[00:00] Bryan Hyde: Welcome to the Health Policy Podcast. I'm Brian Hyde. Today I'm joined by Sydney Holliman. She is the senior editor for Healthcare Dive. And Sydney, that doesn't begin to describe, you know, some of the things that you have been able to do. Take a moment, if you will, and tell us a little bit about your background, about who you are and what you do. [00:19] Sydney Halleman: Yeah, it's great to be on the podcast. So I'm a journalist. I have over 6 years of experience in healthcare, Right now, I lead editing and lead the publication strategy for Healthcare Dive, which is a healthcare business publication that's online. We mainly get our readers through newsletters, but our website is also a great way where you can keep up to date on healthcare news. And before Healthcare Dive, I wrote on financial news in the healthcare center for a financial publication. So I wrote on like large-cap mergers and acquisitions, venture capital fundraising. So yeah, I have experience with kind of all sides of the healthcare spectrum now. But I consider myself just to have started to really dip my toes into everything. I'm not sure if you could ever be a 100% accurate healthcare expert, but we're definitely trying. So yeah, it's very interesting. [01:16] Bryan Hyde: Well, my hat goes off to you because there are a lot of complicated policy areas out there. Healthcare has got to be one of the most complicated, though, particularly when we're dealing with, with Medicare, Medicaid, and the federal government's interaction with healthcare. And I'm looking at an article that was published last week about Medicare slashing 340B payments and some proposed rules that were proposed by the Centers for Medicaid and Medicare Services. And as we dive into that, just for the sake of people like myself who are kind of new to some of these topics, Could you kind of lay out some of the background behind the 340B program and behind, you know, some of the things like site-neutral payments, just so I understand the vocabulary that has to be used in addressing these issues? [02:06] Sydney Halleman: Yeah, of course. So 340B is a healthcare program that's been really thrown into the spotlight over the past decade, but especially under the Trump administration. Essentially, it's one of these programs that is very widespread, and especially in nonprofit hospitals. And it's something that impacts the healthcare that a lot of people get, but which almost no one has ever heard of before. So 340B was a program designed in the '90s to basically make it easier for hospitals that serve a large proportion of low-income or what they call disadvantaged populations to afford drugs. So basically, this program was created to make sure hospitals can actually have enough money to serve the patients that they need to see. But it's come under scrutiny recently because the program has been accused of really spiraling out of control. There were not many hospitals that were participating in the program initially, Backtrack to last year, and there was around $80 billion flowing through this program. So it's really ballooned significantly from its original intent. There's been around a 600% increase in the amount of covered entities, so the hospitals that can participate in this program, that have joined just since 2000. And that's mainly because Medicare has kind of broadened the definition of which hospitals can join this program. But critics have really accused this program of basically funneling money to hospitals without that money actually getting to patients, which was the original intent of the program itself. So it's one of these areas in healthcare where the intention is just— seems to not be what the program is actually accomplishing anymore. And there's been a lot of different attempts to reform this program. And recently, with this proposed rule, it seems like the Trump administration has taken kind of a decisive step towards trying to curtail this program, which has been a long— I would say like a long time coming, especially in the first Trump administration. They tried to reform it and it's gone through a lot of interesting different iterations. So that's kind of the general backdrop of this program. [04:35] Bryan Hyde: So with a proposed rule like this, what's the process before it becomes actual, you know, enforceable policy? [04:42] Sydney Halleman: Yeah, that's a great question. So rules are proposed and then several months later they end up becoming finalized by the government. And there's a bunch of different steps that happen in between that. Essentially, the proposed rule is released with the intention of soliciting comment from the industry. And that could be anything from individual doctors to hospitals. But what it most— what it in the most cases ends up being is a chance for various industries to lobby against the government, either for— usually against certain motions that have been proposed in the bill. So— or in the policy. So, you know, hospital lobbies, insurance lobbies, pharmaceutical lobbies, special interest lobbies, they will basically meet with officials in the administration after this rule has been proposed to really try and either get things into the bill or more than likely get things out of it. So it is, it is a long, drawn-out process. Sometimes things are proposed that never make it into the final version. More often than not, we do see finalized versions of these rules that are, that are quite similar to the proposed version. And then once the rule is finalized, of course, there's always the, the risk of litigation, which has become increasingly common. So even when a rule is finalized, it's often not the end of usually contentious issues that have been announced in these proposals. But it really does set off, I would say, a lobbying crusade, these proposed rules. [06:14] Bryan Hyde: So I have to ask, Sydney, is this one of those instances where, for instance, if you talk about them kind of reining in the 340 program, is that treated or is it portrayed by some of those who lobby as, oh, they're trying to gut this program or they're trying to do away with it entirely? when in fact maybe what they're trying to do is reduce spending or prevent, you know, overspending? I guess I'm asking, do they, do they tend to