340B Policy Updates & Strategies for Success

Transcript

CHAD MULVANY

On today's episode of Achieving Health, I've got the latest policy and legislative updates from Washington, D.C., for the week of August 18th, 2025. Then, I'll be joined by my colleague Brian Bell, principal in the Healthcare Consulting practice at Forvis Mazars. We'll dive into the 340B drug pricing program, including strategies to get the most out of it, as well as new policies and legislation that could change how the program works. Stay tuned.

ANNOUNCER

This is Achieving Health, a podcast from Forvis Mazars, where we delve into the topics that matter most to healthcare organizations across the continuum of care. Our goal is to help you navigate the dynamic healthcare landscape and achieve health at your organization. Here's your host, Chad Mulvany.

CHAD MULVANY

Welcome to Achieving Health. I'm Chad Mulvany, director in the Healthcare practice at Forvis Mazars. Thank you for joining me today. I'd like to start out with a quick reminder about our OBBBA Tuesdays webinar series, which starts August 26th and continues every other Tuesday through November 4th. We'll dive into the healthcare implications of the One Big Beautiful Bill Act and explore how hospitals and health systems can prepare for Medicaid cuts and the expected increase in the uninsured.

We'll have a link in the show notes where you can register. I hope you'll be able to join us for what will be an insightful series of webinars that will help organizations prepare for these changes. We'll begin today with our Washington Watch segment, where I share updates on the most recent actions of federal policymakers and their anticipated impact on healthcare providers and payers.

Today's Washington Watch reflects information as of noon Eastern Time on Friday, August 15th, 2025. My comments are based on what's being reported by D.C. trade press at the time of the conversation, mixed with a lot of judgment about where things may go, based on my experience in D.C. So today's remarks reflect information as of this moment and will change.

With Congress out for recess, the payment rules released, and the OBBBA rulemaking not yet cranked up, it's been, dare I say, a slow couple weeks in D.C. However, there's still plenty to talk about. As far as our agenda is concerned, I want to touch on the Fed fiscal 2026 funding bill and also the potential extenders that many providers need to see extended.

And we'll really cover here what happens when Congress gets back from summer vacation, as it will quickly need to turn its attention to passing either appropriation bills, a continuing resolution, or some combination of both to prevent a federal government shutdown on October 1st. Along with the funding bill, providers need to monitor D.C. to make sure the extenders they care about ride along with whatever is passed to hopefully keep the government open.

We'll also talk a little bit about the OBBBA’s Rural Health Transformation Program. During an appearance on one of the recent Sunday shows, CMS administrator Dr. Oz mentioned that the applications for the RHTP will be available for states to complete in early September. While it remains to be seen who the individual states will make the funding available to and how they will distribute it, now's probably a good time to provide some high-level thoughts about how to approach this funding opportunity.

We also, from the health insurance side, have seen the administration announce something related towards short-term limited duration insurance. We knew this was coming, but HHS and the Treasury recently announced they were going to revisit the definition of short-term limited duration insurance, which will likely lead to bills individual patients, who do have the coverage, didn't anticipate, and also an increase in uncompensated care.

And speaking of uncompensated care, my friends at HFMA have an article about increasing uncompensated care. Given changes in coverage, this is probably just the beginning of this trend, so providers should take steps now so they can be prepared for it. So with that, let's dive into our agenda.

For 2026 federal government funding, with approximately six weeks to go until the new fiscal year begins, the path to legislation funding the government is unclear. The Senate, before recess, passed three relatively noncontroversial appropriation bills. This package included the Senate's military construction VA, agriculture, and legislative branch bills, three of them comprising about $188 billion of the more than $1.6 trillion in discretionary spending that needs to be approved before the new fiscal year begins on October 1st.

But with the nine other annual spending bills left untouched until at least September and only two bills passed by the House, with approximately four weeks left in the fiscal year when Congress returns, it is likely that a stopgap funding measure will be necessary to avoid a government shutdown. However, this may be easier said than done. Obviously, we have the standard disagreements between political parties over spending levels, policy riders, and other legislative priorities, i.e., a large healthcare package.

But this year, it's a little unique given that Congress, before recess, passed a package of rescissions, slashing spending by approximately $9 billion for public broadcast and foreign aid. And this was done in a party line vote in both the House and Senate in July. This was funding that was included in the 2025 continuing resolution, and part of a bipartisan agreement that was subsequently rescinded.

As a result of this, I would say that trust between the parties is low. Further, Punchbowl, a news outlet that covers D.C., reports that the White House is considering submitting a second rescission package to the Hill, which, if submitted, it believes would increase the odds of a shutdown. Look, the ability to handicap a shutdown is well beyond my abilities. However, important to remember that if there is a shutdown, Medicare funding is mandatory spending, so payments to providers will continue to flow.

