Hospitals back governor’s financing package while 340B changes draw concern

Representatives of the Ohio Hospital Association and the Ohio Children's Hospital Association told the House Medicaid Committee they support the governor's hospital financing package as a whole, even as the budget would change how the state handles 340B (HRSA) drug program claims.

In testimony, hospital witnesses said the financing package — which includes an increase in the hospital franchise fee and a re-alignment of state-directed payments — is intended to raise state revenue that will be matched with federal dollars and then redistributed to hospitals in ways tied to quality.

“While we support the current budget, we fully acknowledge the changes to Medicaid at the federal level are significant,” said Scott Borgaminski of the Ohio Hospital Association, noting hospital margins and workforce costs have left many institutions financially stressed. The association described the package as a “win-win” for the state while acknowledging the trade-offs involved.

What the budget proposes for 340B: Director Corcoran and hospital witnesses discussed a department proposal to limit the state’s loss of pharmacy rebates tied to 340B claims. The director told the committee that increased visibility from the single PBM allowed the state to identify roughly $323 million in lost rebates tied to contract pharmacy arrangements and argued that excluding contract pharmacies from certain claims would recapture rebate revenue for the state and program.

Hospitals said the 340B changes would affect a relatively small number of hospitals (hospital witnesses estimated roughly 7–20 hospitals could be materially affected) and that the overall package — franchise fee increases, state-directed payments tied to quality metrics and 340B adjustments — was preferable to alternative cuts.

Why it matters: Hospital operations are sensitive to payer mix, Corcoran noted: Medicaid reimburses at a lower average level than Medicare or commercial insurance. Economists and hospital groups testified that higher franchise fees and redesigned state-directed payments could shore up hospital finances in ways targeted to quality.

How hospitals reacted: The Ohio Children's Hospital Association emphasized the group's financial gap: “For every $1 of care we provide in Medicaid, we receive 76¢ back,” the association said in submitted testimony. Children's hospitals urged preserving the totality of the hospital package to protect pediatric services and statewide specialty care hubs.

What to watch next: Stakeholders told the committee they want continued negotiation over implementation details, especially how any 340B-related limits are structured to avoid unintended access or operational impacts for federally qualified health centers and other grantees. The department said it is working with FQHCs and hospitals to limit any negative impact.

Ending note: Hospital groups signaled support for the package as introduced but asked the committee to preserve guardrails — especially quality metrics and transitions — as the financing changes are implemented.