Avalere Health
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Jun 08, 2015

Avalere White Paper: Hospital Acquisitions of Physician Practices and the 340B Program

Avalere recently researched the relationship between hospital participation in the 340B program and the recent trend of hospitals acquiring physician practices.

The 340B program has grown significantly over recent years and this white paper sought to look at one of the possible reasons as to why this might be occurring. The research specifically looked at 4,865 hospitals and their possible acquisitions of all types of physician practices between 2009 and 2013. 

Avalere  found that 61 percent of hospitals in the study that were identified as potentially acquiring physician practices participated in the 340B Program during the analysis timeframe compared to a 45 percent 340B participation rate among all hospitals included in the analysis. There are many reasons why a hospital would decide to acquire a physician practice. These findings do not necessarily mean that the acquisition of physician practices by 340B hospitals is driven solely by the drug discounts available in the 340B Program. The analysis merely indicates that there appear to be differences between 340B and non-340B hospitals with regards to possible physician acquisitions. 

Previous research has shown that hospital acquisitions of physician practices is one way that hospitals can increase their profits from the program. Medicines prescribed by physicians in the acquired practice may become eligible for the 340B discount after the acquisition, allowing the hospital to potentially capture the difference between the 340B discounted price and price paid by the patient’s insurer. When an independent physician provides drug therapy, the claim submitted to the beneficiary’s health plan indicates a physician office as the site of care. When the physician’s office is acquired by a hospital, the hospital will generally bill for this same care by using the hospital outpatient department as the location of care. 

The research also examined the types of patients receiving physician-administered drugs at hospitals identified as potentially acquiring physician practices. Cancer patients represented the largest share (35 percent, on average) of all patients receiving drug administration in an acquisition month. Patients with blood disease were next (19 percent, on average) and lastly patients with musculoskeletal system and connective tissue disease (11 percent, on average). 

The analysis was funded by the Alliance for Integrity and Reform of 340B (AIR 340B). Avalere maintained editorial control over the content of the analysis and release.

Access the full report below.

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