However, the extenders, which generally have enjoyed bipartisan support, may expire. The ones to watch would include: the Medicare Dependent Hospital Program, the Medicare Low-Volume Adjustment program, the COVID-era Telehealth waivers, Medicare Hospital at Home program, and the Medicare Rural Ambulance add-on, as well as a further delay of the ACA Medicaid DSH cuts. You know, I think it's more likely than not that the Medicare Dependent Hospital Program, Low-Volume Adjustment, the Telehealth waivers, the Hospital at Home program, and the Rural Ambulance add-on get extended if there is a shutdown whenever there is a 2026 funding bill that is passed.

However, I am less certain about a further delay of the first $8 billion in ACA Medicaid DSH cuts that are scheduled to take effect on October 1st of 2025 given fiscal conservatives concern about the deficit. So, I think that is a place in particular that it will be worth watching, and for those concerned about it to have continuing conversations with your congressional representatives.

Moving on to the Rural Health Transformation Program, OBBBA, as many are aware, creates a Rural Stabilization fund with $50 billion. This is to be paid out as $10 billion annually across Fed fiscal years 2026 through 2030. States can submit a one-time application for their share of the funds.

CMS Administrator Dr. Oz has said the application will be available to states in early September. In this application, states will need to outline a detailed rural health transformation plan. And just to clarify, the funding is only available to the 50 states. If you assume that all 50 states apply and are accepted, the way the legislation is written or the statute is written, half of the $10 billion in any given year is distributed evenly, so each state would get a $100 million. Again, assuming everybody applies, everybody gets accepted.

The other half is allocated based on a statutory formula that includes the percentage of the state's population that is rural, the percentage of rural providers, as defined in statute in a state, relative to the national total, the quote unquote “situation” of Medicaid DSH hospitals in the state, and other factors CMS thinks is appropriate.

From there, once a state is approved and receives the funding, it's going to be up to the states to decide how to spend the money and who gets it. The statute includes a list of potential uses, and I'm going to shorthand many of these because reading long lists isn't the most compelling podcast. At least that's what they tell me.

So the uses include: prevent and manage chronic disease, increase provider payments, adopt technologies to improve care delivery, recruit clinicians to rural communities, right-size rural delivery systems, support access to substance use disorder treatment, encourage innovative care models, and other uses aligned with the program's goals, as determined by the CMS administrator. A state has to choose at least three of these activities. So, there’ll kinda be a menu of options regardless of how the state applies.

While there has been a lot of interest in this fund from providers, I would suggest, at the risk of stating the obvious, considering this as a part of an OBBBA response slash sustainable strategy, not the whole strategy, and I'd suggest this for a couple of reasons.

First, while $50 billion over five years is certainly a significant investment in rural healthcare, the Kaiser Family Foundation projects that rural areas will lose $137 billion in federal Medicaid funding over ten years. That's approximately 37% of the estimated reduction in Medicaid funding. So you know, what's coming back isn't enough to sort of fill the hole of what's going out.

While the statute defines rural healthcare providers for purposes of the variable allocation, it does not specify which providers are eligible for the funding, nor how states should allocate it. And even, again, want to just be clear, that states aren't guaranteed by statute the funding. Further, the CMS administrator, Dr. Oz, has reportedly told several members of Congress that non-rural areas could also obtain funds from the RHTP.

Therefore, it's possible that who receives funding may be broader than the list of providers that's used to allocate the fund and will be left, or could be left, to the states to determine, or future CMS guides. And the other thing to remember is it may include non-providers or come with requirements to spend money on specific technologies or services, in essence, acting as a pass-through to a non-healthcare entity.

Further, while one of the permissible uses of the funds is to provide payments to providers, it seems unlikely that a state would use the majority of these dollars to specifically account for lost Medicaid revenue. Reason why I say this is the funding is time-limited, right? The pool should be expended by 2030 while Congress may, or future Congress may, provide more funding.

I'm not sure if I were a state legislator, a state governor, or a health system executive that I would count on Congress providing that money. So, if states provide revenue support without requiring some type of significant rural delivery system structural transformation, the state would need to find additional funding in 2031 if Congress doesn't re-up it. So, it's going to put the state in a bit of an odd spot.

When you think about the fund, instead of kind of thinking about it as a backfill for Medicaid revenue, given the parameters of the transformation plan required in the application and the allowable uses of the funds, it is likely that the states will require the dollars to be invested by recipients in specific interventions that improve outcomes or improve the efficiency of care delivery. And these are things that will likely just need seed funding, but not ongoing support.

So, as a provider who may be interested in eventually applying to a state for these funds, I think the counsel that I would offer is: revisit your strategic plans. I would first look at the statute, what the statute requires states to include in its Rural Health Transformation Plan.

I would look at the intended uses. I would even think about what CMS administrator Dr. Oz has said about his interests. And then I'd look at your strategic plan and sort of draw, you know, whatever the center of that Venn diagram is probably the short list of things where you might want to throw your hat into the ring for funding and could make a pretty strong argument as to why you need those funds. I would also sort of think about it in terms of an evolving process.

