Federal program at heart of hospital controversy
At the heart of controversy between St. Luke Hospital and Lanning Pharmacy is a federal program called 340b.
Traci Lanning, owner of Lanning pharmacy, demanded an independent audit of the hospital’s 340b program during the April hospital board meeting.
During that same meeting, hospital chief executive Jeremy Ensey resigned after three 30-minute executive sessions that followed the open session during which Lanning spoke.
The hospital, as a non-profit critical-access hospital, qualifies for the 340b program and, since it does not operate a public pharmacy, has a contract with Lanning.
A formal agreement for program consultation services, signed Sept. 15, 2020, by Ensey and Aaron Lott, president of Authority Rx, stipulates that the consultant will provide both general and advanced auditing services.
A contract between the hospital and Lanning Pharmacy signed July 14, 2015, sets out the terms of the hospital’s agreement with the pharmacy.
Under its terms, the hospital is to purchase drugs covered under the 340b program and pay Lanning a fee of $18 for each prescription it dispenses.
If Lanning does not have a sufficient supply of 340b drugs, it is allowed to fill prescriptions from its own supply of medications or decline to fill the patient’s prescription until an arrangement is made with the hospital.
Lanning’s contract with St. Luke was amended Nov. 1 to revise the terms of payment.
Under the new terms, the hospital is to pay Lanning a dispensing fee of 43% of the net revenue the hospital receives from the program.
The revenue comes from insurance payments to Lanning. The hospital bills the pharmacy and gets to subtract the price it paid for the drug before the 43% split is determined. The hospital keeps 57% of the profit.
The 340b program is intended to help low income and uninsured patients and the medical facilities that serve them.
Whether the money earned by the pharmacy or the hospital is passed along to consumers is up to the pharmacy and the hospital.
Health Ministries Clinic, based in Newton, is a federally qualified health center, so it is eligible for the 340b program. Its purpose is to provide services to any patient, with or without insurance.
It provides medical, dental, and behavioral health services including in-house laboratory, diagnostic imaging, pharmacy services, and assistive services such as transportation, language interpretation, case management, and coordination of care.
Matthew Schmidt, chief executive of Health Ministries, said the clinic reinvests 340b savings by reducing out-of-pocket patient costs, expanding services, and improving the quality of care by initiatives such as electronic record systems, staff training and development, and buying medical equipment.
“Whichever combination of reinvestment strategies is chosen, the underlying premise that all of these should ultimately benefit the patient in some way is a crucial point,” Schmidt said.
St. Luke and Lanning have not detailed exactly what they do with the money.