Many Hospitals Get Big Drug Discounts. That Doesn’t Mean Markdowns for Patients.

One participant is the Cleveland Clinic’s flagship hospital, which reported $1.35 billion in net income last year. The hospital doesn’t admit enough Medicaid and low-income Medicare patients to qualify for low-cost drugs under the program’s original requirements. But a quirk in federal law allowed the hospital to qualify as a “rural referral center,” despite its location near the center of Cleveland.

Despite the benefits, the program hasn’t resulted in new drug discounts for low-income Cleveland Clinic patients, nor has it caused the hospital to increase the financial assistance it offers to those who can’t afford care. The charity care the main hospital writes off represents less than 2% of its patient revenue, according to a Wall Street Journal analysis of hospital Medicare filings.

Cleveland geriatrician

Peter DeGolia

said a new patient recently asked him to rewrite a prescription originally provided by a specialist at the Cleveland Clinic. The patient couldn’t afford the medication, so he turned to MetroHealth, a county hospital system that uses the federal discounts to offer lower prices on drugs its doctors prescribe to uninsured and low-income patients.

Dr. DeGolia said he was surprised to learn the Cleveland Clinic’s main hospital qualified for the federal program, and didn’t pass along drug markdowns to patients. “That I find shocking,” he said.

A Cleveland Clinic Health System spokeswoman said in a written statement that the flagship hospital hasn’t introduced specific drug discounts for patients, but has a variety of programs that benefit the communities it serves, including money-losing services that the federal drug-discount program helps support. The main Cleveland hospital is one of the state’s top providers of care to Medicaid patients, she said.

The hospital’s $1.35 billion net income figure for 2021, she said, includes investment returns.

Cleveland Clinic’s adoption of the drug-discount program at its main hospital in April 2020 produced about $136 million in savings on drugs that year, the spokeswoman said.

Most of the satellite 340B sites of Cleveland Clinic’s flagship hospital are in areas with higher levels of household income and private health insurance than its main campus. Locations can include multiple sites.

Locations of Cleveland Clinic Hospital’s 340B remote sites

Medically underserved areas

Median household income by tract

Private health insurance coverage by tract

Cleveland

Clinic

Hospital

Locations of Cleveland Clinic Hospital’s

340B remote sites

Medically underserved areas

Median household income by tract

Cleveland

Clinic

Hospital

Private health insurance coverage by tract

Locations of Cleveland Clinic Hospital’s

340B remote sites

Medically underserved areas

Median household income by tract

Cleveland

Clinic

Hospital

Private health insurance coverage by tract

The federal drug-discount program, known as 340B after the statutory provision that created it, requires pharmaceutical companies to sell drugs to participating hospitals at reduced prices. The program has grown rapidly in recent years. It now includes about 2,600 nonprofit and government hospitals, which spent at least $38 billion on discounted drugs last year, according to the Health Resources and Services Administration, the federal agency known as HRSA that oversees the program.

What the hospitals do with their valuable discounts isn’t always clear.

The program doesn’t require participating hospitals to pass on drug discounts to patients, insurers or Medicare. There is no rule limiting how much they can charge for the drugs. They don’t have to report how much they make from such sales, nor do they have to spend any profits to benefit low-income patients.

Once a hospital gains 340B designation, it can extend the discounts to an unlimited number of affiliated clinics and offices, as well as to prescriptions its patients fill at outside pharmacies that it contracts with. Those locations don’t have to qualify on their own by serving low-income or rural communities.

The Journal used federal records to compile a database of the hospitals enrolled in the program, and mapped the networks formed by nearly 29,000 affiliated clinics and departments, using census data to provide socioeconomic context. The Journal also analyzed thousands of hospital cost reports filed with Medicare.

The data show that hospitals often extend their 340B discounts to clinics in well-off communities, where they can charge privately insured patients more than those on Medicaid. Two-thirds of the sites outside the hospitals’ own census tracts were in neighborhoods where the median household income exceeded that in the hospitals’ own locations. Among the upscale suburbs with hospital-linked facilities using the 340B program were Lexington, Mass., and Encinitas, Calif. Both of those hospital systems said they use the proceeds to help needy patients.

