Medicaid Cuts and 340B Eligibility Implications for Health Systems

This technical report discusses the implications of Medicaid reform and H.R. 1 on 340B eligibility for health systems. It outlines how changes in Medicaid coverage and financing could reduce disproportionate share hospital (DSH) days, thereby jeopardizing 340B eligibility. The report details the specific thresholds for various hospital types to maintain 340B status and highlights the dual financial exposure that health systems may face due to reduced Medicaid volume and tightened financing tools. Additionally, it presents a financial analysis of a nine-hospital system, illustrating the significant impact of losing 340B discounts on earnings before interest, depreciation, and amortization (EBIDA). The report emphasizes the need for health systems to model their exposure to Medicaid disenrollment, optimize inpatient day capture, and engage with state-level Medicaid agencies to mitigate coverage loss. It also stresses the importance of elevating DSH percentage monitoring to a strategic key performance indicator (KPI) for executive teams.