exaggerate in order to, to try to make the position that you shouldn't do anything, you know, it's, it's working just fine? [06:47] Sydney Halleman: Yeah, I would say there's, there's definitely, you know, exaggeration on both sides. I mean, the Trump administration— so basically what's happening in this rule is The Trump administration is proposing to cut the amount of money that they send through this program by about a third. Usually, originally, hospitals were given discounts on a certain amount of drugs under 340B, but Medicare would reimburse them at 100% of the drug's cost plus 6%. They would pocket that difference. And the hospitals in the participating program said, we need this because we need to basically fund our operations so we can serve disadvantaged populations. We have a lot of low-income patients. You know, this is very necessary. So what the Trump administration now is proposing to do, and they have proposed to do similar things in the past, is to cut that spending by a lot. So basically they'll be reimbursed a lot less. The Trump administration's point of view and what they laid out very clearly in the rule and what they have been saying for a long time is that You know, this program has spiraled out of control. We have basically no transparency into how hospitals are using the 340B funds. So it's unclear if they're helping patients. It's unclear if they're going towards like charity care, which is something that a lot of nonprofit hospitals have to provide in order to get tax breaks. It's just not clear where this money is going. And it looks like a lot more entities are actually participating in the program. So the Trump administration frames this as trying to rein in spending, and why hospitals on the flip side say that this is going to basically disadvantage all nonprofit providers that participate in this program, but especially we're talking about rural hospitals, hospitals that aren't vertically integrated. They maybe don't have a lot of other hospitals or outpatient centers to gather revenue. hospitals that are really on the brink and that are truly emblematic of the rural health crisis. More rural health hospitals are closing every year. And basically what the hospital lobby is saying is that this is going to impact them. And there is some research that shows that that could be the case. You know, I think a lot of what the administration is trying to target or what they say they're trying to target are a lot of these large nonprofit hospital operators that benefit from a program that was originally intended to really actually help a very small proportion of hospitals. So while this rule is going to take away money, kind of from broad swaths of it from the program, it's also probably going to impact these rural hospitals. So lobbying on both sides, you know, it's hard to get through rules that are going to cut money from any sector without there being some pushback. So that is expected. But hospitals have historically been very aggressive over protecting their 340B funds. They say that reimbursement has really gone down, has not kept up with the pace of inflation. Hospitals are closing, especially rural hospitals, at a wider pace. So there are a lot of arguments that the healthcare system on the provider level is suffering. But then there is other examples from research that a lot of hospitals benefiting from 340B really maybe were not the intended beneficiaries of this program when it was originally created. [10:25] Bryan Hyde: Sydney, you mentioned earlier that the Trump administration had tried before to enact some reform regarding the 340B program and that there was litigation involved. What happened there? [10:40] Sydney Halleman: Yeah, it's been very interesting. So in 2018, the Trump administration tried to— they proposed a very similar rule and ended up finalizing actually a very similar rule to what they just proposed last week. They proposed to cut 340B payments by about 20%. Similar reasoning given in the proposed rule last week. That was eventually finalized, but it was— hospitals filed lawsuits against this and it was eventually taken up by the Supreme Court and they made a decision in 2022. And what the Supreme Court said was that they overturned the 340B policy and their reasoning was that the government had not conducted a survey of hospitals to see what their actual drug costs were, that they hadn't basically done enough research on this. And the Supreme Court ruling really sparked off this very complex network of how the hospitals and how the government were basically going to pay each other back for this policy because the policy was finalized in 2018, 2019, but the Supreme Court didn't actually overrule it until 2022. So there were about 4 years there where the policy was actually in effect. And what's complicated about this is that, you know, the Supreme Court ruled that basically the government had unlawfully cut funds from these hospitals participating in this program. But whenever a policy is proposed under this rule, it has to be budget neutral, which means that the policy can't create either a surplus or a deficit. So in 2018, when they proposed this when they actually finalized this measure, they cut the 340B payments, but they had to then raise non-drug payments. So what this meant is that the industry got more money than it needed to after the Supreme Court ruling decided from non-drug payments, and it didn't get enough of the actual 340B payments. So it created this really complex scenario where the government had to pay back the industry for 340B payments. payments, but also the industry had to pay the government back in non-drug payments. Part of the controversy over this current rule is that the government ended up paying back the 340B funds, but the industry is still paying back the non-drug funds that are owed to the government. In this recent proposal, not only did the Trump administration cut 340B funds, but they actually accelerated the amount that the industry needs to pay. the government back from this 340B litigation. So basically, it just created this really big funding snafu where government money is being exchanged in both directions. But the Supreme Court really didn't touch the underlying principles of 340B. They really— I can't