Rural Referral Center Participation in the 340B Drug Discount Program

Issue Brief

The Rural Referral Center (RRC) hospital is one of the most quickly growing 340B covered entity types in terms of its share of total purchases at 340B discounted prices. RRCs accounted for $1.3 billion in total purchases at 340B prices in 2022, an increase of 405 percent since 2017—more than twice the rate of growth for the overall 340B Drug Pricing Program. Contrary to their name, RRCs do not have to be located in rural areas or treat rural patients to qualify as 340B covered entities. In fact, 82 percent of currently enrolled 340B RRCs are in urban areas, and 77 percent of their patients reside in urban areas. In terms of their geographic locations, RRCs resemble 340B Disproportionate Share Hospitals (DSH) more than they do other rural 340B hospital types. However, RRCs are subject to an eligibility threshold 32 percent lower than DSHs in terms of the disproportionate share adjustment percentage, a measure of low-income inpatients treated at a hospital. Recent growth in 340B purchases by RRCs demonstrates that more urban hospitals are using this pathway to enter the 340B program despite treating an insufficient number of low-income patients to qualify as DSHs, the traditional pathway to 340B access for general acute care hospitals located in urban areas.