Obviously, there is a lot of uncertainty right now. Some of this will become clarified when we see the application to states. It will become even clearer when states submit applications. And so, kind of start thinking about now what your rationale is for the funding. Refine that argument and refine any financial argument that you might have as to what the ROI to the state would be for investments, as you better understand what CMS wants the states to do with it and the state would like to do with it. There may also be integration opportunities.

One required element of a state's Rural Health Transformation Plan focuses on strengthening local and regional strategic partnerships between rural hospitals and other healthcare providers. So, there may be opportunities to use the funds to support partnerships related to innovative care delivery models. And this could include expanding value-based care.

States may choose to use RHTP funds to implement or deploy value-based care models in rural areas that will improve outcomes and reduce the total cost of care. So, I think providers as you think about that and that's something that you're interested in, you should start to evaluate potential partners and risk-based models, as well as the data and infrastructure necessary to succeed if a state chooses to use the funding for this purpose.

Moving on to Short-Term Limited Duration Insurance. HHS, the Treasury announced on August 7th that they were planning rulemaking to reconsider the definition of STLDI until the new rules are finalized. However, the departments have said that they will not prioritize enforcement actions against insurers that do not fully comply with the 2024 definition, including related notice requirements.

Regulations expanding the availability of Short-Term Limited Duration Insurance were issued during the first Trump administration as an alternative to plans offered on the health insurance exchanges and small group markets. Subsequently, the Biden administration limited availability of these plans and narrowed the definition of them.

So, expanding access to these plans may leave individuals underinsured and unaware they're underinsured. While these plans typically market themselves as a cheaper alternative to comprehensive coverage like what is available on the exchange, they typically also only pay a fixed dollar amount of coverage per day for hospitalization that's insufficient to cover the cost. If these plans are expanded, hospitals in particular will need to monitor their penetration into the markets they serve and also adjust financial assistance policies and self-pay account resolution strategies accordingly.

On a related note, I mentioned earlier HFMA’s article about uncompensated care. The article notes that full-year charity care deductions for hospitals with more than 200 beds surged more than 30% from 2022 to 2024. And bad debt rose 18% during the same period. The increase came even as hospitals waited to write off medical debt longer. The rise in bad debt and charity care is in part fueled by higher rates of denials and an uptick in ED visits from uninsured and underinsured individuals.

And so, one of the things to think about is if you assume the enhanced exchange subsidies will expire at the end of the year, and this is particularly true for non-expansion states, and the OBBBA work requirements and more frequent eligibility redeterminations go into effect in 2027, the uninsured, or the uncompensated care and bad debt numbers will increase further.

The exchange subsidies have led to record high enrollment in the ACA marketplaces. Since 2020, the year before the enhanced subsidies went into effect, the number of people with ACA coverage has grown by 88% from 11.4 to 21.4 million. All the growth in the marketplace, and over the last four years, has really been a result of those enhanced advance premium tax credits. Subsidized enrollments up approximately 106% from 9.6 million in 2020, to 19.7 million in 2024.

Further, the enhanced subsidies have cut premium payments by an estimated 44% for enrollees receiving premium tax credits. If the subsidies expire, most marketplace enrollees will see premium payments increase substantially. And already we're seeing from rate filings that plan premiums will increase substantially because Congress has essentially waited too long to possibly take up legislation that will extend those subsidies.

The changes to Medicaid and exchange eligibility and OBBBA are projected to increase the uninsured by over 10 million individuals by 2034. Most of the impact will occur through work requirements for adults aged 19 to 64, and increased eligibility redetermination for individuals enrolled through the expansion pathway. These two provisions alone are expected to reduce Medicaid spending by almost $400 billion over 10 years.

Implications for providers is that they really need to start planning and preparing for increased self-pay collections and uncompensated care now. I think first, providers need to revisit their financial assistance policies, and this is particularly true for tax-exempt organizations to make sure they continue to meet the needs of their community in light of anticipated coverage losses. Second, I think most organizations are using presumptive eligibility tools to determine who is eligible for financial assistance.

But if you're not, it's probably a good time to start. Third, in non-emergent situations where the patient is not eligible for financial assistance, providers need to improve upfront cash collections prior to service, revisit policies that define non-emergent care, and determine when it's appropriate to require full or partial payment in advance of service, and certainly start thinking about partnerships that can help with the financing of services at the point of care.

Further, beyond revisiting financial assistance policies, tax-exempt organizations should take other steps to protect their status, like review efforts to capture all community benefit expenses on the 990 and amplify efforts to educate stakeholders on the value that tax-exempt organizations provide. This concludes today's Washington Watch. Up next, I'll be joined by Brian Bell for a conversation about 340B.

I'd like to welcome our guest for today's episode, Brian Bell. Brian is a principal in the Healthcare Consulting practice at Forvis Mazars. He focuses on helping clients identify and implement operational efficiencies, cost-reduction opportunities, and revenue-generating strategies related to the 340B program and pharmacy. Brian, thanks for joining us today.

