Eye on Advocacy: Designation Push Continues, 340B Under Scrutiny

Last quarter, we shared advocacy wins included in the fiscal year (FY) 2026 funding package and outlined key future priorities. Congressional focus since has shifted to pressing geopolitical issues, alongside a partial government shutdown tied to congressional Republicans' efforts to advance a narrowly supported reconciliation bill. To resolve the shutdown, President Trump signed a funding bill on April 30, after a 76-day funding lapse for the Department of Homeland Security.

Amid this backdrop, our team has continued advancing essential hospitals' priority advocacy issues.

Essential Hospital Designation

We have focused heavily on building support for essential hospital designation, including securing new House cosponsors and raising awareness about designation's importance as a policy tool for lawmakers. The legislation remains strongly bipartisan, led by Reps. Lori Trahan (D-Mass.) and David Valadao (R-Calif.), and now includes six additional cosponsors. As of (May 12), cosponsors include:

• Juan Ciscomani (R-Ariz.)
• Troy Carter (D-La.)
• Marc Veasey (D-Texas)
• Darren Soto (D-Fla.)
• Jennifer Kiggans (R-Va.)
• Brittany Pettersen (D-Colo.)
• Gus Bilirakis (R-Fla.)
• Ritchie Torres (D-N.Y.)
• Ann Wagner (R-Mo.)
• Burgess Owens (R-Utah)
• Emanuel Cleaver (D-Mo.)
• Terri Sewell (D-Ala.)
• Troy Balderson (R-Ohio)

To assist both internal and member advocacy, we have developed a designation FAQ document.

340B Drug Pricing Program

In late March, more than 90 bipartisan House lawmakers signed a Dear Colleague letter supporting a prohibition on the use of federal funds to implement a 340B Drug Pricing Program rebate model. Led by Reps. Doris Matsui (D-Calif.), Dusty Johnson (R-S. Dak.), Debbie Dingell (D-Mich.), and Tracey Mann (R-Kans.), the letter calls for inclusion of this restriction in the FY 2027 Labor, Health and Human Services, Education, and Related Agencies bill.

In late April, a competing letter circulated in the House by Reps. Buddy Carter (R-Ga.) and Diana Harshbarger (R-Tenn.) that is addressed to HHS and HRSA in support of the 340B rebate model. Five additional Republicans signed on:

• Brian Babin (R-Texas)
• Mike Ezell (R-Miss.)
• Glenn Grothman (R-Wis.)
• Russ Fulcher (R-Idaho)
• Mary Miller (R-Ill.)

In the Senate, a Dear Colleague letter circulated in April requesting that the 340B rebate model pilot not be funded. There were nine Democrat signers:

• Peter Welch (D-Vt.)
• Chris Van Hollen (D-Md.)
• Angus King (D-Maine)
• Ben Ray Lujan (D-N.M.)
• Richard Durbin (D-Ill.)
• Tina Smith (D-Minn.)
• Amy Klobuchar (D-Minn.)
• Jeff Merkley (D-Ore.)
• Kirsten Gillibrand (D-N.Y.).

As many FAN members know, a rebate model would fundamentally alter the 340B program by shifting from up-front discounts to retrospective rebates. This change would require safety net providers to front significant capital for drug purchases, creating operational and financial strain.

The association is currently preparing for the release of two rumored pieces of legislation. One, led by Reps. Jack Bergman (R-Mich.) and Raul Ruiz (D-Calif.), builds on a February bill that would exempt community health centers from proposed 340B rebate models by extending the exemption to federally qualified health centers and select other federal grantees. Notably, essential hospitals are not exempt from the pernicious rebate under his bill. The association appreciates that this legislation recognizes the rebate as a threat but will push back on its exclusion of essential hospitals.

The other is being led by Rep. Scott Peters (D-Calif.) and several others who are as yet unconfirmed. It proposes 340B reforms that would be burdensome and detrimental to essential hospitals and undermine the program's original intent.

Additionally, the Health Resources and Services Administration (HRSA) issued a request for information earlier this year seeking input on rebate models and their potential impact. America's Essential Hospitals responded and provided members with a template to support broader engagement.

