S., Schaenman, J. M., . . . Durand, C. M. (2023). Wait time advantage for transplant candidates with HIV who accept kidneys from donors with HIV under the HOPE Act. Transplantation. https://doi.org/10.1097/tp.0000000000004857

[9] U.S. Department of Health and Human Services. (2024, September 12). Biden-Harris Administration Issues Proposed Rule to Expand Access to Life-Saving Organs for People with HIV. Retrieved from https://www.hhs.gov/about/news/2024/09/12/biden-harris-administration-issues-proposed-rule-expand-access-life-saving-organs-people-hiv.html

Disclaimer: Guest blogs do not necessarily reflect the views of the ADAP Advocacy Association, but rather they provide a neutral platform whereby the author serves to promote open, honest discussion about public health-related issues and updates.

Biden Sides with Insurers, Shifting More Costs to Patients

By: Ranier Simons, ADAP Blog Guest Contributor

The high cost of healthcare is the product of a complex, fragmented financing system. The machinations of multiple public and private payors coupled with the advent of middlemen, such as pharmacy benefit managers, in the healthcare expenditure landscape often hinder the development of common sense solutions. This is especially true in the present discourse surrounding 340B Drug Pricing Program, Prescription Drug Affordability Boards (PDABs), and Alternative Funding Programs, which are all intertwined around 'controlling' prescription drug costs. At the center of the medical, fiscal maelstrom is the patient. Rising medical debt has a crushing impact on many aspects of patients’ lives and healthcare outcomes. Potential solutions come and go. Unfortunately, one remedy to alleviate patient costs recently failed. The Biden Administration fell short of instituting promised regulations surrounding patient protections against insurers abusing copay assistance programs.[1]

Photo Source: Lifepoint Health

The 2026 Notice of Benefit and Payment Parameters (NBPP) proposed rule was posted to the Federal Register on October 10th.[1] This rule addresses many things, including the operations of insurance plans. The executive summary states explicitly, “Our goal with these proposed requirements is providing quality, affordable coverage to consumers while minimizing administrative burden and ensuring program integrity. The changes proposed in this rule are also intended to help advance health equity, mitigate health disparities, and alleviate discrimination.”[1] However, the proposed rule lacks promised provisions that would have closed essential health benefits loopholes and shielded patients from adverse cost-sharing activities by insurers. In the NBPP, insurers won and patients lost.

This is a fight that many advocates felt had already been won, thanks to the combined efforts of the HIV+Hepatitis Policy Institute, Diabetes Leadership Council and the Diabetes Patient Advocacy Coalition. In September of 2023, a federal court struck down a previous federal rule issued under the Trump Administration that allowed insurance companies to use copay accumulators and maximizers, which allowed them to take advantage of manufacturer copay assistance programs to the detriment of patients.[2] This ruling meant that insurers had to follow previous 2020 federal guidelines that prohibited the usage of copay accumulator practices except with regard to brand name drugs that have generic equivalents if allowed by state law.[3]

The court remanded authority back to the U.S. Department of Health & Human Services (HHS), meaning the federal government needed to issue new regulations. The government previously in November 2023 stated in a brief that it would issue new rules directly addressing the prohibition of copay accumulator practices.[4] Yet, it has not, and the 2026 NBPP does not do that. As of January 2024, 19 states have passed legislation that bans or restricts accumulators in individual or small-group health plans.[5] That leaves patients in many states unprotected without federal regulation that explicitly bans copay accumulator practices. Without protection, patients are still victim to insurers using copay accumulators, maximizers, and even alternative funding programs.

The 2026 NBPP also does not include a provision to close an essential health benefits loophole insurers, and PBMs are taking advantage of it. Essential health benefits (EHB) are categories of services the Affordable Care Act (ACA) states insurance plans must cover.[6] One of those categories is prescription drugs. The ACA provides cost-sharing limits on EHBs. What is happening is that PBMs are investigating which drugs have high-cost thresholds or those for which manufacturer copay assistance programs are available. They subsequently identify those drugs as ‘non-essential health benefit’ drugs, removing their shield of protection. That designation enables them to siphon all of the manufacturer copay assistance funds to themselves without applying it to patients' deductibles and other cost-sharing. A 2025 NBPP rule closed this loophole for individual and small group markets but is still open for large group and self-funded plans. The 2026 NBPP does not bring the federal government’s promise to close the loophole to fruition.