BRIAN BELL

Hi, Chad. Yeah, I appreciate the opportunity to speak with you and the healthcare community today, and as you said, I've dedicated my entire career to the healthcare organizations across the country. I've been doing this for more than 20 years. And really have focused in on, kind of, a number of areas across the healthcare spectrum from strategic reimbursement, revenue cycle, provider-based clinics, margin improvement, and, of course, 340B and pharmacy. And truly my passion and I wake up every day and enjoy the opportunity to work with organizations across the country.

CHAD MULVANY

And thinking about kind of what you just summarized as your background, it almost sounds like that, you know, the career path took you there, and it's certainly an important program, particularly given the financial challenges that covered entities and other hospitals and providers are facing. Can you share a little bit more about your background as to how you came to the field?

BRIAN BELL

Yeah, absolutely. And you know, when I started, you know, going to college and really kind of thinking through what I wanted to do, I really wanted to make a difference. And I think I focused in on healthcare from day one in college and, you know, worked at a hospital through my internships and then ultimately started in consulting, I was at a large international firm, went to a very small regional firm and then ultimately ended up at Forvis Mazars.

But I think when I was trying to figure out, what do I want to be when I grow up, it was truly, I wanted to try to help make a difference and that's really why I focused in on healthcare, kind of, for my entire career. And then I think 340B and pharmacy is a really special place because 340B means so much to the covered entities that have the ability to participate in the program.

And really, without it, and I know we're going to spend a lot of time talking about this, without it there’d be a lot of, kind of, differences in the access and the quality of care that we receive, you know, as patients on a day-to-day basis across the country.

CHAD MULVANY

No, I think I think you're spot on. And just a couple of things that you said really resonated with me. One, I think that wanting to make a difference has certainly been one of the key themes that we've heard so far amongst all of our guests. You know, there are a lot of things that all of us could be doing, but we're all in healthcare because we want to improve the lives of individuals in our community to help them achieve optimal health.

And you know, when you think about the 340B program in general, you know, it's such a key program for ensuring access in the most disadvantaged of communities in our areas. And that's why I think it's just such a vitally important program to ensure that there is equitable access to high-quality healthcare. You know, Brian, there's a lot going on in the 340B space, so what are the things that you're monitoring, whether it's regulatory, litigation, legislation, that you think our listeners should be following as it relates to 340B?

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BRIAN BELL

Yeah, absolutely. And to say there's a lot of things is kind of an understatement. So, we're closely monitoring a lot of things in this space. The rebate model, or the pilot rebate model, is top of mind for a lot of covered entities around the country. We're also monitoring future federal legislation that could lead to significant reform of the program, or keep the program closer to kind of how it operates today.

But we know that there's a lot of debate in D.C. over kind of what the 340B program should look like in the future. In addition to some of that 340B federal legislation, we're also actively monitoring some of the OPPS reimbursement changes as well as potential site-neutrality changes. These could be significant.

In addition to the federal side, also really keeping a close eye on the state laws that are impacting covered entities in a positive way. There's also a number of reporting laws, and then a lot of litigation. So, both at the federal and state level. And then, kind of throw in the One Big Beautiful Bill and the potential impact on Medicaid. These have really kept us busy.

CHAD MULVANY

Yeah. Because, I mean, we're seeing a lot of organizations having to watch their DPP closely just given the redeterminations post-COVID. So, you start to throw in changes as a result of the work requirements. The more frequent eligibility determinations for the expansion population starts to put pressure on that, downward pressure, again on that DPP, potentially.

You know, let's dive a little deeper into the couple of the things that you mentioned. And maybe we'll start with the rebate model. You know, we covered it in depth last episode, but just for those who didn't have a chance to listen, to kind of get everybody up to speed so we're all on the same page.

On July 31st, HRSA released its guidance around the pilot rebate model. And it, you know, the good news is it's a relatively narrow pilot that's focused on 10 drugs that are subject to the Medicare drug price negotiations for 2026. And those are all Part D drugs so the impact is mostly going to be felt through community or contract pharmacies.

The model is structured for a minimum of one year. And the important thing to note about this is that HRSA’s notice states that HRSA may allow for an expansion of the rebate model based on an assessment of the program. And the key here for what the model is intended to address is manufacturer concerns around duplication of the 340B rebate and the Inflation Reduction Act maximum fair price.

In terms of timing, HRSA is going to approve applications for a January 1st, 2026 start date by October 15th. And it is requiring that manufacturers approved provide at least 60 calendar days notice to covered entities before implementation. There are a handful of data elements. It's a limited handful that covered entities will be required to submit, and in theory, manufacturers will be required to pay or deny the rebate within 10 days. So, just kind of with that background, what should covered entities be doing to prepare for this?