Hospitals that meet the definition of rural referral centers are ramping up drug purchases under the program at a faster rate than any other type of 340B hospital, by more than 700% over five years, according to a HRSA report obtained through a Freedom of Information Act request. A Journal analysis found that most aren’t in rural areas, including Chicago’s Northwestern Memorial Hospital, Harvard-affiliated Brigham & Women’s Hospital in Boston and the Cleveland Clinic’s main campus.

Cumulatively, 340B hospitals wrote off 2.7% of their patient revenue as charity care, or assistance to needy patients, in their most recent Medicare filings. The figure for the non-340B hospitals was almost identical, at 2.6%. Some of the hospitals with the lowest charity-care rates were 340B hospitals.

The data raise questions about the program’s growth and purpose. In some cases, the program appears to be bolstering profits in well-off areas more than it is underwriting services in less-privileged neighborhoods.

Gail Wilensky,

a former federal health official who oversaw the Medicare and Medicaid programs in the early 1990s but wasn’t involved in shaping the 340B program, characterized the original version as “a limited program to go to inner-city hospitals to help them survive.” Today, she said, “not only is the growth astronomical, we have no clue how this money is used, because there has never been any accountability demanded on how it was used.”

Hospitals say that financial assistance to needy patients is only a limited portion of the community benefit they provide. Many hospitals said they use the proceeds from 340B to support a variety of services, including free vaccinations, mental-health care, medical services that are money-losing and subsidizing care for Medicaid beneficiaries. The locations of 340B sites remote from their main hospitals, they said, aren’t a good measure of what hospitals provide to low-income communities.

Maureen Testoni,

chief executive of 340B Health, a group that represents 340B hospitals, said the savings the facilities receive, whether from the main hospital or an off-site location, all contribute to funding safety-net hospitals and subsidizing care to low-income or rural patients. She said 340B hospitals provided the majority of uncompensated and Medicaid hospital care.

The Biden administration has asked Congress to require 340B participants to report drug savings and how they use the proceeds. “We recognize we could enhance accountability and transparency,” said an official with the federal Department of Health and Human Services, adding that the department sees 340B as an essential safety-net program.

When Congress created the 340B program in 1992, lawmakers expected it to include around 90 hospitals, according to a congressional report on the legislative history of the bill. The hospitals could qualify as “disproportionate share hospitals,” where a significant share of inpatient admissions were low-income Medicare and Medicaid patients, though the discounts aren’t for inpatient drugs. The hospitals had to be nonprofit or owned by a state or local government. The program also included certain clinics, particularly the federally funded ones that serve largely low-income patients, which remain eligible today.

The 2010 Affordable Care Act brought a big expansion of 340B, adding new categories including critical access hospitals, which are small, typically rural facilities, and rural referral centers, which are supposed to be rural hospitals that treat a large volume of patients, including many complicated cases.

Under the federal definition of rural referral centers, hospitals that aren’t in rural locations could still qualify if they meet other criteria—minimally, having at least 275 beds. There is no requirement to serve rural patients.

A Journal analysis of HRSA data found that 88 out of the 111 rural referral centers in the 340B program weren’t located in areas deemed rural by HRSA.

More than four-fifths weren’t admitting enough low-income Medicare and Medicaid beneficiaries to qualify for 340B as a disproportionate share hospital, according to a Journal analysis of data from hospitals’ cost reports filed with Medicare. Among them were Northwestern Memorial Hospital, Brigham & Women’s Hospital and the Cleveland Clinic flagship.

“We were trying to help rural hospitals,” said

Robert Kocher,

an Obama White House health adviser involved in crafting the ACA who is now at venture-capital firm Venrock. “It would not be our intention to have a medical center in Cleveland, Boston or Chicago be included.”

A spokesman for Northwestern Memorial HealthCare, the parent system of Northwestern Memorial Hospital, said the Medicare regulator determined it could qualify as a rural referral center in 2020. A spokeswoman for Brigham & Women’s Hospital, part of the Mass General Brigham system, declined to comment.

Partly because of the growing number of eligible hospitals, annual spending by hospitals on drug purchases through the program quintupled between 2015 and 2021, to at least $38 billion, according to HRSA, though those numbers don’t represent all sales.

