The resumption of Medicaid redeterminations is having a substantial impact on Medicare DSH and 340B hospitals. Hospitals are at risk of reduced Medicare DSH payments / 340B savings or even exclusion from one or both programs altogether. Here are key points:
1. Medicaid Enrollment Trends
Peak Enrollment: National Medicaid enrollment reached approximately 94 million participants in April 2023, significantly up from February 2020 due to the suspension of Medicaid Redeterminations (eligibility checks) during the COVID-19 pandemic.
Resumption of Redeterminations: These checks resumed in April 2023, leading to a decline in Medicaid enrollment as about 25 million individuals lost their Medicaid coverage, with many not re-enrolling.
2. 340B Registration Process
Timeline: Providers can register for the 340B Drug Pricing Program during specific windows (1st–15th days of January, April, July, and October). Approved registrations become effective on the 1st day of the third month following registration (e.g., a January 10 registration becomes effective April 1).
Connection to Medicare Cost Reports: The Medicare Cost Report, typically filed five months after the end of a hospital’s fiscal year, determines the Disproportionate Share Hospital (DSH) percentage, which is critical for 340B program eligibility.
3. Hospital Eligibility and Strategic Considerations
Eligibility Thresholds: Many hospitals qualify for the 340B program under a DSH adjustment percentage above 11.75%. Some could qualify with a lower threshold of 8% under a different entity type.
Risk of Ineligibility: If a hospital's DSH percentage drops below the required threshold for its registered entity type, it immediately loses 340B program benefits after filing its cost report.
Strategic Oversight: Hospitals must closely monitor Medicaid share trends and project DSH percentages. Timely action (e.g., adjusting entity type or re-registering during allowed windows) can prevent disqualification and avoid losing millions in benefits.
4. Implications of Medicaid Enrollment Declines
Declining Medicaid enrollment directly affects hospitals' DSH percentages, potentially reducing their eligibility for 340B program benefits.
Providers unaware of alternate pathways for 340B eligibility may miss out on valuable program benefits due to delays in re-registration or incorrect assumptions about eligibility thresholds.
Recommendation:
Hospitals and providers should:
Monitor Medicaid trends and their impact on DSH percentages.
Evaluate eligibility under alternate 340B classifications proactively.
Register strategically during open periods to maintain uninterrupted 340B program participation.
Consider implementing operational strategies to maximize Medicaid eligible day counts.
Careful planning can mitigate the financial risks associated with program ineligibility and Medicaid share declines.
Contact Adam Blackwell at adamblackwell@govdataservices.com for assistance related to this article.