BRIAN BELL

To start, I was a little bit surpriserd when this came out because it felt like HHS and HRSA had really kind of stated that they weren't supportive of changing, kind of, the program from a front-end cost savings program to a back-end rebate model. I think they received some pressure as far as kind of their approach to this.

And that's why this is a pilot. But to your point, Chad, while I was a little surprised, this could be a lot worse. And so fortunately, the pilot’s limited to the NDCs included in the IRA, and it's a limited number of manufacturers. It’d have truly been devastating if it was all NDCs, all manufacturers, so it could have been worse.

I have a lot of concerns. The current model, the way we think about the way our retail pharmacies, contract pharmacies receive drugs and the way this purchasing occurs, the current model doesn't really work for a rebate model because of the way this purchasing set up. For non-340B, when we think about the contract pharmacies, they’re going to purchase on that non-340B account, and we need to figure out how that's going to work in the future.

So, this is going to be a big process change that requires a potential utilization of an entirely different purchasing model. The other side of this is resources and vendor management, and these are really going to be critical components of how we're successful in a rebate model world.

So, covered entities are going to really need to rely on their vendors for good data to meet those reporting requirements that you mentioned. And then from a resource perspective, internally, entities are going to need resources. We're going to have to be able to submit the claims. And then there's going to have to be a team that's built out to follow up.

So, similar to payer denials, I'd expect that these rebates are going to be difficult to claim. And those denied rebates are going to require follow up, which is already going to hurt a resource-strained entity even more. So, there's a lot of work to be done. And when we think about, you know, kind of receiving which manufacturers are gonna move forward, you know. And in mid-October, we can't wait until then to get our process set up.

So, we're gonna have to start now to get it set up, because recovery of that rebate, it's going to be difficult. We're going to have to focus on resources, technology, and process. And like I said, we have to start today. And I think lastly, on the rebate model, while I do expect that there will be potential litigation, I think that litigation will start after the model's already implemented because we've learned that from past cases where we're gonna have to show the harm.

We can't predict harm in order to file a case, so I think organizations have a short road ahead with a lot of work to do in order to get prepared for the model.

CHAD MULVANY

Yeah. And, you know, Brian, you raised an important point about litigation. One: yes, we'll have to wait to show the harm. But two: you know, one might say, okay, I'll wait. But then you're also betting that a court will stay the model while the case is heard. And that's a pretty risky bet, I think. And, you know, one of the things that you touched on in terms of implementing and, you know, I like the analogy that you made from a process standpoint.

As you set this up, I think, kind of like the revenue cycle, you have to start tracking certain performance metrics around this, by manufacturer, to not only understand your performance, but because this is a pilot, in theory, that HRSA is going to evaluate before it expands. You need to be able to provide HRSA, your state legislator, your federal legislators, folks at CMS, other entities, a picture of how this is impacting your organization.

And to me, some of the things that I would want to track and set up the infrastructure to automate to track is by manufacturer timely processing. So, how many of the manufacturers are either paying a rebate or denying it within 10 days? Denial rates, you know, your manufacturer denial rate by claims count, dollar value, percentage of both dollars and claims, administrative expense, how much you're spending on staffing, legal, IT and other support costs.

Because one of the things that the notice says is that, you know, covered entities should not bear cost for this model. It's possible that they may have underappreciated the people, process, and technology that you'll have to put into place to succeed under this and to capture those rebates. You also mentioned some developments from the OPPS proposed rule.

What are your thoughts on the proposed drug pricing survey and what should providers know as they respond?

BRIAN BELL

Yeah, I think if you think back to the previous OPPS reimbursement reduction for 340B from 2018 through 2022, the courts ruled in favor of the covered entities because they stated the federal government had not completed that survey to determine the actual, you know, kind of needs for the reimbursement cut. So, I think this sets it up where we are probably going to land on some cuts.

I think back to the OPPS remedy, though. You know, it provided all of those dollars back in the form of lump sum. I think the one thing I wanted to kind of call out to the audience is there are also a lot of organizations focused on the recoupment of some of the Medicare Advantage reductions from ‘18 through ‘22.

So, I think it becomes more and more important to kind of hyper-focus in on that as we kind of move into this next round of reductions but kind of fast forward to the current proposed survey. This is the first step in reduction or reimbursement for future 340B Part B drugs. When we look at the previous reduction, we were at ASP -22.5%. So that was from ASP plus 6%. So, a 28.5% reduction. And in that ASP plus 6% is where we currently sit. You know, I really would expect similar reductions where we're probably going to be in that 28.5% plus range and really need to prepare for this.

So, one, if we're budgeting for the future, we need to prepare for a reduction for our separately payable drugs. We also have to start to focus on our process because, typically, as we reduce these drugs, it's dependent on a modifier, and we really want to be effective in our process and how we're applying that modifier because of the reduction. You know, from a survey perspective, it'll be interesting to see what the response rate will be.

You know, if you think back to when the government previously tried to kind of do a survey the, you know, public health emergency hit, the response rate was low, and we kind of didn't move forward with that. So, this is a big deal.