The prices hospitals pay for the drugs are confidential, and their proceeds from any markups aren’t broken out in financial disclosures. The margins can be enormous.

Hospitals can acquire certain drugs that have had significant price increases for nearly free, allowing them to pocket almost the entire cost reimbursed by insurers. Under Medicaid rules that also apply to the 340B program, drug companies have to rebate any annual price increases that exceed the overall rate of inflation. For older drugs with big increases over the years, the rebate can exceed the product’s original launch price.

The cost of these drugs, known as “penny priced” medicines, is set at $0.01. They include the anti-inflammatory medication Humira, which has a list price of $6,410 a month, and the gout drug Krystexxa, which has an average net price of nearly $54,500 a month.

AbbVie Inc.,

maker of Humira, and Krystexxa-maker

Horizon Therapeutics

PLC declined to comment.

After surveying 340B hospitals, the Medicare agency estimated their typical discounts on drugs administered in outpatient settings at around 35% off what is known as ASP—the federally reported average sales prices hospitals otherwise pay for drugs.

The health plan of a large New York-based union known as 32BJ, an affiliate of the Service Employees International Union, analyzed claims for outpatient-administered drugs. It found that 340B hospitals were charging the union’s health plan as much as 25 times ASP.

The profit from 340B discounts “shouldn’t just go to the providers,” said Cora Opsahl, director of the 32BJ Health Fund. The union’s health plan, she said, is entitled to rebates on certain medications, but those are blocked if the drug is subject to 340B discounts.

After deductibles and coinsurance are taken into account, patients with health insurance can end up paying more out of pocket than the hospital spends to purchase a drug. This can happen to Medicare beneficiaries whose drugs are administered outpatient, according to a 2015 report from the Department of Health and Human Services’ Office of Inspector General.

In its fiscal year ended June 30, 2021, University of Michigan Health had an estimated margin of $482 million on 340B drugs, up from about $399 million in the year-earlier period, according to an internal document obtained through a public-records request.

The 340B proceeds were larger than the net income of the hospital system in 2021, said

Dana Habers,

chief operating officer for pharmacy services at University of Michigan Health. “It’s critical for us,” she said, and it underwrites services including discounts on drugs for low-income patients.

The discount program’s economics add to the ample incentives hospitals already have to serve patients with private insurance that pays more. The analysis of HRSA data showed that as hospitals expand their use of 340B beyond their main locations, they often apply the program’s discounts in places where more people have private coverage, and incomes are higher.

Among 340B hospitals with at least 10 sites registered outside their own census tracts, more than 60 placed all of the sites in neighborhoods with higher rates of private insurance coverage than the hospitals’ own neighborhoods. Under HRSA’s definition, the registered sites can represent a clinic, an office or a category of clinical service offered within a bigger center, so a hospital can list several, and in some cases more than a dozen, 340B sites at a single address.

Overall, 61% of the remote sites of private nonprofit 340B hospitals were in areas with higher rates of private insurance than the parent hospital.

Not every 340B hospital favored better-insured neighborhoods. Government-owned ones had less than half of remote sites in such areas—and had a higher charity-care rate than the private nonprofits. A spokesman for Parkland Health, a county-owned system in Dallas, said it aims to place remote clinics near low-income residents who face challenges accessing care.

The Journal’s analysis focused on 340B acute-care hospitals that serve the general population, excluding children’s hospitals, cancer centers and a few others.

Among those hospitals, the one with the most 340B sites was Detroit’s Henry Ford Hospital. The nonprofit, part of Henry Ford Health, has 467 sites registered for 340B drug discounts located outside its home neighborhood, 92% of them in census tracts with higher rates of private insurance than the parent hospital. The hospital is located in central Detroit, in a census tract where 37% of residents have private health insurance, according to census data. The average rate in its remote sites’ tracts is 74%.

Henry Ford Hospital in Detroit has many 340B satellite locations in areas with higher private health insurance rates than the main hospital’s neighborhood. County-owned Parkland Memorial Hospital in Dallas, located in an area with little private coverage, has remote sites in areas with even lower levels of such coverage.

