340B at Risk: How the One Big Beautiful Bill Act Threatens a Critical Safety-Net Program
The 340B Drug Pricing Program has long served as a vital financial lifeline for safety-net hospitals. The program allows eligible hospitals to purchase outpatient drugs at steep discounts and reinvest those savings across their facilities. However, the enactment of the One Big Beautiful Bill Act (OBBBA) in 2025 has introduced significant risks to 340B eligibility and to the financial sustainability of the hospitals that depend on the program.
For most hospitals, 340B eligibility depends on a metric known as the Disproportionate Share Hospital (DSH) percentage, which reflects the share of low-income Medicare and Medicaid patients treated by a hospital. The OBBBA’s Medicaid cuts not only reduce federal spending but also impose new administrative requirements, such as work or community engagement mandates. These requirements are expected to shrink Medicaid enrollment and reduce the number of Medicaid patient days hospitals can report on their Medicare Cost Reports.
This decline is critical because Medicaid patient days are a major component of the DSH calculation. Fewer Medicaid days translate into lower DSH percentages, potentially pushing many hospitals below the eligibility threshold and resulting in the loss of 340B participation.
An assessment reported by the Healthcare Financial Management Association (HFMA) indicates that up to 12% of currently participating 340B hospitals could lose eligibility due to Medicaid cuts. For many safety-net providers, particularly smaller and rural hospitals, 340B savings are essential to maintaining financial stability. The combined pressure of losing access to drug discounts, declining Medicaid reimbursement, and increased uncompensated care as coverage declines could force reductions in essential services or even lead to hospital closures in underserved communities.
In response, hospitals operating near the DSH eligibility threshold must adopt strategic measures. Emphasis should be placed on monitoring DSH trends, conducting proactive financial forecasting, and ensuring the accuracy of data submitted on Medicare Cost Reports. Maintaining 340B eligibility will require careful planning, robust data management, and continued advocacy to mitigate the effects of federal policy changes.
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For more information, please contact:
Colin R. Conklin, CHFP| Senior Consultant -