Photo Source: Chronic Disease Coalition

Copay accumulators, maximizers, and alternative funding programs increase patients’ financial burden while lowering costs and increasing profits for insurance plan sponsors and other vendors. Copay accumulators accept manufacturer copay assistance funds up to the limits of patients’ insurance deductibles while not counting it towards patients’ out-of-pocket contributions towards their deductible.[5] Adam J. Fein, Ph.D. with the Drug Channels Institute, summarized, "Benefit designs have been shifting drug costs to patients, some of whom are now responsible for a much greater share of their prescription costs. These out-of-pocket expenses can be quite high, especially for more expensive specialty drugs when patients face coinsurance amounts and payment in the deductible coverage phase."[5] Thus, patients still have to meet their out-of-pocket contributions even after they have already been met by the copay assistance program. The insurance plan is effectively being paid twice, known as ‘double dipping.’

Copay maximizers are more nefarious because they drain a disproportionate share of manufacturer assistance funding.[5] Here, the plans set a patient’s out-of-pocket obligation to match the maximum value of support the copay assistance program provides. Thus, even if a deductible is $5,000, a patient’s out-of-pocket obligation could be set to $20,000 if that was the maximum use case of a particular copay assistance program. Patients incur very low out-of-pocket costs, but funding that could be stretched to help more patients is drained into industry coffers.

Alternative funding programs are the newest development in violating patient protections. Here, plans eliminate coverage entirely for specialty or costly drugs, thus leaving patients with the plans effectively uninsured.[5] Then, the patients are made to apply for patient assistance programs, which pay the entire list price for the drug. Patients incur minimal costs. However, plan sponsors and other vendors are paid the entire list cost value, which reduces their plan expenses but is a significant and improper financial depletion of assistance funds.[5] Additionally, there are delays involved in patients applying for these programs, and some are denied. Delays and denials are unnecessary barriers to patient access to medication that should be essential health benefits.

Photo Source: First Federal Credit Control

Since the EHB loophole remains open for large group and self-funded plans, masses of patients are left unprotected. It is not enough for the federal government to acknowledge a problem. Effective remedy requires acknowledgment of a problem, specific delineation of a solution, followed by enforcement of the solution. It is likely this loophole will only exacerbate the growing problem with medical debt.

Carl Schmid, executive director of the HIV + Hepatitis Policy Institute, encapsulates the situation perfectly, stating, “Every day these rules are delayed is another day that insurers and PBMs are pocketing billions of dollars meant for patients who are struggling to afford their drugs. Coming from an administration that prides itself on supporting patients and lowering their prescription drug costs, this is a huge disappointment. While they have gone on record that they will issue these rules, the clock is ticking, and there isn’t much time left.”[7]

[1] National Archives and Records Administration. (2024, October 10). Proposed Rule: Patient Protection and Affordable Care Act; HHS Notice of Benefit and Payment Parameters for 2026; and Basic Health Program. Retrieved from https://www.federalregister.gov/documents/2024/10/10/2024-23103/patient-protection-and-affordable-care-act-hhs-notice-of-benefit-and-payment-parameters-for-2026-and

[2] United States District Court. (2023, September 29). Memorandum Opinion. Retrieved from https://hivhep.org/wp-content/uploads/2023/09/HIV-Hepatitis-Policy-Institute-v.-HHS-DDC-opinion.pdf

[3] HIV+Hepatitis Policy Institute. (2023, October 2). Court Strikes Down HHS Rule that Allowed Insurers to Not Count Copay Assistance. Retrieved from https://hivhep.org/wp-content/uploads/2023/10/copay-accumulator-court-decision-press-release-10.2.23.pdf

[4] United States District Court. (2023, November 27). Defendant's Conditional Motion to Clarify Scope of Court's Order. Retrieved from https://hivhep.org/wp-content/uploads/2023/11/govt-clarification-request.pdf

[5] Fein, A. (2024, February 14). Copay Accumulator and Maximizer Update: Adoption Expands as Legal Barriers Grow. Retrieved from https://www.drugchannels.net/2024/02/copay-accumulator-and-maximizer-update.html

[6] HealthCare.Gov. (2024). Essential Health Benefits. Retrieved from https://www.healthcare.gov/glossary/essential-health-benefits/#:~:text=A%20set%20of%2010%20categories,offers%20when%20you%20compare%20plans

[7] HIV+Hepatitis Policy Institute. (2024, October 4). Biden-Harris Administration Sides with Insurers & Fails to Take Steps to Lower Patient Costs for Prescription Drugs. Retrieved from https://hivhep.org/press-releases/biden-harris-administration-sides-with-insurers-fails-to-take-steps-to-lower-patient-costs-for-prescription-drugs/

Disclaimer: Guest blogs do not necessarily reflect the views of the ADAP Advocacy Association, but rather they provide a neutral platform whereby the author serves to promote open, honest discussion about public health-related issues and updates.   