Rate of private health insurance coverage in 340B sites’ locations

Medically underserved areas

Higher than hospital’s location

Equal to/lower than hospital’s location

Parkland Memorial

Hospital

Rate of private health insurance coverage

in 340B sites’ locations

Higher than hospital’s location

Equal to/lower than hospital’s location

Medically underserved areas

Parkland Memorial

Hospital

Rate of private health insurance coverage

in 340B sites’ locations

Higher than hospital’s location

Equal to/lower than hospital’s location

Medically underserved areas

Parkland Memorial

Hospital

In some areas, Henry Ford Health owns hospitals that don’t qualify for 340B, such as a campus in affluent West Bloomfield that includes resort-style amenities, according to its website. Yet 11 sites in adjacent and nearby locations in West Bloomfield do get the 340B discounts because they are affiliated with the parent hospital in downtown Detroit, which isn’t in the same county as West Bloomfield.

The analysis found several other hospital systems using a similar approach.

West Bloomfield, a northwestern suburb that has private insurance rates of 80% or higher and median household income of around $121,000—more than three times the median income for the city of Detroit—has 14 registered 340B hospital sites. A similar-size region on the eastern side of Detroit, which includes three federally designated medically underserved areas, has none.

In Grosse Pointe, right over the Detroit city line from that underserved area, there is a 340B hospital owned by the nonprofit Beaumont Health system, now part of Corewell Health. Beaumont, which owns a half-dozen 340B hospitals in the Detroit area with 55 remote sites signed up for the drug discounts, has none registered in the city of Detroit.

Henry Ford, for its part, has 340B sites registered in upscale Grosse Pointe Farms.

Henry Ford Health, the parent system of Henry Ford Hospital, said in a written statement that the locations of the 340B sites don’t reflect who benefits from the program. It said it uses the savings to provide healthcare to vulnerable patients throughout its service area, including more than $700 million in uncompensated care and community benefit in 2021. A Corewell spokesman said the system’s sites are compliant with HRSA rules, and 340B helps it improve access for underserved communities.

Write to Anna Wilde Mathews at [email protected], Paul Overberg at [email protected], Joseph Walker at [email protected] and Tom McGinty at [email protected]

One participant is the Cleveland Clinic’s flagship hospital, which reported $1.35 billion in net income last year. The hospital doesn’t admit enough Medicaid and low-income Medicare patients to qualify for low-cost drugs under the program’s original requirements. But a quirk in federal law allowed the hospital to qualify as a “rural referral center,” despite its location near the center of Cleveland.

Despite the benefits, the program hasn’t resulted in new drug discounts for low-income Cleveland Clinic patients, nor has it caused the hospital to increase the financial assistance it offers to those who can’t afford care. The charity care the main hospital writes off represents less than 2% of its patient revenue, according to a Wall Street Journal analysis of hospital Medicare filings.

Cleveland geriatrician

Peter DeGolia

said a new patient recently asked him to rewrite a prescription originally provided by a specialist at the Cleveland Clinic. The patient couldn’t afford the medication, so he turned to MetroHealth, a county hospital system that uses the federal discounts to offer lower prices on drugs its doctors prescribe to uninsured and low-income patients.

Dr. DeGolia said he was surprised to learn the Cleveland Clinic’s main hospital qualified for the federal program, and didn’t pass along drug markdowns to patients. “That I find shocking,” he said.

A Cleveland Clinic Health System spokeswoman said in a written statement that the flagship hospital hasn’t introduced specific drug discounts for patients, but has a variety of programs that benefit the communities it serves, including money-losing services that the federal drug-discount program helps support. The main Cleveland hospital is one of the state’s top providers of care to Medicaid patients, she said.

The hospital’s $1.35 billion net income figure for 2021, she said, includes investment returns.

Cleveland Clinic’s adoption of the drug-discount program at its main hospital in April 2020 produced about $136 million in savings on drugs that year, the spokeswoman said.

Most of the satellite 340B sites of Cleveland Clinic’s flagship hospital are in areas with higher levels of household income and private health insurance than its main campus. Locations can include multiple sites.