blame them for not wading into this extremely complex and very divisive policy area. So it really just said, you need to do a hospital acquisition survey. before you end up proposing a rule like this. And that's what the Trump administration did. They actually did a survey this year, and I think they're really relying on that to make sure that they have a strong legal case for finalizing this rule. [14:05] Bryan Hyde: Interesting. Yeah, I mean, you weren't kidding when we started this conversation. We talked about there's a lot of complexity here, and this is a good example of it. [14:14] Sydney Halleman: Yeah. [14:14] Bryan Hyde: Now, I understand that the proposed rule also would address site-neutral payments, and I think you've touched on this before, but Help me understand that term, site-neutral payments. How does that work? [14:26] Sydney Halleman: Yeah, so I think one of the— another interesting facet of healthcare policy that pretty much everyone who's ever gotten healthcare has experienced, but we, you know, the broad public just generally isn't aware of. So right now in Medicare, and historically, Medicare has paid hospital-owned outpatient departments at a higher rate than independent outpatient departments in independent physician offices. And this is because hospitals claim that they have higher overhead costs to actually run their business. They claim because of laws that basically govern their participation in Medicare, they have to take all patients regardless of their ability to pay. This means that they have higher costs for uncompensated care. They tend to get generally sicker patients. And so— They've argued that they need basically higher reimbursement to cover some of these overhead costs. The problem with that is that research has suggested that it's actually fueling hospital consolidation because hospitals have more incentives to acquire outpatient clinics because they get basically higher reimbursement amounts. And also research has shown that vertical consolidation among hospitals generally leads to higher prices for patients and sometimes lower quality care. So this is a really pressing topic, especially because right now in the US healthcare system, over 50% of doctors work for hospital systems. We're really seeing almost a complete obliteration of the independent physician, and patients are also seeing prices go up. So site-neutral payments means that there's a neutrality between outpatient payments. So like an independent outpatient department in a hospital physician department, a hospital-owned outpatient department would be getting paid either the same or some very similar rate. This has had bipartisan support for a long time, but it's been extremely hard to both integrate into really every aspect of Medicare policy, but also it's been very difficult to implement this against hospital lobbying, hospital interest groups. And that entire apparatus. So the Trump administration and also the Biden administration and previous administrations have taken kind of, I would say, numerous piecemeal steps to start working in some neutrality among the payments. So last year, a rule was finalized where some drug services were going to be— the payments were going to be neutralized. So they were going to start paying hospital-owned outpatient departments less at the typical physician rate compared to a higher rate that they're normally receiving. So in this recent proposed rule, they broadened that and they included non-contrast imaging services, so like X-rays, MRIs without contrast. And so the government claims this is going to save a lot of money going forward, and very possibly we'll see these definitions expand going forward. Yeah. [17:44] Bryan Hyde: Wow. One final question. We're down to our last couple of minutes here. But price transparency, I hear that come up often in discussions about healthcare reform. Do these proposed rules address that issue as well? [18:00] Sydney Halleman: Yeah. So another kind of longstanding priority for the Trump administration has been price transparency. A lot of A lot of conservative analysts and definitely a lot of people in the Trump administration and outside of it think that greater transparency into hospital and insurance prices will basically give consumers better market power to be able to decide what plans and what providers they want to visit. And this is pretty impossible to do now. I mean, I'm sure just as a patient, it's extremely hard to be able to find out, you know, if I get an MRI, at this provider, is it going to cost more than if I travel 30 minutes away from another MRI? It's really hard to get that information now. So the government has been pushing in various different ways to try and make these prices publicly accessible in file formats that are easy to read and easy to analyze. The industry has historically had very spotty compliance with this. And the Trump administration has really revived efforts to make both hospitals and insurers actually comply with this. So basically, in this proposed rule, they put out a request for information, which is something— a common technique that different agencies will do before they end up proposing rules or finalizing any sort of policy on these issues. They'll ask the industry and various stakeholders, what more can we do about this? So in this proposed rule, they asked basically for some more details on how to make files more easily accessible in this price transparency initiative. Because, you know, I think the goal of this initiative is very clear, but it really comes down to the minutiae, like what type of files do they need to be? What machines, like how readable do they have to be? You know, who, what kind of level of technological complexity do you need to be able to view these things? You know, it really just comes down to these fine details. And so they're basically requesting some information from the industry, probably in advance of promulgating more rules. [20:09] Bryan Hyde: Again, we are talking with Sydney Holliman. She's a journalist and the senior editor at Healthcare Dive. And you've done a marvelous job of stripping away some of the complexity surrounding these issues. Sydney, thank you for joining us today on the Health Policy Podcast. [20:25] Sydney Halleman: Thanks, Brian.