Are Nonprofit Hospitals' Community Benefit Tax Breaks Truly Serving Communities in Need?

By: Ranier Simons, ADAP Blog Guest Contributor

Nonprofit hospitals are supposed to be primarily focused on the communities they serve. They exist, in theory, to provide quality, equitable access to care for all, regardless of the ability to pay. The mission should be community service and improving the healthcare outcomes and well-being of their communities. Unlike for-profit hospitals, which concentrate on generating profits for private shareholders or owners, nonprofit hospitals are mandated to use their profits to invest in the community. Unfortunately, data shows that many nonprofit hospitals are not fiscally operating to properly benefit their communities despite the significant tax exemptions they are afforded, referred to as community benefits. In fact, some nonprofit hospital systems are exploiting their tax incentives and adding to patient and community medical debt. As such, many stakeholders and policymakers are increasingly scrutinizing nonprofit hospitals' tax-exempt status.

Photo Source: Third Way

Over half of the hospitals in the United State are designated by the Internal Revenue Service (IRS) as nonprofit.[1] According to the American Hospital Association (AHA), there are approximately 6,120 hospitals in the United States, with 2,987 of them categorized as nongovernment not-for-profit community hospitals.[2] The nonprofit designation means the entities are tax-exempt from most federal, state, and local taxes. A recent study conducted by researchers at Johns Hopkins Bloomberg School of Public Health, Johns Hopkins Carey Business School, and Texas Christian University found that in 2021, nonprofit hospitals received $37.1 billion in tax benefits.[3] Over the next decade, estimates indicate that the federal revenue lost from nonprofit tax breaks will be approximately $260 billion.[1] The significant tax deductions should spawn considerable community benefits. Nevertheless, the reality paints a different picture.

In turn, for the designation as a charitable non-hospital, these entities are required to use the funding generated from the tax breaks to provide for the needs of the patients served. This help is referred to as community benefit obligations. These obligations can be fulfilled with endeavors such as health education programs, community health improvement initiatives, charity care, and financial assistance programs.[1] Unfortunately, data shows that many nonprofit hospitals are not adequately fulfilling their community benefit requirements and, in some cases, operate like for-profit institutions. In some cases, they even fall short of the level of community benefit given by for-profit institutions. 

One of the most quantifiable and identifiable metrics of community benefit is charity care. Charity care is defined as providing free or significantly discounted medical care for patients who cannot afford it. Many patients who face medical affordability challenges are significantly impacted by emergency room or inpatient hospitalization expenses.[4] Both uninsured/underinsured and insured patients present a need for charity care. 

There is a growing chorus amongst stakeholders invested in improving public health calling for reforms to the lucrative 340B Drug Pricing Program, which was initially designed to "stretch scarce federal resources as far as possible, reaching more eligible patients and providing more comprehensive services." According to a recent report by IQVIA, the 340B Program ballooned to $124B in 2023, yet another report found 85% of disproportionate share hospitals (DSH) earn more in 340B profit than they spend on charity care. The special interests fighting 340B reform claim clear guidelines already exist for community benefit requirements. 

The IRS first issued guidance for hospitals designated as 501(c)(3) nonprofit entities regarding the specific charity care requirement in 1956.[1] This was before Medicare and Medicaid when there was a dire need for a means to help those in need. It directly specified that nonprofit hospitals could not deny care to those who couldn’t pay if they wanted to maintain their nonprofit status. After the advent of Medicare and Medicaid, the IRS pivoted to the community benefits standard concept of required activity in 1969.[5] This broader definition is part of the present dilemma with qualifying the community help nonprofit hospitals provide.

Whether specifically charity care or community benefit, data shows that most nonprofit hospitals are not adequately utilizing their savings from tax-exempt status to reinvest in the community. According to a March 2024 policy brief issued by the nonpartisan Lown Institute, in 2021, “about 80% of [nonprofit] hospitals spent less on meaningful community investment compared to the value of their tax breaks.”[6] For charity care specifically, in 2018, Johns Hopkins University research data showed that overall, nonprofit hospitals provided charity care valued at only 2.3% of their total operating expenses compared to the valuation of their tax exemption, which was 4.3% of total operating expenses.[7] A 2023 United States Senate HELP Committee report indicated similarly trending 2021 data. The report examined 16 major nonprofit hospital chains, all of which had more than $3 billion in annual revenue. Twelve of the 16 allotted less than two percent of their total revenue to charity care, with six of those twelve allotting less than one percent.[8]