Locations of Cleveland Clinic Hospital’s 340B remote sites

Medically underserved areas

Median household income by tract

Private health insurance coverage by tract

Cleveland

Clinic

Hospital

Locations of Cleveland Clinic Hospital’s

340B remote sites

Medically underserved areas

Median household income by tract

Cleveland

Clinic

Hospital

Private health insurance coverage by tract

Locations of Cleveland Clinic Hospital’s

340B remote sites

Medically underserved areas

Median household income by tract

Cleveland

Clinic

Hospital

Private health insurance coverage by tract

The federal drug-discount program, known as 340B after the statutory provision that created it, requires pharmaceutical companies to sell drugs to participating hospitals at reduced prices. The program has grown rapidly in recent years. It now includes about 2,600 nonprofit and government hospitals, which spent at least $38 billion on discounted drugs last year, according to the Health Resources and Services Administration, the federal agency known as HRSA that oversees the program.

What the hospitals do with their valuable discounts isn’t always clear.

The program doesn’t require participating hospitals to pass on drug discounts to patients, insurers or Medicare. There is no rule limiting how much they can charge for the drugs. They don’t have to report how much they make from such sales, nor do they have to spend any profits to benefit low-income patients.

Once a hospital gains 340B designation, it can extend the discounts to an unlimited number of affiliated clinics and offices, as well as to prescriptions its patients fill at outside pharmacies that it contracts with. Those locations don’t have to qualify on their own by serving low-income or rural communities.

The Journal used federal records to compile a database of the hospitals enrolled in the program, and mapped the networks formed by nearly 29,000 affiliated clinics and departments, using census data to provide socioeconomic context. The Journal also analyzed thousands of hospital cost reports filed with Medicare.

The data show that hospitals often extend their 340B discounts to clinics in well-off communities, where they can charge privately insured patients more than those on Medicaid. Two-thirds of the sites outside the hospitals’ own census tracts were in neighborhoods where the median household income exceeded that in the hospitals’ own locations. Among the upscale suburbs with hospital-linked facilities using the 340B program were Lexington, Mass., and Encinitas, Calif. Both of those hospital systems said they use the proceeds to help needy patients.

Hospitals that meet the definition of rural referral centers are ramping up drug purchases under the program at a faster rate than any other type of 340B hospital, by more than 700% over five years, according to a HRSA report obtained through a Freedom of Information Act request. A Journal analysis found that most aren’t in rural areas, including Chicago’s Northwestern Memorial Hospital, Harvard-affiliated Brigham & Women’s Hospital in Boston and the Cleveland Clinic’s main campus.

Cumulatively, 340B hospitals wrote off 2.7% of their patient revenue as charity care, or assistance to needy patients, in their most recent Medicare filings. The figure for the non-340B hospitals was almost identical, at 2.6%. Some of the hospitals with the lowest charity-care rates were 340B hospitals.

The data raise questions about the program’s growth and purpose. In some cases, the program appears to be bolstering profits in well-off areas more than it is underwriting services in less-privileged neighborhoods.

Gail Wilensky,

a former federal health official who oversaw the Medicare and Medicaid programs in the early 1990s but wasn’t involved in shaping the 340B program, characterized the original version as “a limited program to go to inner-city hospitals to help them survive.” Today, she said, “not only is the growth astronomical, we have no clue how this money is used, because there has never been any accountability demanded on how it was used.”

Hospitals say that financial assistance to needy patients is only a limited portion of the community benefit they provide. Many hospitals said they use the proceeds from 340B to support a variety of services, including free vaccinations, mental-health care, medical services that are money-losing and subsidizing care for Medicaid beneficiaries. The locations of 340B sites remote from their main hospitals, they said, aren’t a good measure of what hospitals provide to low-income communities.

Maureen Testoni,

chief executive of 340B Health, a group that represents 340B hospitals, said the savings the facilities receive, whether from the main hospital or an off-site location, all contribute to funding safety-net hospitals and subsidizing care to low-income or rural patients. She said 340B hospitals provided the majority of uncompensated and Medicaid hospital care.

The Biden administration has asked Congress to require 340B participants to report drug savings and how they use the proceeds. “We recognize we could enhance accountability and transparency,” said an official with the federal Department of Health and Human Services, adding that the department sees 340B as an essential safety-net program.