I think as we think about reimbursement of future costs going up, a rebate model, all these different things coming at us, this is just one more thing that we have be laser focused in on to make sure that, you know, we're preparing for it. And then ultimately also looking at how do we fill that gap, whether it's, you know, new services, lowering costs, etc., to kind of fill the gap for future reimbursement cuts?

CHAD MULVANY

Yeah, I know those are those are all great points. And, you know, to your point about low response rate: in the OPPS proposed rules, CMS does spend a lot of time discussing that response rate. And it almost seems like they are anticipating another low response rate, although I think most of that was due to the, as you noted, public health emergency, because in the spring of 2020, I feel like we were all working 16 hours a day doing something else at least.

And so, like they've talked about, well, you know, if you don't respond, we may take this as an indication that your separately payable drug price or costs are de minimis and we may start to look into more packaging. Or, if you don't respond specifically to the survey so that we can get a statistically valid picture, we may just assume again that your drug prices for separately payable drugs are de minimis.

And so, however they want to sort of segment the different hospitals that respond, we may just assume that for whatever segment we assign you, you've got that, we’ll put you in the lowest cost quartile or decile however they want to do it. And you know that if they were to do that strategy would obviously put downward pressure, I think, very artificially on whatever the proposed discount will ultimately end up being in the 2027 proposed OPPS rule, which is the timeline that they laid out.

You know, you also make an important point about starting to prepare now for this cut, because they've telegraphed that it is coming. And I think you're spot on, you know, looking at new services, looking for cost savings opportunities, but also understanding that if they do this again, or when they do this again, it will, like the last time, very likely be done on a budget neutral manner.

So, it's going to shift money around the OPPS system and create winners and losers. But I do think that you can't automatically assume that just because you won last time, you'll win again because your service mix may have changed. Something may have happened differently. So, I do think you have to plan on taking a haircut and preparing for that haircut appropriately.

BRIAN BELL

I think the last thing, you know, in addition to kind of the proposed rule regarding the 340B reimbursement is the acceleration of the recoupment of the OPPS remedy. I think there's not, you know, a lot we can do at that recoupment. It is going to, you know, go from a half percent to 2%.

And I think just assessing this to kind of understand what it will do for payments, it will be a change for non-drug services. And, I think the biggest thing that I'm hearing from clients is there's all of these things coming at us, whether it's the change in reimbursement, whether it's the recoupment of the prior OPPS remedy, the IRA, rebates, etc.

I think as we think about all this, a lot of organizations are just going through that process of saying, okay, run me the 10 what-if scenarios that we can do our kind of diligence to figure out which path we should go, depending on which, you know, item moves forward. And I think just focusing in on the data and running those what-if scenarios, whether you're working with consulting group or whether you're doing this internally, I think it's just going to be really, really important to understand. While we don't have a crystal ball, kind of creating your own crystal ball so at least you know the outcome if x, y, or z hits.

CHAD MULVANY

Yeah. No, I think that's exactly right. You know, the other thing that I would add in this is, as you look at, because of the recoupment, the conversion factor, you know, the post-recoupment conversion factor nationally is barely over the 2025 conversion factor. So out of the gate before you start to apply any state-specific or hospital-specific budget neutrality adjustments, you could end up with a negative increase to the conversion factor, depending on who you are, where you are. And that's going to be tough.

What advice would you give 340B covered entities when it comes to telling their story? Obviously, there's been a lot of scrutiny over the program from legislators, the manufacturers tend to aggressively assert that there is abuse of the program based off of sort of cherry-picked anecdotes. So how do you, how do covered entities help combat this sort of misinformation campaign?

BRIAN BELL

Yeah. And this is really, really important to get right. It's going to be crucial to highlight how essential the 340B program is for expanding care and providing top-quality services to vulnerable populations. And kind of going back to the initial regulation, and what were the goals of the 340B program? It's going to be really important to tell that story.

And, you know, when I think about most of the covered entities I work with, the 340B savings aren’t going straight to the bottom line. You know, we hear that a lot where we're just, you know, padding out the bottom line with these savings. But at the end of the day, a lot of the covered entities, or most of the covered entities, are just trying to maintain slim margins, and they're trying to avoid cutting services and cutting staff. And really knowing and showing how you use these savings is really important, especially because they cover uncompensated care underpayments. And we need to really have the ability to show those things and say, okay, yes, here's what our savings were, but this is how we used our savings. And when we think about 340B savings, it truly enables covered entities to offer services like infusion, cancer treatments locally, which might be otherwise unavailable.

You know, during this past year, my mom received cancer treatment at her local hospital because that hospital participates in 340B. Otherwise she would have had to drive, you know, an hour, at least, each way, and I think that's the story in a lot of communities. In rural communities, 340B provides the means for those patients to receive care at home.