In contrast to most nonprofit hospitals with poor levels of tax break investment, the Lown Institute identified a few positive anomalies for the 2021 fiscal year. Data was taken from information on IRS Form 990. Ten hospitals and ten hospital systems were identified as having community investments that exceeded their tax breaks.[9] The analysis was based on metrics deemed to have a “direct and meaningful impact on community health.”[9] These metrics included financial assistance, community health improvement services, cash and in-kind contributions, community-building activities, and subsidized health services.[9] 

Lakeland (Fla.) Regional Medical Center and Summit Healthcare Regional Medical Center (Show Low, Ariz.) topped the hospital list with high community investment spending at $194 million and $159 million, respectively.[9] Hackensack Meridian Health (Edison, N.J.) and Nebraska Medicine (Omaha) topped the health system list at $358 million and $119 million, respectively.[9] It is unusual for nonprofit entities to have community investments that exceed their tax exemptions. Usually, for-profit entities would have more of an incentive to have high levels of charity expenditures as for-profit entities can write them off to lower their tax burden, unlike nonprofits.

Photo Source: Health Affairs

The actions of nonprofit hospitals that do not adequately satisfy their charity care and community benefit are damaging in multiple ways. Some of the bad actors have low levels of revenue spent on charity care yet aggressively pursue bills of patients who cannot afford their needed care. Nonprofit hospitals have sold patient debts to for-profit collection agencies, garnished wages, put liens on property, and even denied non-emergent care to low-income individuals with insurmountable medical debt.[10] This is in bad faith and not in the community's best interests when there is ample revenue from the tax-exemption profit that can and should be used for charity care. Data shows that many low-income patients who are victims of aggressive debt collection practices are eligible for free and discounted care. Despite the protections put in place by the Affordable Care Act (ACA), many nonprofit hospitals make it difficult for patients to find out they are eligible for charity care, in addition to making the process challenging to navigate.[8]

Some nonprofit hospitals operate more like for-profit entities, especially regarding acquisition. Nonprofit hospitals have merged, acquired for-profit hospitals and insurers, and even opened for-profit businesses in other countries.[11] Several nonprofit hospitals with low percentages of revenue spent on charity care also have high CEO compensation. For example, in 2021, Allina Health System in Minneapolis, Minnesota, paid its CEO a salary equal to 21% of the total charity care provided by the entire hospital system.[8] New York Presbyterian Hospital paid its CEO $10.9 million while only allotting $68.5 million in charity care when the total 2021 hospital system revenue was almost $10 billion.[8]

Reform is needed to ensure nonprofit hospitals operate in the manner for which they were intended. Reforms suggested by the Committee for a Responsible Federal Budget include transparency and refining reporting, clearly delineating what community benefit means, and setting minimum community benefit spending levels.[8] The form entities use to report their community benefit activities is IRS Form 990 Schedule H. That form needs to be revised to require nonprofit hospitals to give significantly more details of categories and amounts of community benefit spending.[8] Moreover, rules should be updated to require reporting at the facility level, not the health system parent organization level.[8]

Community benefit should be more explicitly defined. Currently, it is too nebulous and includes metrics that are hard to measure and do not necessarily provide direct community or patient benefit.[8] Things like physician education and Medicaid shortfall should no longer be considered. Most importantly, things like Medicaid shortfall expenditures are already offset by funding, such as disproportionate share hospital payments.[8]

Federally, Congress should consider setting minimum levels of community benefit spending. Some states have already instituted this. Texas, for example, has stringent state laws around nonprofit hospitals. If an entity is not designated as a Medicaid Disproportionate Share Hospital (DSH), it can fulfill the required charity care levels by: providing charity care and community benefit equaling at least five percent of the entity or system’s net patient revenue with four percent of that being charity care and government-sponsored indigent care, provide charity care that exceeds the amount of funding generated by tax-exempt status, or prove that charity care is being given at proportionate levels corresponding to the community needs and entity’s ability.[12]

Photo Source: NPR

As a part of the continuing examination of the burden of medical debt, this week, ADAP Advocacy launched an online survey to collect data on patient perspectives and experiences with medical debt. It is available nationwide for anyone in the United States to participate. It is also anonymous with the option of providing personal information if you wish to be contacted for additional follow-up.

The ADAP Advocacy-sponsored Ryan White Grantee 340B Patient Advisory Committee commissioned the study to support patient-centered reform. Many hospitals, as recipients of drug rebates under the 340B Drug Pricing Program, are notoriously bad actors. Data from the survey will add color to patients’ lived experiences with medical debt’s whole-person effect on their lives.