When Congress created the 340B program in 1992, lawmakers expected it to include around 90 hospitals, according to a congressional report on the legislative history of the bill. The hospitals could qualify as “disproportionate share hospitals,” where a significant share of inpatient admissions were low-income Medicare and Medicaid patients, though the discounts aren’t for inpatient drugs. The hospitals had to be nonprofit or owned by a state or local government. The program also included certain clinics, particularly the federally funded ones that serve largely low-income patients, which remain eligible today.

The 2010 Affordable Care Act brought a big expansion of 340B, adding new categories including critical access hospitals, which are small, typically rural facilities, and rural referral centers, which are supposed to be rural hospitals that treat a large volume of patients, including many complicated cases.

Under the federal definition of rural referral centers, hospitals that aren’t in rural locations could still qualify if they meet other criteria—minimally, having at least 275 beds. There is no requirement to serve rural patients.

A Journal analysis of HRSA data found that 88 out of the 111 rural referral centers in the 340B program weren’t located in areas deemed rural by HRSA.

More than four-fifths weren’t admitting enough low-income Medicare and Medicaid beneficiaries to qualify for 340B as a disproportionate share hospital, according to a Journal analysis of data from hospitals’ cost reports filed with Medicare. Among them were Northwestern Memorial Hospital, Brigham & Women’s Hospital and the Cleveland Clinic flagship.

“We were trying to help rural hospitals,” said

Robert Kocher,

an Obama White House health adviser involved in crafting the ACA who is now at venture-capital firm Venrock. “It would not be our intention to have a medical center in Cleveland, Boston or Chicago be included.”

A spokesman for Northwestern Memorial HealthCare, the parent system of Northwestern Memorial Hospital, said the Medicare regulator determined it could qualify as a rural referral center in 2020. A spokeswoman for Brigham & Women’s Hospital, part of the Mass General Brigham system, declined to comment.

Partly because of the growing number of eligible hospitals, annual spending by hospitals on drug purchases through the program quintupled between 2015 and 2021, to at least $38 billion, according to HRSA, though those numbers don’t represent all sales.

The prices hospitals pay for the drugs are confidential, and their proceeds from any markups aren’t broken out in financial disclosures. The margins can be enormous.

Hospitals can acquire certain drugs that have had significant price increases for nearly free, allowing them to pocket almost the entire cost reimbursed by insurers. Under Medicaid rules that also apply to the 340B program, drug companies have to rebate any annual price increases that exceed the overall rate of inflation. For older drugs with big increases over the years, the rebate can exceed the product’s original launch price.

The cost of these drugs, known as “penny priced” medicines, is set at $0.01. They include the anti-inflammatory medication Humira, which has a list price of $6,410 a month, and the gout drug Krystexxa, which has an average net price of nearly $54,500 a month.

AbbVie Inc.,

maker of Humira, and Krystexxa-maker

Horizon Therapeutics

PLC declined to comment.

After surveying 340B hospitals, the Medicare agency estimated their typical discounts on drugs administered in outpatient settings at around 35% off what is known as ASP—the federally reported average sales prices hospitals otherwise pay for drugs.

The health plan of a large New York-based union known as 32BJ, an affiliate of the Service Employees International Union, analyzed claims for outpatient-administered drugs. It found that 340B hospitals were charging the union’s health plan as much as 25 times ASP.

The profit from 340B discounts “shouldn’t just go to the providers,” said Cora Opsahl, director of the 32BJ Health Fund. The union’s health plan, she said, is entitled to rebates on certain medications, but those are blocked if the drug is subject to 340B discounts.

After deductibles and coinsurance are taken into account, patients with health insurance can end up paying more out of pocket than the hospital spends to purchase a drug. This can happen to Medicare beneficiaries whose drugs are administered outpatient, according to a 2015 report from the Department of Health and Human Services’ Office of Inspector General.

In its fiscal year ended June 30, 2021, University of Michigan Health had an estimated margin of $482 million on 340B drugs, up from about $399 million in the year-earlier period, according to an internal document obtained through a public-records request.

The 340B proceeds were larger than the net income of the hospital system in 2021, said

Dana Habers,

chief operating officer for pharmacy services at University of Michigan Health. “It’s critical for us,” she said, and it underwrites services including discounts on drugs for low-income patients.

