Illinois Hospitals Are Cashing In on a Program Meant to Help Patients
A federal drug discount program designed to help patients has quietly become a lucrative revenue stream for many hospitals in Illinois. Now state lawmakers are considering legislation that would expand that program — known as 340B — even further.
Before they do, they should examine how the program is already being used — or rather, abused. Financial data suggest that many Illinois hospitals are not using 340B to expand care for patients but to boost revenues and invest millions of dollars in financial markets.
In fact, Illinois hospitals participating in the program invest an average of $68.3 million in stocks and bonds, compared with $24.4 million among non-340B hospitals.
Congress created the 340B Drug Pricing Program in 1992 to help hospitals serving large numbers of low-income and uninsured patients purchase prescription drugs at steep discounts. Lawmakers intended those savings to strengthen the healthcare safety net by allowing hospitals to reinvest the money in care for underserved communities.
But Congress never required hospitals to pass those savings directly on to patients or demonstrate that the profits improved access to care. That omission has allowed hospitals to transform 340B into a powerful revenue generator.
The strategy is straightforward. Hospitals purchase medications at heavily discounted prices through the program, then bill insurers — and patients — the full price for those same drugs. The difference between the discounted purchase price and the reimbursement they receive becomes profit.
Those profits can be substantial.
According to my analysis of publicly available financial data on Illinois hospitals, facilities participating in 340B generate significantly more revenue than hospitals that do not. On average, Illinois' 340B hospitals reported patient revenue of about $497 million, compared with $351 million at non-340B hospitals.
If the program were functioning as intended, those higher revenues would translate into dramatically greater support for patients. But the numbers tell a different story.
Illinois hospitals participating in 340B devote a percentage of charity care that is no different from the amount provided by non-340B hospitals.
Meanwhile, Illinois 340B hospitals invested 119% more revenue in stocks and bonds, on average, than their non-340B peers.
In other words, a program designed to help struggling patients increasingly helps fund hospital investment portfolios.
Hospitals participating in 340B also tend not to invest in their labor forces. They employ 33% more contract workers, including agency nurses, than non-340B hospitals. Those contract workers make more than double what full-time employees at 340B hospitals are paid.
Taken together, these trends point to a program that has drifted far from its original mission. What began as a targeted safety-net initiative has become a major source of revenue for large hospital systems — one that operates with little transparency and few guardrails ensuring the money benefits patients.
And yet lawmakers in Springfield are considering legislation that would expand hospitals' ability to profit from the program. The proposal would prohibit drug manufacturers from limiting how hospitals use outside pharmacies to dispense discounted 340B medications.
Supporters argue the measure would protect access to the program. But expanding 340B without addressing the program's existing loopholes risks amplifying the problems already visible in Illinois.
A safety-net program should strengthen care for patients. It should not quietly bankroll hospital investment portfolios.
• Dr. Lisa Grabert is a visiting research professor at Marquette University. She previously served as a senior aide to the U.S. House Committee on Ways and Means and as senior associate director of policy at the American Hospital Association.