The Institute for Health Policy Accountability (IHPA), an independent authority on key drivers of decision making in the health care space, published a new report detailing how non‑profit hospital systems in Kentucky are abusing the 340B Drug Pricing Program and generating billions in annual revenue, paying top administrators seven‑figure compensation, and undertaking major multi-million dollar expansions. 

As highlighted by IHPA last month, non‑profit hospital systems across the nation are exploiting the 340B program, a federal program intended to support low‑income patients, and hiking prices for their patients on drugs they received at a discount. 

The report reviews the waste, fraud, and abuse of the 340B program from several major hospital systems across Kentucky, including Baptist Health, Norton Healthcare, St. Elizabeth Medical Center Inc., Saint Joseph Health System, and UK Healthcare.

Key findings from the IHPA report include:

• Limited charity care

• • • Baptist Health has a $73 million shortfall, spending just $62 million on charity care and community investment, with more than $135 million in tax exemptions.
    • Norton Healthcare received $110.5 million in tax exemptions, with less than $32 million in community benefits provided.

• Inflated executive compensation

• • • Baptist Healthcare CEO and Director Gerard Colman made over $3 million in total compensation, and according to the organization’s 990, Colman is also the fourth-highest-paid nonprofit employee in the state.
    • Norton Healthcare CEO Russell Cox is the fifth-highest paid nonprofit employee in the entire state, with over $3 million in total compensation.
    • The St. Elizabeth Medical Center President and CEO Garren Colvin, makes nearly $1.4 million, according to its 2023 filing.
    • Saint Joseph Health pays 14 employees over six-figure salaries, ranging from $400,000 to over $1.2 million, according to the organization’s 2023 990.

• Million-dollar expansions

• • Baptist Healthcare’s profits from 340B are spent on over $800 million in new development.

Read the full report here.

Enacted by Congress in 1992, the 340B program was meant to lower prescription drug costs for nonprofit hospitals that serve low-income and vulnerable communities. Instead, research shows the program has been exploited by major health systems that generate billions in annual revenue.

This report follows a Senate HELP Committee hearing, in October, where Republican Senators voiced their frustrations with the program:

“Anyone who says that 340B is cost-neutral to taxpayers is not paying attention,” Committee Chair Sen. Bill Cassidy, R-La., said at the hearing. “As the 340B program grows, so have healthcare costs. 340B should be about making drugs more affordable. It should not be a line item on an investor call.” 

According to a recent CBO analysis, hospitals across the U.S. have exploited the 340B Drug Pricing Program, resulting in significant waste, fraud, and abuse. The report found that the program “encourages behaviors that increase federal spending and raise prices for American taxpayers.”

The Institute for Health Policy Accountability is an independent authority on key drivers of decision making in the health care space. IHPA provides fact-based research and analysis across the public policy landscape, adding a central and currently missing voice to the conversation.

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