Hartford Business Journal

HARTFORDBUSINESS.COM | JANUARY 27, 2025 19 FOCUS | HE ALTH CARE CHA's report stated that under- payment by government payers continues to place a tremendous financial strain on health systems. In fiscal 2023, hospital systems in Connecticut experienced $1.38 billion in Medicare losses and $1.43 billion in Medicaid losses, CHA reported. Medicaid payments average 62 cents on the dollar, while Medicare payments average 74 cents on the dollar, according to the CHA. The Medicaid program, which provides healthcare coverage for low-income individuals, has created financial problems for the state budget as well. The program is facing $260 million in cost overruns during the current fiscal year, which began July 1, due to higher demand for hospital outpatient, clinic and pharmacy services, the governor's office said. Hospital officials say that, to alle- viate some of the prescription medi- cation cost burden, they have relied on the 340B Drug Pricing Program, which was enacted by Congress in 1992 to "shield safety-net hospitals from rising drug prices and help them care for low-income patients and communities." Under the program, Kidwell said, pharmaceutical manufacturers that want to participate in Medicaid are required to provide a discount on their outpatient drugs to "covered enti- ties," including certain hospitals, federally qualified health centers (FQHCs), children's hospitals and clinics. "Typically when hospitals see a larger proportion of govern- ment payers, … the reimbursements that hospitals see don't necessarily cover the whole cost of the care," said Richard Wojtowicz, regional director of pharmacy services for Trinity Health Of New England (THONE). "That's especially true for hospi- tals like St. Francis (in Hartford) or Mercy Medical Center (in Springfield, Massachusetts)," which see a dispro- portionate share of patients who lack the ability to pay, he said, referring to hospitals owned by THONE. "We cannot overstate the impor- tance the 340B program has on sustaining access to care in Connecticut," Kidwell said. Over the past five years, however, drug manufacturers have been "very aggressive in trying to restrict our access to the program," he added. Most recently, that has taken the form of drugmakers saying they will turn 340B into a rebate program. "So, Day Kimball would have to buy the drug at full cost and then apply for a rebate," Kidwell said. "And hope the drug manufacturer provides the rebate." The result, he said, is that while a 10% year-over-year increase in the cost of prescription medications is financially difficult, it becomes even worse if the 340B program changes because hospitals would have to "buy those drugs without those discounts." According to Viens, 70% of Day Kimball's patients use Medicare or Medicaid. "We do get a little bit better reim- bursement from the commercial payers, but there's no way we can make up that delta with those 30%," he said. He added that the difference between paying the full wholesale price for a drug and the discounted price through 340B is dramatic. "Something that would be $50 on 340B could be $5,000 wholesale," Viens said. Arkansas and Louisiana recently enacted state laws that limit manu- facturers from placing conditions on 340B, and prohibit them from refusing to supply the discounted drugs. Viens, Kidwell and Wojtowicz all said their organizations are lobbying state legislators to consider similar restrictions. The Big 3 There are other ways health systems can reduce the cost of their drug purchases. One is to contract with a whole- saler. According to a 2019 analysis by Deloitte Consulting, about 92% of prescription drugs in the United States are distributed through wholesalers. Of that, 90% of the distribution is handled by just three companies — AmerisourceBergen/Cencora, Cardinal Health and McKesson Corp. In December, UConn Health added $400 million to extend its contract with AmerisourceBergen/Cencora by two years, bringing the total cost of the five-year contract to $1.15 billion. Viens said Day Kimball has contracts with McKesson, while also participating in a group purchasing coalition with Yale New Haven Health. "We get to buy at similar pricing as they do," he said. With the Connecticut General Assembly now in full swing, Kidwell said the CHA will be lobbying hard on a number of issues related to the financial well-being of hospitals. Medicaid reimbursement rates are at the top of that list, but he said there is more about the program to discuss than just that. "We certainly want it to pay for the cost of care and to make sure we're maintaining access," Kidwell said, "but it also can be used to really go after those upstream drivers of health so that we can keep people healthier in the first place." Richard Wojtowicz

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