Assessing the Impact of 340B and the Carve Out on New York's Federally Qualified Health Centers

Yvette Ng

doi:10.36648/2572-5483.8.2.186

Assessing the Impact of 340B and the Carve Out on New York's Federally Qualified Health Centers

Yvette Ng^1,2*, Jacqueline M Chiofalo^1,2 and Sean J Haley¹

¹Department of Health Policy and Management, City University of New York’s Graduate School of Public Health and Health Policy, New York, USA

²Department of Community Health and Social Sciences, City University of New York’s Graduate School of Public Health and Health Policy, New York, USA

*Corresponding Author:: Yvette Ng
Department of Health Policy and Management,
City University of New York’s Graduate School of Public Health and Health Policy, New York,
USA,
E-mail: Yvetteng80@sphmail.cuny.edu

Received date: February 16, 2023, Manuscript No. IPJPM-23-15918; Editor assigned date: February 20, 2023, PreQC No. IPJPM-23-15918 (PQ); Reviewed date: March 06, 2023, QC No. IPJPM-23-15918; Revised date: March 13, 2023, Manuscript No. IPJPM-23-15918 (R); Published date: March 27, 2023, DOI: 10.36648/2572-5483.8.3.186

Citation: Yvette Ng, Chiofalo JM, Haley SJ (2023) Assessing the Impact of 340B and the Carve Out on New York’s Federally Qualified Health Centers. J Prev Med Vol.8 No.3:186

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Abstract

Federally Qualified Health Centers (FQHCs) are a critical component of the healthcare safety net in the United States, largely serving people who are lower income and often uninsured. An important source of revenue for FQHCs comes from their participation in the Federal 340B drug program, which provides discounts on drug costs. On April 1st, 2023, FQHCs in New York will lose 340B funds due to a proposed change that will transition the prescription drug benefit away from Medicaid managed care plans. This loss has the potential to negatively impact health equity efforts in New York.

Keywords

Health centers; Healthcare safety; Health measures; Preventative services

Introduction

Federally Qualified Health Centers (FQHCs) are not-for-profit community-based healthcare centers that provide integrated primary care services to underserved populations. FQHCs play an important role in the safety net system, by caring for all patients regardless of their ability to pay [1]. The National Association of Community Health Centers (NACHC) states that patients treated at FQHCs have improved outcomes in certain health measures (e.g., hypertension and diabetes control), have higher rates of preventative services (e.g., mammograms, colorectal screening) and receive more education to help control/manage their conditions (e.g., asthma) than national averages [2]. NACHC also reports that this is accomplished while being more cost-efficient than private practices and outpatient clinics; Medicaid patients served by FQHCs have 24% lower cost overall compared to patients receiving primary care at other settings. FQHCs place a strong emphasis on providing nonclinical services and social support programs including transportation, health education programs and connecting patients to government programs for which they are eligible (e.g., health insurance, food assistance). These services address social determinants of health and play an important role in improving access to care and health outcomes [3]. FQHCs rely on revenue from Medicaid and federal grants to support their operations [4]. Still, FQHCs have historically struggled to secure enough financing; a national survey conducted in 2019 indicated that increasing operating costs were a top challenge in over half of those surveyed [5]. While some federal grant funding has increased since 2010 (specially, funding from the Community Health Center Fund), the rate of increase has not kept pace with need. There were approximately 1,100 FQHC organizations operating nearly 7,000 sites serving approximately 19.5 million patients in 2010 compared to almost 1,400 organizations with 13,500 sites serving nearly 29 million patients in 2020 [2]. In addition to more locations and patients served, the breadth of services has evolved to meet communities’ needs. Each time a public health issue emerges, FQHCs bear the additional responsibilities of addressing the crisis in medically underserved communities. In the backdrop of the opioid epidemic, FQHCs are increasingly offering substance use disorder services which have been shown to help reduce opioid related mortality [6,7]. FQHCs played a crucial role during the COVID-19 pandemic in helping to manage and control spread of disease, first with testing (with 90% of FQHCs providing testing by May 2020) and then in vaccination efforts, particularly among Black and Hispanic communities, the very communities disproportionately impacted by the pandemic [8,9]. Despite federal funding support for COVID related efforts, already under-resourced FQHCs are increasingly facing challenges due to increasing costs to comprehensively care for patients and low rates of reimbursements.

340B

One stream of funding that helps support the daily operation of FQHCs is the 340B drug program. The program mandates pharmaceutical manufacturers to provide outpatient drugs at a discount to qualified healthcare facilities for those drugs to be covered under Medicaid reimbursement as outlined in Section 340B of the Public Health Service Act [10]. The 340B drug program was enacted to allow FQHCs (along with certain other qualifying healthcare facilities) to “stretch scarce federal resources as far as possible, reaching more eligible patients and providing more comprehensive services” [1]. FQHCs can purchase the drugs at the discounted price, but obtain reimbursement at full cost, allowing them to use the difference as unrestricted funds to support a variety of services to their under and uninsured. When healthcare entities not participating in the 340B program purchase drugs for patients enrolled in Medicaid managed care, drug rebates from the manufacturer are returned to the state and federal government (based on the predetermined federal/state split of Medicaid costs), allowing the government to retain the difference, not the healthcare facility. To avoid double discounting, FQHCs adhere to strict compliance and reporting measures to ensure drugs purchased as part of the 340B program are not included in the state calculations for rebates. This process leads to additional administrative costs and complexity at the state level. Some states have recently prohibited their 340B healthcare entities from participating in the 340B drug discount program, so that the state can 1) simplify the rebate process and 2) claim the rebates instead. This approach is often referred to as a “carve out” of the prescription drug benefit from the overall Medicaid managed care benefit package [11].

