Becker's Hospital Review

9 CFO / FINANCE Inside Providence's plan for 340B rebate disruption By Ella Jeffries T he federal government's recently approved 340B rebate pilot could reshape one of hospitals' most relied-on drug discount programs, replacing upfront savings with delayed reimbursements and forcing covered entities to shoulder new financial and administrative risks. As the Jan. 1 start date nears, Renton, Wash.- based Providence is bracing for what it calls the program's most disruptive shi in decades. e Health Resources and Services Administration announced Oct. 31 the approval of eight manufacturer rebate plans under the new 340B pilot. Participating companies include Bristol Myers Squibb, Immunex Corp., AstraZeneca AB, Pharmacyclics, Merck Sharp & Dohme, Boehringer Ingelheim, Novo Nordisk, Janssen Biotech and Janssen Pharmaceuticals. e nine drugs covered span several high-cost therapies — including Eliquis, Enbrel, Farxiga, Imbruvica, Januvia, Jardiance, multiple NovoLog and Fiasp products, Stelara and Xarelto — and all plans will operate on the Beacon platform. Under the new model, manufacturers will issue post-sale rebates rather than upfront discounts. Covered entities must now purchase through their 340B wholesaler accounts and submit both pharmacy and medical claims data to obtain unit-level rebates. Hospital leaders have warned the change could strain safety-net providers by widening cash flow gaps and adding administrative complexity. A recent analysis from 340B Health found that disproportionate share hospitals could face average upfront costs exceeding $72 million if the rebate model expands. e pilot has already drawn sharp criticism. America's Essential Hospitals called the rebate approach "a clear case of the fox guarding the hen house," arguing that it offers "no benefit to patients' ability to access discounted drugs." A bipartisan group of 162 lawmakers has also urged HHS to delay implementation, citing its accelerated timeline and potential legal overreach. At Providence, the reaction has been pragmatic but urgent. Mike Skafi, assistant vice president of pharmacy operations, told Becker's the system has spent months modeling both financial and operational exposure. at work includes financial forecasting, strategic assessments, policy engagement and operational readiness. Providence is analyzing historical and projected data across its 340B operations, using tools for rebate model forecasting and Medicare price cap impact analysis to gauge risks and opportunities. e team is also running scenarios for both approved and denied claims, with corresponding financial implications. To inform its strategy, Providence partnered with external experts to evaluate legislative, financial and operational factors, including mitigation strategies for potential disruptions. e system is closely tracking guidance from HHS and the Office of Management and Budget, as well as any congressional actions that could shi oversight from HRSA to CMS. Internally, leaders are refining risk mitigation plans to prepare for possible manufacturer shorting, rebate denials and other market pressures. Mr. Skafi said the first year of the pilot is likely to see several hurdles, including cash flow volatility, rebate timing and administrative complexity. e shi from upfront 340B discounts to post-sale rebates will require hospitals to float large sums of cash to drugmakers before reimbursement, creating new financial strain. Covered entities will also need to navigate multiple portals for claim submission, reconciliation and dispute resolution — a fragmented process that increases the risk of missed rebates, delayed payments and compliance failures. Providence anticipates additional IT and data security challenges as hospitals are required to transmit claim-level data while maintaining privacy compliance and audit readiness. "ere will be a need for additional personnel to manage claims-level data and audit the receipt of timely payments," Mr. Skafi said. "is will take time away from other essential operational and compliance tasks." He added that training and cross-functional coordination between pharmacy, finance and compliance teams will be essential to avoid workflow disruptions once the rebate model takes effect. Providence has already established a cross-functional collaboration framework to address those challenges. Pharmacy, finance and compliance teams are developing a shared operations dashboard to track performance, forecast drug expenditures and identify rebate opportunities. Privacy leaders are also reviewing the new data submission portals to ensure secure transmission and reporting alignment. "We're taking a multidisciplinary approach to address operational, financial and regulatory challenges," Mr. Skafi said. "Forecasting increased drug expenditure due to wholesale acquisition cost exposure and preparing for formulary impacts are key priorities." If 340B margins erode, Providence intends to protect what Mr. Skafi called its "first dollars" — the funds that support charity care, medication access and community health initiatives. ese areas, he said, directly impact vulnerable populations and reflect the mission of the 340B program. e system also plans to preserve funding for compliance infrastructure and audit readiness, recognizing that any failure in these areas could jeopardize eligibility. Providence is urging HRSA to strengthen enforcement mechanisms that hold drug companies accountable and ensure that rebate administration costs are fully covered. "Spending 340B dollars on administrative compliance not only redirects resources away from patients in need," Mr. Skafi said, "but it is also completely counter to the program's purpose." Providence is also reassessing its pharmacy network strategy, particularly around specialty and contract pharmacy models, and reallocating staff to manage rebate submissions and collections. e system is engaging in coordinated advocacy efforts with the American Hospital Association, the American Society of Health-System Pharmacists and 340B Health to protect upfront discounts and reduce the administrative burdens the rebate model would introduce. For other pharmacy leaders who may not yet have a plan in place, Mr. Skafi's advice is to start early. "Review the impacted product list so you know what dollars are at risk," he said. "Explore the rebate portals, engage with your third- party administrators and begin mapping your operational strategy now." n

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