Medical debt continues to adversely affect patients' healthcare outcomes and cause stresses on other aspects of daily living. Nonprofit hospitals are supposed to operate in a manner that benefits anyone who needs care regardless of the financial means to pay for it; however, that is not the status quo. Reform is necessary since data shows many nonprofit hospitals are focused on generating profits instead of providing robust investment into their communities.

Senator Bernie Sanders succinctly described the dire situation when he expressed, “At a time when 85 million Americans are uninsured or underinsured, over 500,000 people go bankrupt because of medically-related debt, and over 60,000 Americans die each year because they cannot afford to go to a doctor when they need to, nonprofit hospitals should be providing more charity care to those who desperately need it, not less….And if they refuse to do so, they should lose their tax-exempt status.”

Read our related blog, In the United State, is Medical Debt is Truly Hospital Debt?

[1] Committee for a Responsible Federal Budget. (2024, June 12). The Federal Tax Benefits for Nonprofit Hospitals. Retrieved from https://www.crfb.org/papers/federal-tax-benefits-nonprofit-hospitals

[2] American Hospital Association. (2024, January). Fast facts on U.S. Hospitals. Retrieved from https://www.aha.org/statistics/fast-facts-us-hospitals

[3] Johns Hopkins Bloomberg School of Public Health. (2024, September 26). U.S. Nonprofit Hospitals Received More than $37 Billion in Total Tax Benefits in 2021. Retrieved from https://publichealth.jhu.edu/2024/us-nonprofit-hospitals-received-more-than-37-billion-in-total-tax-benefits-in-2021

[4] Levinson, Z., Hulver, S., Neuman, T. (2022, November 3). Hospital Charity Care: How It Works and Why It Matters. Retrieved from https://www.kff.org/health-costs/issue-brief/hospital-charity-care-how-it-works-and-why-it-matters/

[5] Bai, G., Letchuman, S., & Hyman, D. A. (2023). Do nonprofit hospitals deserve their tax exemption? New England Journal of Medicine, 389(3), 196–197. https://doi.org/10.1056/nejmp2303245

[6] Lown Institute. (2024, March). Hospital Community Benefit Spending: Improving transparency and accountability around standards for tax-exempt hospitals. Retrieved from https://lownhospitalsindex.org/wp-content/uploads/2024/03/lown-institute-fair-share-policy-brief-20240321.pdf

[7] Zare, H., Eisenberg, M. D., & Anderson, G. (2021). Comparing the value of community benefit and Tax‐Exemption in nonprofit hospitals. Health Services Research, 57(2), 270–284. https://doi.org/10.1111/1475-6773.13668

[8] United States Senate HELP Committee. (2023, October 10). Executive Charity Major Nonprofit Hospitals Take Advantage of Tax Breaks and Prioritize CEO Pay Over Helping Patients Afford Medical Care. Retrieved from https://www.sanders.senate.gov/wp-content/uploads/Executive-Charity-HELP-Committee-Majority-Staff-Report-Final.pdf

[9] Gooch, K. (2024, March 26). 20 hospitals, systems where charity care exceeds tax breaks. Retrieved from https://www.beckershospitalreview.com/finance/20-hospitals-systems-where-charity-care-exceeds-tax-breaks.html?oly_enc_id=8229J1560589D4S

[10] Thompson, I. (2023, September 5). Nonprofit Hospitals Pursue Aggressive Medical Debt Collection. Retrieved from https://nonprofitquarterly.org/nonprofit-hospitals-pursue-aggressive-medical-debt-collection/

[11] Rosenthal, E. (2024, July 22). Why many nonprofit (wink, wink) hospitals are rolling in money. Retrieved from https://www.washingtonpost.com/opinions/2024/07/22/nonprofit-hospital-health-care-industry/

[12] Texas Hospital Association. (2024, September). Charity Care and Community Benefit in Texas: Frequently Asked Questions. Retrieved from https://www.tha.org/wp-content/uploads/2024/09/Charity-care-FAQ-September-2024-FINAL.pdf

[13] Muoio, D. (2023, October 11). Sanders: Nonprofit hospitals 'should lose their tax-exempt status' if they 'refuse' to increase charity care. Retrieved from https://www.fiercehealthcare.com/providers/sen-sanders-nonprofit-hospitals-should-lose-their-tax-exempt-status-if-they-refuse

Disclaimer: Guest blogs do not necessarily reflect the views of the ADAP Advocacy Association, but rather they provide a neutral platform whereby the author serves to promote open, honest discussion about public health-related issues and updates.