Under 2020 Medicaid Redesign Team recommendations to save $2.5 billion in New York State Medicaid savings, Governor Cuomo included moving the pharmacy benefit for Medicaid managed care members to fee-for-service (e.g., a carve out) to his FY21 executive budget [12]. After a three year delay due to widespread opposition from participating healthcare facilities, Governor Kathy Hochul plans to proceed with the 340B carve out in April 2023 [13].

Potential Routes Forward

Repeal planned carve out

Advocates for New York FQHCs have asked that New York State not change the 340B program. The Community Health Care Association of New York State (CHCANYS) estimates the financial losses to FQHCs to be $260 million per year as a result of the carve out [14]. FQHCs in New York State serve over 2 million people each year, 89% of which were low income, 68% of which were a racial or ethnic minority and 13% of which were uninsured. Over 70% of Medicaid enrollees in New York are part of managed care plans as of July 1^st, 2020 [15]. The 340B program transition as currently planned would have a debilitating effect on New York’s FQHCs, the services they provide and in turn, the communities they serve. In a 2022 survey of New York FQHCs, it was reported that the current 340B medication program supports services that provide low cost or free medications to low-income patients (89%), care management (81%) and community outreach to expand access to care (59%) [16]. As a result of the Governor’s proposed carve out, 75% of New York FQHCs responded that they would need to reduce or eliminate community outreach and reduce the level of free/low-cost medications provided to low-income patients, 44% reported that they would decrease the number of care delivery sites or hours and 79% would lay off staff [17]. FQHCs prevent utilization of costlier medical treatment downstream such as emergency department or inpatient visits, and prescription drug spending [18,19].

In addition to the detrimental impact to patient care, it is unclear whether the main goal of the carve out (to save the state money) will be realized. Granular details of the assumptions behind the state calculations of potential savings have not been disclosed, so it is unknown whether all costs have been accurately accounted for. Multiple groups have conducted analyses which show that costs incurred by the state will exceed any savings during the first several years [20,21].

Proceed with planned carve out while ensuring continuity of FQHC operations

Should the state choose to continue with the carve out, New York State must set aside additional transition funding to ensure the level of services and quality of patient care provided by FQHCs are not compromised. The state has proposed reinvestment funds to FQHCs and other 340B entities impacted by the carve out to lessen the consequences of the lost revenue [20,21]. However, it is unclear if reinvestment funds will fully cover losses sustained by FQHCs, nor does it consider the funding cliff that FQHCs will face immediately on April 1^stand the potential confusion to Medicaid beneficiaries.

For FQHCs to best ensure continuity of care for their patients, the state needs to provide additional clarity on when this reinvestment would be provided and how it would be allocated amongst all eligible providers. FQHCs currently have a dependable funding stream tied to patient utilization from the 340B program, allowing them to better plan and manage daily operations. The state needs to provide a similar level of reliability, by assuring that funding for this reinvestment would proceed beyond the initial three years of the transition (the state’s current commitment), not be subject to cuts in each budget cycle, and increase proportionately to service utilization and community need (rather than being a flat monetary commitment).

The state further needs to assess similar transitions that occurred in other states and leverage learnings to ensure the transition does not disrupt patient care. California carved out their benefits in January 2022 and the initial transition led to issues relating to missing patient data and claims being improperly denied and pharmacists not being able to override the denials. This resulted in interruptions for patients receiving often time-sensitive and lifesaving medications [22]. Like New York’s proposal, California included $105 million in reinvestment funds for its 340B entities (Supplemental Payment Pool for Non- Hospital 340B Clinics). Yet, by October 2022, none of the funding has been distributed to California’s FQHCs, resulting in cut hours, reduced services and staff reductions in response to the funding cliff [23,24]. New York must plan appropriately to ensure adequate funding reaches FQHCs in a timely fashion so that vital services are not interrupted.

Conclusion

Given the proven work of FQHCs in caring for medically underserved communities, the proposed change to the 340B program may hinder New York State’s goals set forth in Prevention Agenda 2019-2024 to “promote health equity in all populations who experience disparities” [25]. New York’s FQHCs improve access to care, provide integrated primary-based care to the state’s neediest communities and are cost-effective. Any benefits to the state in savings from the 340B carve out may come at the expense of access to quality care for New York’s low income rural and urban residents who have already been beleaguered by the pandemic. Given the important role of 340B funding in FQHC operations, policy makers should carefully consider the breadth of impact in carving out 340B and other alternatives to ensure sustained and reliable funding for the state’s FQHCs.

Acknowledgement

The authors would like to acknowledge Monica Ortiz Rossi, Sean Pratt and Christine Whang at the CUNY Graduate School of Public Health & Health Policy for their comments and suggestions.