And I think we have to effectively, you know, convey this impact to the communities and legislators, kind of demonstrating that 340B savings help expand those services and stretch the scarce federal resources, and I think telling our story has been pivotal in the states that have passed state legislation. It's because the covered entities and the associations in those states have been able to tell their story effectively, in order to make a difference.

CHAD MULVANY

I think that's right. And I think you hit on something important there with the example that you gave with your mother. You know, it's a combination of having ... being able to humanize the data that you're sharing and the impact, because no one should have to drive an hour after getting cancer treatment ... either to or from. Much less, and then you start to get into questions of, you know, your mother obviously could afford, could have afforded it if she needed it, but a lot of people can't, and so they would end up having to forego therapy.

Let's talk about the One Big Beautiful Bill Act and its changes to Medicaid eligibility enrollment. How could these changes impact organizations’ ability to either become or remain 340B eligible?

BRIAN BELL

This is a concern that a lot of organizations across the country are working on, or at least thinking through, especially when many hospitals are already struggling to qualify for 340B based on their shrinking DSH percentage. There's been a lot of challenges with maintaining Medicaid days, increase total days, and declining SSI percentages. So, when we think about increasing requirements for Medicaid, that this could ultimately increase the likelihood that some covered entities will lose the ability to participate if their Medicaid days continue to go down.

And as we add requirements, and I think we've seen some statistics that the number of Medicaid patients will decrease with new requirements. So, I think these eligibility changes will have a significant impact on qualifying for 340B and ultimately also lead to an increase in uncompensated care. Which on the other side, this expands the need for 340B and then I think, take the cost side and the 340B side out of it.

It will also impact quality. So, a lot of these patients, you know, to your point around, some patients have the ability to, you know, pay for the care, get to their care. But, quality will be impacted if more patients are uninsured and don't have the ability to seek out that care that they need.

CHAD MULVANY

Yeah. No, I think that's right. And honestly, so, right underneath the rebate model in terms of things related to 340B that keep me up at night is the OBBA Medicaid cuts because, while there aren't 340B provisions in the bill, the Medicaid cuts are such that it does have a pretty direct impact on 340B access.

And I think that's something that, as you think about those, the Medicaid cuts rolling through first, in terms of what happens with provider taxes and state-directed payments, and then also on the uncompensated care side, that really, to your point, just heightens the need for that discount. So, I think that's going to be a challenge that hospitals are going to have to work through.

If you were one of those hospitals on the bubble, what would you do to focus on improving identification of Medicaid eligible days? And what else can these hospitals do to help preserve their 340B status?

BRIAN BELL

In addition to scrubbing data, you know, to improve Medicaid days, and that's how I started out my career, I did a lot of those DSH reviews, and organizations across the country are doing those. But in addition to that, in order to improve their likelihood to maintain 340B status, hospitals are really focused in on what else can we do.

And in some of these areas include converting behavioral health units from exempt units to being included in those Medicaid days, working in the community to, you know, treat those Medicaid patients, whether it's within behavioral health or otherwise. And also reducing their total days by focusing in on long length-of-stays. Just developing a strategic way to reduce those length-of-stays around sound processes. And also by utilizing, you know, swing beds and skilled nursing facilities or rehab facilities to ultimately give the patients the care they need, but potentially not in that hospital setting.

And we've seen that since, really, the start of, you know, the public health emergency where we have a lot of these longer length-of-stays and typically those longer length-of-stays aren't our Medicaid patients. So when we think about the DSH calculation, that's why we continue to see that decline in DSH percentage, which is leading to organizations falling out of the 340B program.

CHAD MULVANY

Given the margin challenges many organizations are facing, what strategies have you seen covered entities use to grow their programs and to capture additional savings?

BRIAN BELL

So, organizations are doing everything they can to compliantly grow their 340B program. So, they're focusing in on entity-owned retail and specialty pharmacy capabilities. This is an area that has not been a focus of the manufacturer restrictions. This expansion also provides the ability to provide high-quality care, financial assistance to our patients. And like I said, avoid some of the contract dispensing fees as well as the restrictions.

Organizations are also focused in on reducing the impact of the manufacture restrictions, whether it's through alternative models, submitting claims data or a combination of approaches to compact these manufacture restrictions.

They're also really focused on provider-based clinics for the increased reimbursement, but I think more importantly a 340B eligibility. So historically, if we've had clinics that aren't 340B eligible, how do we make those eligible put them on a reimbursable line so that they're eligible for 340B?

They're also focused in on other services. And a lot of these services are provided by pharmacists and really allowing pharmacists to operate at the top of their license, whether they're around, you know, more traditional pharmacy, pharmacist-led services, whether it's around vaccines, specialty care, medication, therapy management. They're really going all-in in order to not only expand 340B, but also really focus in on how do we continue to expand quality.

And then lastly, looking at referrals and, you know, part of the 340B regulation allows us to capture closed loop referrals and doing that in a compliant way. So, I think that's going to be really, really important, and it's part of kind of all these different pieces around medication therapy management and making sure that we're expanding 340B in a compliant way is how do we capture everything within the confines of the patient definition.

