One of the strongest drivers of hospital profitability is their patient payor mix. Simply put, commercial patients pay the most.
For hospital executives seeking to maximize financial performance, sharing 340B savings in partnership with a provider-owned or other local health plan presents a strategic opportunity to increase commercial patient market share, driving profitability.
The 340B Advantage and Its Strategic Use
The 340B Drug Pricing Program enables eligible hospitals to acquire medications at significantly reduced costs, supporting them for their services for underserved populations. An often-overlooked strategy by hospitals is reinvesting them to improve their commercial patient mix.
Commercial patients have health plans that typically have their own PBM. When a script is filled , much of the time it is captured through the PBM’s specialty drug program, not through the hospital’s pharmacy, meaning there is no 340b pricing to provide additional revenue to the hospital. A key benefit to a 340b qualified entity of working through a local health plan is the ability for the plan’s PBM to keep the script and purchase any drugs eligible under 340b.
This creates a virtuous cycle. The qualifying entity, by sharing the 340b savings, get more commercial patients, with more 340b and commercial revenue. The local health plan is more competitive against the large national plans.
This can be true whether the local health plan’s commercial membership is ACA members, large group fully insured, or self-funded.
Why This Matters to Hospitals
For hospitals, failing to partner with a local or provider-owned health plan through the use of 340B savings means missing out on significant revenue potential. Reinvesting these savings into a favorable health plan network can mean:
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Hospitals see increased commercial patient volume.
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Revenue grows through higher reimbursement rates from commercial insurance.
Why This Matters to the regional/provider owned health plan:
Partnering in a narrow network with a local 340b qualifying entity can give you a cost advantage in the marketplace. And lower priced plans tend to stick around longer.
For a further discussion, contact DuNord Reinsurance Consulting at (612) 382-5094.
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