SCOOP: "Patients deserve accountability, not virtue signaling": Congress probes abuses of 340B program

“There are a growing number of urban hospitals masquerading as rural facilities in order to get even more generous benefits under the Medicare and the 340B drug program,” Rep. Jason Smith noted.

As the government braced for a Sen. Chuck Schumer-induced (D., N.Y.) shutdown, the House’s Ways and Means Committee exposed how tax exempt hospitals spend American tax dollars.

The hearing, titled Virtue Signaling vs. Vital Services: Where Tax-Exempt Hospitals are Spending Your Tax Dollars, focused on the oft-maligned 340B drug program. Rep. Jason Smith (R., Mo.), the chair of the committee, asked witnesses about how urban hospitals are often “masquerading” as rural facilities in order to get benefits from both Medicare and from the 340B drug program.

“There are a growing number of urban hospitals masquerading as rural facilities in order to get even more generous benefits under the Medicare and the 340B drug program,” Smith remarked. “Benefits that are supposed to go to truly rural hospitals…Regulatory loopholes put the money on the table that these hospitals cannot resist. If Congress does not act, probably very soon, the majority of nonprofit urban hospitals will become duly classified in order to access those urban rural only perks.”

Rep. Greg Murphy (R., N.C.), a urologist who is also the co-chair of the GOP Doctors Caucus, honed in on the almost comedic abuses of funds that 340B hospitals make across the country.

“Why the Hell should anybody have naming rights to a stadium from a non-profit when they’re gonna cry that if Medicaid reform comes down, they have uncompensated care?” Murphy asked. “Tell me how anybody can defend that.”

One of the witnesses, Will Hild, brought the receipts to the hearing. “What I would say is an egregious abuse of their tax-exempt status is spending large amounts of money simply on brand ID, on superfluous Super Bowl ads like we saw from NYU Langone — where they spent ostensibly eight million dollars to simply promote their brand — I think when you have a situation where it’s simply a hospital system polishing their own brand, that is a waste of money and an abuse of the tax-exempt status.”

“I don’t think it can be defended,” Hild is the Executive Director of Consumers’ Research,” said. “Especially at a time when these hospitals don’t provide any price transparency.” “They seem to be acting as if they’ve run out of ways to invest in the provision of care in a better, or more cost-affordable way. If that’s the case, then maybe they don’t need these subsidies.”

The failure to provide price transparency is also something that Hild addressed at the onset of his remarks to the subcommittee.

“This misprioritization of politics over patients distracts hospitals from their core mission and can compromise the quality of treatment and increase costs, which can put consumers in serious physical and financial danger,” Hild said. “At the same time, hospitals are pushing political agendas, many fail to comply with healthcare price transparency rules and a proportional growth in charity care.”

Another problem that the lawmakers focused on is the community benefit standard. Rep. Carol Miller (R., W.Va.) asked Dr. Ge Bai, one of the witnesses, about a study Bai conducted “about the rise in urban hospitals with rural status in Medicare, [which showed] there has been a sharp increase of urban hospitals dually classifying as both rural and urban to access benefits intended for those hospitals serving our rural populations.”

“Your study further showed that ¾ of these dually classified hospitals were non-profit and thus tax exempt,” Miller added. “In your opinion does this growing trend of dual classification lead to truly rural hospitals receiving even less resources to provide community benefits?” she asked.

“Absolutely,” Bai responded. “If Congress does not act to close the loophole, you will see more non-profit hospitals dual classified taking advantage of the status. The result will be a smaller and smaller pool of money for truly rural areas.”

Another witness, Dr. Stanley Goldfarb, is a nephrologist and the chair of Do No Harm. He told lawmakers that “this community benefit needs to be clarified. The DEI enterprise, the gender affirming care, they’ve all been included in this idea of a community benefit… I feel very strongly this needs to be clarified by Congress and the community benefit needs to be outlined more clearly than it is now.”

Goldfarb, who was previously the dean of curriculum at the University of Pennsylvania Medical School, also addressed what he sees as a “profound betrayal of the public mission” by some non-profit hospitals across America.

“Non-profit hospitals enjoy extraordinary privileges under federal law, most notably their tax-exempt status,” he noted. “This taxpayer subsidy, worth billions of dollars each year, is designed to enable hospitals to provide care to the underserved in their communities…But, instead of focusing only on curing disease, expanding access to care and saving lives, too many are also focused on controversial and counterproductive political causes such as DEI and radical gender ideology.”

Goldfarb and Rep. Beth Van Duyne (R., Texas) went back and forth about the community standard, which Van Duyne called an “important piece in determining whether a hospital qualifies for nonprofit status” that has nevertheless “come under scrutiny” in recent years.

“Hospitals need to think very hard about the things that they waste their money on,” he replied. “Creating these DEI enterprises has been a huge problem.”

“We are witnessing hospitals that should be committed only to serving the sick diverting their attention to political activism,” Goldfarb continued. “They are spending millions on DEI bureaucracies and radical ideology interventions when these resources could be put to far better use. They are spending valuable time and organizational resources on these issues. This is a profound betrayal of the public mission.”

Healthcare experts who weren’t the witnesses during the hearing told the Washington Reporter that much of what lawmakers discussed was spot in.

“Non-profit hospitals receive billions in tax breaks and 340B subsidies, yet too many patients face unaffordable bills, medical debt, and limited access to care,” Terry Wilcox, the co-founder and Chief Mission Officer of Patients Rising,” told the Reporter. “Congress must redefine ‘community benefit’ to prioritize charity care and debt relief, mandate real accountability in 340B spending, and tie tax exemptions to measurable patient outcomes. Patients deserve accountability, not virtue signaling.”

Ahead of the hearing itself, PhRMA’s Molly Jenkins addressed some of the “scare tactics” that 340B hospitals use to “evade accountability.”

“Hospitals are using scare tactics to attempt to block the Health Resources and Services Administration’s (HRSA) commonsense 340B rebate model pilot, which simply asks for basic data to help make sure certain key legal requirements are met for ten medicines before receiving the 340B price through a rebate,” Jenkins noted. “Rebate models are a standard practice typically used in other important federal drug programs and the commercial market. Big hospitals have long exploited 340B to line their pockets. In fact, new data from the CBO directly refutes the misleading rhetoric from big hospitals and shows that hospital actions are driving up costs for taxpayers.”