October 13, 2023
The Senate Ramps Up Scrutiny of Non-Profit Hospitals
Within the last two weeks, the Senate has ramped up its scrutiny of non-profit hospitals. They have launched an investigation into how hospitals use their savings from the 340B drug discount program and Sen. Bernie Sanders (I-Vt.), Chairman of the Senate Health, Education, Labor, and Pensions (HELP) Committee, released a report urging Congress and the Internal Revenue Service (IRS) to make changes to hospitals’ community benefit requirements. The investigation regarding 340B savings targets the Cleveland Clinic and Bon Secours Mercy Health, seeking extensive information from them. Sen. Saunders’ report targets 16 health systems across the nation, highlighting their CEO compensation as well as investments in charity care and community benefit. While federal reforms this year are unlikely, the increased Congressional activity and bipartisan support for changes could lead to future revisions of the Affordable Care Act’s community benefit requirements or reforms to the 340B program.
340B Program Request for Information (RFI)
Senator Bill Cassidy, M.D. (R-LA), ranking member of the Senate HELP Committee, requested information from the Cleveland Clinic and Bon Secours Mercy Health regarding their use of 340B program savings. The letter states, “The Government Accountability Office has identified the troubling recent pattern of 340B covered entities increasingly serving wealthier communities with higher rates of insurance, which is far afield from the program’s intent. Additionally, GAO has found that covered entities often do not share 340B discounts directly with their patients.”
While the scope of this RFI was limited to two facilities, AHPA believes that all 340B entities should be ready for this type of scrutiny. The letters asked for the health systems to provide by October 12th extensive information, including total amount generated from the program, amount of any direct and indirect patient savings, and copies of all internal guidance documents explaining how they spend their 340B savings. There are currently several bills seeking to increase the reporting requirements of 340B entities. For an environmental scan of recent 340B legislative activity, click here.
Report on Non-Profit Hospitals
The report released by Senator Sanders urged Congress and the IRS to strengthen oversight on the community benefit and charity care spending necessary for non-profit hospitals to retain their tax-exempt status. “In 2020, nonprofit hospitals received $28 billion in tax breaks for the purpose of providing affordable health care for low-income Americans and yet, despite these massive tax breaks, most nonprofit hospitals are actually reducing the amount of charity care they provide to low-income families even as CEO pay is soaring,” said Sanders. The report highlights 16 major health systems and notes how many of them dedicated less than 2% of their net patient revenue to charity care. While this is not the first time that non-profit hospitals are scrutinized, we are seeing increased activity this year, including many media articles, publications, advocacy campaigns, and legislative activity. Some policy proposals seek to set a charity care or community benefit investment threshold and others seek to tie a hospital’s property tax-exemption to their total community benefit investment.