Hospitals that buy drugs at steep discounts through the federal 340B program spent a smaller share of their budgets on charity care than hospitals outside the program, according to a new analysis of nearly 4,000 facilities. The report from the Pioneer Institute and CancerCare, released September 24, found that 340B hospitals devoted 2.16% of operating expenses to charity care, compared with 2.82% at hospitals that do not take part in the program.
The gap was similar for care given to uninsured patients. Participating hospitals spent 1.60% of operating expenses on that care, while non-participating hospitals spent 2.26%, the authors reported.
For patients, the findings raise a practical question. The 340B program was built to help safety-net providers serve low-income and uninsured people, yet a patient facing a large hospital bill has no easy way to know whether drug discounts are translating into help with that bill. The hospital industry disputes the report's framing, and the analysis has not been peer-reviewed.
A Discount Program That Now Tops $100 Billion
Congress created 340B in 1992. Under the program, drugmakers that take part in Medicaid agree to sell outpatient drugs at reduced prices to eligible hospitals and clinics. The discounts can range from 25% to 50%, and providers keep the savings, Healthcare Dive reported. The federal Health Resources and Services Administration (HRSA) says on its 340B program page that the program lets covered entities "stretch scarce federal resources as far as possible, reaching more eligible patients and providing more comprehensive services."
Covered entities include HRSA-supported health centers, Ryan White HIV/AIDS clinics, children's hospitals, and hospitals that serve a disproportionate share of low-income patients. Hospitals and outpatient facilities bought $100 billion worth of 340B drugs in 2025, a nearly 23% increase from the year before, Healthcare Dive reported. Measured at list prices, the Pioneer report, citing IQVIA estimates, puts 2025 volume at $179.5 billion.
The law does not require hospitals to spend their 340B savings on charity care. That gap sits at the center of a long fight between drugmakers, who want tighter limits, and hospitals, which say the savings help keep struggling facilities open.
Charity Care Is One Measure, and Hospitals Say It Is Too Narrow
Charity care generally means free or discounted care for patients who meet a hospital's financial assistance rules and cannot afford to pay. Tax-exempt hospitals must have written financial assistance policies, which the IRS describes as covering free or discounted health services for people who qualify. The report drew its figures from Medicare cost reports that hospitals file themselves with the federal government.
The American Hospital Association (AHA) rejected the comparison. "This report is another in a long line of misleading studies that wrongly singles out charity care as the only way to measure how hospitals provide for their patients and communities," Bharath Krishnamurthy, the AHA's director of pharmaceutical policy, told Healthcare Dive in an email.
The AHA's objection reflects a real accounting limit. Charity care counts only free or discounted care given under a hospital's financial assistance policy. It leaves out losses on patients whose insurance pays less than the cost of care, as well as unpaid bills written off as bad debt. Hospitals argue that those losses are also part of serving low-income communities.
Krishnamurthy said 340B hospitals also use their savings to support behavioral health clinics, diabetes counseling, food banks, and free or discounted drugs. By the AHA's own measures, 340B hospitals have provided nearly $100 billion in total community benefits. Many of those services would not show up as charity care on a cost report.
The report's authors see the lack of clear reporting as the problem. "A discount this big shouldn't be a mystery," said William Smith, a senior fellow who directs Pioneer's Life Sciences Initiative. Kim Czubaruk, vice president of policy at CancerCare, said, "Hospitals receiving 340B discounts should be able to show how those savings help patients in need."
Limits on What the Numbers Show
The analysis is a policy report, not a peer-reviewed study. The full paper states that CancerCare provided financial support and intellectual input, and a CancerCare executive is among its authors. The report compares averages across large groups of hospitals, so it cannot show why the difference exists or whether it holds for any single hospital.
The two groups also differ in ways that could affect the result, such as size, location, and patient mix. Hospitals often qualify for 340B partly because they treat many Medicaid patients, and care for people covered by Medicaid is not counted as charity care. A hospital serving mostly insured low-income patients could report modest charity care while still carrying a heavy safety-net load. The report does not settle that question, and critics and supporters read the same numbers very differently.
What the report does highlight is a transparency gap that lawmakers from both parties have flagged. MedicalDaily previously reported on a bipartisan Senate bill, the SUSTAIN 340B Act, that would require covered entities to file annual reports on how they use the program. Pioneer and CancerCare called for a similar step, along with standard charity care definitions and a minimum level of benefit for low-income patients. Several other 340B proposals, including a Senate discussion draft, are also under consideration in Congress.
Patients struggling with a hospital bill do not need to wait for Congress. Anyone uninsured or underinsured can ask the billing office for the hospital's financial assistance policy and an application, even after a bill arrives. Nonprofit hospitals must publicize those policies, and many offer free or reduced-cost care based on household income. Keeping copies of bills, income records, and any denial letters can make an application or appeal easier.
Key Questions Answered
What did the report find? Across nearly 4,000 hospitals, those in the 340B program spent 2.16% of operating expenses on charity care, compared with 2.82% at non-participating hospitals.
Who produced it? The Pioneer Institute, a Boston-based public policy group, and CancerCare, a nonprofit that supports people with cancer. CancerCare also provided financial support for the paper.
What is charity care? Free or discounted care for patients who meet a hospital's financial assistance criteria and cannot afford to pay all or part of their bill.
What did hospitals say? The American Hospital Association called the report misleading and said charity care leaves out other community benefits that 340B hospitals provide.
Is the report peer-reviewed? No. It is a policy analysis based on hospital cost reports, and it shows an association, not a cause.
What can patients with large hospital bills do? Ask the hospital billing office for its financial assistance policy and application, even after receiving a bill.
Published by Medicaldaily.com