Noteworthy Congressional Hearing Activity

In late March, the House Committee on Energy & Commerce Health Subcommittee held a hearing to examine how the health care provider landscape, including hospitals, physician practices, and community-based providers, affects health care costs, access, and affordability. The Oversight and Investigations Subcommittee also held a hearing to examine fraud in Medicaid and Medicare. In April, the Health Subcommittee hosted Secretary of Health and Human Services Robert F. Kennedy Jr., who testified on the FY 2027 HHS budget.

The March Health Subcommittee hearing is part of a broader, ongoing effort focused on health care transparency and affordability. In response, the association circulated a statement to committee members highlighting the increasingly challenging circumstances facing essential hospitals. The hearing touched on the impact of provider consolidation, Medicare and Medicaid payment policy, transparency, and recent coverage changes on patients and providers. Democrats highlighted how the Medicaid cuts stemming from H.R. 1 are devastating to hospitals. Witnesses broadly agreed upon key cost drivers but disagreed on the role of recent federal health policy changes.

In mid-April, the House Committee on Ways and Means held a full committee hearing focused on Medicare fraud. The hearing examined the prevalence of fraud, waste, and abuse in Medicare and efforts to combat fraud to protect patients and taxpayers. Witnesses included Lynn Ianni, PhD, Medicare beneficiary and Medicare fraud victim; Sheila Clark, president and CEO, California Hospice and Palliative Care Association; David Klebonis, CEO, Palm Beach Accountable Care Organization; Christopher Deery, director of corporate and financial investigations, Independence Blue Cross; and Kristi Martin, principal, Highway 136 Consulting.

In an April 28 hearing with health system CEOs, the committee examined how rising health care costs affect patients and families, with a focus on health systems' role in health care affordability.

Committee Republicans emphasized that hospital prices and system incentives are primary drivers of rising health care costs, repeatedly pointing to consolidation, corporatization, and payment disparities as key factors that increase prices without improving outcomes. Members highlighted "site-neutral" payment policies as a central reform. They also raised concerns about nonprofit hospital practices, including tax-exempt status, community benefit levels, and use of programs like 340B and the rural reclassification of urban hospitals. Republicans consistently framed affordability as a systemwide issue involving all actors-hospitals, insurers, PBMs, and drug manufacturers-while rejecting claims that the 2025 cuts to Medicaid and other areas of health care are the primary cause of coverage loss or cost increases.

Committee Democrats focused on coverage, access, and affordability, repeatedly arguing that policies tied to the 2025 cuts to Medicaid and other programs and the expiration of Affordable Care Act (ACA) enhanced premium tax credits are driving coverage losses, raising premiums, and financially straining families and providers. Members emphasized that reduced coverage leads to increased uncompensated care, delayed treatment, and worse health outcomes, particularly in rural and underserved communities. Democrats highlighted the importance of Medicaid, Medicare, and the ACA to system stability, while stressing workforce shortages, administrative barriers like prior authorization, and rising pharmaceutical costs as additional contributors to affordability challenges.

Witnesses included Sam Hazen, CEO, HCA Healthcare; Wright Lassiter III, president and CEO, CommonSpirit Health; Brian Donley, president and CEO, New York-Presbyterian, Michael Waldrum, CEO, ECU Health, and Brad Woodhouse, president, Protect Our Care.

The Senate Committee on Health, Education, Labor and Pensions held a full committee hearing on April 16 on "Making Medicines More Affordable: How Competition Can Lower Drug Prices." The conversation largely focused on generics, biosimilars, and TrumpRX. Witness Ryan Long, director of congressional relations and senior research fellow at Paragon Health Institute and nonresident senior scholar at USC Schaeffer Institute, called for reform of the 340B Drug Pricing Program several times throughout the hearing. The association followed up with each member on the committee affirming our staunch support of the program because of its critical importance to essential hospitals and the patients they serve. The committee also held two field hearings, one focused on mental health and substance use disorder treatments and the other focused on making health care more affordable. A key theme in the latter field hearing was the role of intermediaries, particularly pharmacy benefit managers (PBMs), and broader consolidation in driving costs; committee Chair Bill Cassidy (R-La.) emphasized increasing price transparency, promoting competition, and shifting more control to patients through market-based tools.