The discount program’s economics add to the ample incentives hospitals already have to serve patients with private insurance that pays more. The analysis of HRSA data showed that as hospitals expand their use of 340B beyond their main locations, they often apply the program’s discounts in places where more people have private coverage, and incomes are higher.

Among 340B hospitals with at least 10 sites registered outside their own census tracts, more than 60 placed all of the sites in neighborhoods with higher rates of private insurance coverage than the hospitals’ own neighborhoods. Under HRSA’s definition, the registered sites can represent a clinic, an office or a category of clinical service offered within a bigger center, so a hospital can list several, and in some cases more than a dozen, 340B sites at a single address.

Overall, 61% of the remote sites of private nonprofit 340B hospitals were in areas with higher rates of private insurance than the parent hospital.

Not every 340B hospital favored better-insured neighborhoods. Government-owned ones had less than half of remote sites in such areas—and had a higher charity-care rate than the private nonprofits. A spokesman for Parkland Health, a county-owned system in Dallas, said it aims to place remote clinics near low-income residents who face challenges accessing care.

The Journal’s analysis focused on 340B acute-care hospitals that serve the general population, excluding children’s hospitals, cancer centers and a few others.

Among those hospitals, the one with the most 340B sites was Detroit’s Henry Ford Hospital. The nonprofit, part of Henry Ford Health, has 467 sites registered for 340B drug discounts located outside its home neighborhood, 92% of them in census tracts with higher rates of private insurance than the parent hospital. The hospital is located in central Detroit, in a census tract where 37% of residents have private health insurance, according to census data. The average rate in its remote sites’ tracts is 74%.

Henry Ford Hospital in Detroit has many 340B satellite locations in areas with higher private health insurance rates than the main hospital’s neighborhood. County-owned Parkland Memorial Hospital in Dallas, located in an area with little private coverage, has remote sites in areas with even lower levels of such coverage.

Rate of private health insurance coverage in 340B sites’ locations

Medically underserved areas

Higher than hospital’s location

Equal to/lower than hospital’s location

Parkland Memorial

Hospital

Rate of private health insurance coverage

in 340B sites’ locations

Higher than hospital’s location

Equal to/lower than hospital’s location

Medically underserved areas

Parkland Memorial

Hospital

Rate of private health insurance coverage

in 340B sites’ locations

Higher than hospital’s location

Equal to/lower than hospital’s location

Medically underserved areas

Parkland Memorial

Hospital

In some areas, Henry Ford Health owns hospitals that don’t qualify for 340B, such as a campus in affluent West Bloomfield that includes resort-style amenities, according to its website. Yet 11 sites in adjacent and nearby locations in West Bloomfield do get the 340B discounts because they are affiliated with the parent hospital in downtown Detroit, which isn’t in the same county as West Bloomfield.

The analysis found several other hospital systems using a similar approach.

West Bloomfield, a northwestern suburb that has private insurance rates of 80% or higher and median household income of around $121,000—more than three times the median income for the city of Detroit—has 14 registered 340B hospital sites. A similar-size region on the eastern side of Detroit, which includes three federally designated medically underserved areas, has none.

In Grosse Pointe, right over the Detroit city line from that underserved area, there is a 340B hospital owned by the nonprofit Beaumont Health system, now part of Corewell Health. Beaumont, which owns a half-dozen 340B hospitals in the Detroit area with 55 remote sites signed up for the drug discounts, has none registered in the city of Detroit.

Henry Ford, for its part, has 340B sites registered in upscale Grosse Pointe Farms.

Henry Ford Health, the parent system of Henry Ford Hospital, said in a written statement that the locations of the 340B sites don’t reflect who benefits from the program. It said it uses the savings to provide healthcare to vulnerable patients throughout its service area, including more than $700 million in uncompensated care and community benefit in 2021. A Corewell spokesman said the system’s sites are compliant with HRSA rules, and 340B helps it improve access for underserved communities.

Write to Anna Wilde Mathews at [email protected], Paul Overberg at [email protected], Joseph Walker at [email protected] and Tom McGinty at [email protected]