CHAD MULVANY

I think that's great advice and sort of great thoughts on terms of strategies. You know, we've talked a little bit about contract pharmacy restrictions and you alluded to it a little bit. And we've certainly seen a lot of states, particularly this state legislative cycle, or year, pass more laws to address the contract pharmacy restrictions. And I anticipate we'll see more of that, you know, in the coming legislative year. But for those states that haven't enacted legislation, what strategies can covered entities use to address the restrictions?

BRIAN BELL

In the states that haven’t enacted legislation, I would start by, you know, and when I say I, that means all of the covered entities in the state, by putting pressure on your legislators to pass state law. In the states that have passed laws, these laws are effective, they're defensive, and they're being followed by most of the drug manufacturers.

I talked a little bit about the Arkansas law, but this is a law that went all the way to the Supreme Court. And ultimately the Supreme Court came back and said, yes, as a state, you can build out these laws to protect your covered entities. Working with your hospital associations and other trade organizations is critical. When I think about the laws that have passed, it's been due to kind of the diligent effort of these associations to work with legislators and push these laws to the finish line, and really, tell the story of what it means when we don't have the contract pharmacies. It's not an easy challenge, but I think I would kind of challenge everyone that it's worth your time and your effort.

For those states that have law, we're back to 2020 or pre-2020 340B savings. And there's many groups that are spending their time and money and efforts to give 340B a bad name. And we've seen the headlines, we've seen all of those different things that are happening. So, in order to combat those, we must do everything within our power in order to tell our story and really combat some of those anti-340B ads in order to protect the program.

CHAD MULVANY

You know, just want to pick up on two threads from what you said. One, just want to tip the cap to Arkansas, because I do think that that Supreme Court case was the thing that sort of emboldened other states to try, because my sense was a lot of other states were kind of sitting on the fence waiting to see what would happen with the legal challenge, and then once it cleared, they felt more comfortable moving forward.

The other piece, and you're right, there is, again, a lot of money being spent by manufacturers to try to portray the program in a certain light or what the program does. And those messages thus far in many states have not resonated because of that persistent sort of effort that the hospitals, the covered entities, their associations have made. But I do think you need to kind of put your back into it, because these are well-funded groups. So, no, great points, great points.

And then what other challenges or covered entities facing related to the 340B program?

BRIAN BELL

You know, the one thing that we see in pharmacy every day, and really across the healthcare spectrum is: organizations are doing more with less. So, this is a huge challenge for organizations. And when we think about if 340B is reduced or if additional requirements are added, it's only gonna further this issue.

The manufacturer restrictions have been devastating for covered entities and they've required a lot of extra work. Not only just to work to pass the state law, but to work through the restrictions, meet the ever-changing requirements, and keeping up with those requirements. There's also been a number of challenges for organizations as disease states change and drugs go from branded to generic along with some of the manufacturer financial assistance plans, including rebates. And this has been a huge hit for some of the federal grantees across the country that have focused in on a particular disease state.

The drug goes from brand to generic, and then some of the financial assistance goes away. 340B covered entities are also operating in an environment where we don't have a clear future for cost and reimbursement. And, you know, it's hard to plan when we don't have kind of that clear path. So, I think that's another area where, it's a huge challenge to say we don't necessarily know what our cost and our reimbursement will be, I was going to say in 2026, but I'm not sure we know by the end of 2025 what those things will look like.

So really focusing in on these challenges is taking up a lot of time. It's also taking up a lot of efforts, but it's really, really important to spend those time and efforts in order to, kind of, face these challenges that are continuing to grow and continuing to move forward.

CHAD MULVANY

Thank you for sharing that. If you could leave our listeners with one takeaway related to the 340B program, what would it be?

BRIAN BELL

And I think it's back to one of our initial kind of conversation points. And it's knowing your story. So, knowing your story, telling your story, and advocating for your organization and 340B program. Resource demands are difficult. I think finding trusted advisors that will help you meet organizational goals is really, really important.

And then I think also taking time to sit back and celebrate some of the good, you know, and not forgetting about all of the good that your organization does in your communities. There are days that are difficult, margins are tight, but each and every day health organizations are making a difference. And, you know, for me, I'm thankful for the access and the quality of the care that is available to me and my family each and every day. So I think it's really, really important to, yeah, we have a lot of challenges right now, but really focusing in on, and celebrating, some of the success as well.

CHAD MULVANY

Brian. Thank you. I think that's fantastic. And I like the way that we've sort of brought it full circle back to the impact on the community and making sure that we can help individuals and communities achieve health. Brian, thanks again for joining me today and sharing your insights. And thank you to all our listeners for tuning in.

If you'd like to learn more about 340B strategies and policies, we have links to some of our related content in the show notes. I hope you'll join me in two weeks for the next episode of Achieving Health.

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