Federally qualified health centers (FQHCs) are the linchpin of our nation’s health care safety net, serving as health care homes for nearly 30 million people every year. These characteristics were part of the program’s original design. In order to qualify for section 330 community health center grant funding from the federal government, health centers must commit to serving all individuals in their service area, regardless of insurance status or ability to pay. Part of the health center model is to help connect their patients and community with enabling services and a variety of supports to ensure ongoing access to quality health care, which is often accomplished by providing those services on a sliding fee scale. For millions of Americans every year, their community health center is their lifeline—providing services irrespective of their employment status, insurance status, or current financial situation. While the health center program expanded with investment from the Affordable Care Act, the current reach of community health centers would not be possible without the 340B program.
In today’s health care environment, FQHCs depend on the 340B program to meet their mission, putting every dollar received back into the communities they are serving. Numerous external evaluators have found that payer reimbursement rates consistently fail to cover the cost of the comprehensive services provided in the community health center environment. In fact, when Congress created the program in 1992, they recognized this reality – that the 340B drug pricing program would allow these providers to “stretch scarce federal resources as far as possible, reaching more eligible patients and providing more comprehensive services.” By allowing the purchase of drugs at a discounted price, the 340B program enables health centers to serve more patients, at a higher level of complexity, than they otherwise could.
Effectively, health center use and engagement in the 340B program exemplifies the intent behind its creation: to maximize federal investment and expand care to underserved communities as effectively as possible.
340B entities should be held accountable for reinvesting program savings into patient care and program operations.
As entities commit to these important accountability standards, Congress should ensure that the program is fully benefitting those entities.
The Centers for Medicare & Medicaid Services (CMS) should exempt FQHCs from the actual acquisition cost fee for service Medicaid reimbursement methodology and instill additional guardrails to forced “carve-out” policies.
Rationale: Requiring states to pay actual acquisition cost for 340B drugs defies the intent and proven impact of the program. It also limits FQHCs’ ability to participate and succeed in value-based care.
Recommendation: CMS should update its 2016 outpatient drug rule to clarify that states are permitted to reimburse above actual acquisition cost under fee for service Medicaid for drugs purchased under the 340B program at FQHCs, and provide a federal floor that supersedes state policy.
CMS should clarify that states are not permitted to mandate that Medicaid Managed Care Organizations (MCOs) reimburse for 340B drugs at actual acquisition cost or force providers to carve out.
Rationale: While CMS has not indicated that MCOs must reimburse actual acquisition cost, more states are moving in that direction and/or MCOs are including it as a condition of contracting. 340B savings are an essential part of value-based contracting between FQHCs and MCOs and should not be undermined.
Recommendation: In order to preserve the essential savings provided by the 340B program, CMS and the Health Resources and Services Administration (HRSA) must protect FQHCs against actual acquisition cost and/or forced carve-out policies within Medicaid managed care arrangements.
HRSA should establish new guardrails for manufacturer audits of FQHCs.
Rationale: Pharmaceutical manufacturers often place a high burden on FQHCs to audit 340B drug prescriptions, which often takes away from patient care resources.
Recommendation: HRSA should establish additional requirements around entity burden reduction before approving manufacturer audits of FQHCs.