Tax-exempt hospitals in Minnesota that have raked in large sums of revenue from a government safety net program spent tens of millions of dollars overseas over the past fiscal year, raising alarm among watchdogs monitoring the flow of cash in the nonprofit healthcare sector.
Minnesota-based hospitals funded by 340B, a federal drug discount program that has drawn concerns from conservatives, together generated at least $1.34 billion in net revenue through the program’s reimbursement system in 2024, according to a February report from the Minnesota Department of Health.
Simultaneously, these same so-called “community hospitals” collectively spent billions abroad, primarily stashed away in offshore accounts scattered about the Caribbean, Central America, and Europe.
A highly lucrative revenue stream
Providers participating in the 340B program purchase drugs at federally mandated discounted prices from manufacturers, with no limit on the amount of reimbursements that 340B-covered entities can receive from commercial health insurance carriers or other payers, such as Medicare and self-paying patients, for the cost of acquiring the prescription medication.
Industry hawks opposed to 340B’s expansion warn that providers could then charge patients for the full cost of the drugs, unbeknownst to the beneficiaries.
There are also no direct federal or state requirements on how qualified providers use revenue produced under the 340B program.
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Exponential growth in 340B revenue has raised questions about provider billing practices.
The annual findings from the MDH, its second legislative audit of the program, are required by a state statute aimed at increasing financial transparency around 340B as the program grows in popularity among providers.
Enacted in 2023, the 340B disclosure law was passed at a time when Minnesota’s taxpayer-funded healthcare programs were targeted by fraudulent medical billing schemes.
The MDH reported to the Minnesota legislature in February that the state’s billion-dollar 340B earnings for 2024 are more than double the $630 million in 340B revenue that hospitals across Minnesota had hauled in in 2023. That year’s haul, however, was considered “a substantial undercount” because the 340B data largely did not document money made off of office-administered drugs, such as infusions and injections given on site.
The latest $1.34 billion is likely an underestimate of statewide 340B revenue as well, according to the MDH, because the data still do not fully capture all sources of program-derived payments. MDH auditors again cited “challenges surrounding the accurate reporting of office-administered drugs.”
Missing reimbursement data sparks transparency concerns
In the recent report to Minnesota lawmakers, state oversight officials lamented their “inability to accurately trace reimbursements for administered drugs.”
Drugs administered in an outpatient setting, like the aforementioned in-clinic drug therapy, are often significantly more expensive than typical pharmacy-dispensed drugs. Hence, clinically administered drugs bring in more money compared to those dispensed by retail pharmacies.
In the first year of state-mandated 340B reporting, most Minnesota healthcare centers only submitted data on dispensed drugs and left out office-administered drugs, blaming supposed ambiguity in the legislation. The state legislature subsequently clarified its intent to collect data on all 340B drugs, including office-administered drugs, and 340B revenue reports submitted for the following year were accordingly supposed to include both types of drugs.
Still, few participating providers followed MDH guidance in the second year of Minnesota’s 340B transparency pilot program. An unknown amount of the reimbursement data pertaining to administered drugs is missing.
MDH personnel asked providers to acknowledge in a survey which drugs were recorded. Survey responses were “sometimes unclear or conflicted with previously stated information,” and some surveys were never completed. Approximately 12% of providers admitted that they only submitted 340B data on dispensed drugs and omitted office-administered medicines.
More than half of the 340B program participants sent in estimates instead of actual figures for administered drugs. Many of the 340B entities, despite MDH reporting guidelines, did not identify their estimation method. Of the providers that did provide explanations as to how they calculated estimates, their methods for quantifying reimbursements varied vastly.
The MDH was not able to independently validate those methods or the input data used in the calculation of said estimates. Due to such factors, the MDH could not determine the apparent miscount’s magnitude.
The exact volume of 340B drugs dispensed or administered is also unaccounted for due to “widespread inconsistency” in how hospitals counted the quantity of outgoing prescriptions.
Roughly half of providers used “pricing units,” for example, a gram or a millimeter, as required, while the other half grouped by claims or prescription fills. Some providers mixed different pricing units within the same submission. The volumetric data are therefore rendered unusable, as there is not yet a reliable method for reconciling nonuniform reporting.
340B providers may also be fudging the numbers on internal costs, that is, operational expenses incurred by covered entities to administer the program, such as money needed for staffing, training, or other administrative overhead.
MDH personnel say that while there is no way to validate alleged internal costs, auditors observed that several providers reported substantial expenditures, at times greater than 90% of total 340B programmatic costs, including the cost of purchasing the drugs.
The state health department flagged suspicious reporting patterns of providers attributing general upkeep-related expenses to 340B operations and categorizing costs as “waste,” “other,” or another vaguely described budget item.
Thus, it is possible internal costs were inflated by providers, the MDH concluded, resulting in what appears to be lower net 340B revenue as reported on paper.
Simultaneous overseas spending calls into question actual delivery of charity care
The nonprofit Minnesota hospitals raking in 340B revenue have, during the same period, disbursed millions of dollars internationally on investments in foreign countries.
In 2024, the top 25 recipients of 340B revenue in Minnesota spent more than $3.3 billion on activities outside the United States, according to a Washington Examiner review of each hospital system’s 990 IRS filings comparing overseas spending to provider-level 340B income.
A fifth of the cash, more than $668 million, went toward offshore holdings in the Caribbean and Central America. Another $162 million was invested in European accounts.
Conservative critics say some providers are exploiting the 340B program either to subsidize services banned from receiving federal funding, such as pediatric sex-change procedures, or finance activities entirely unrelated to medical care.
Opponents of the program caution that providers who procure deeply discounted prescriptions might pocket the difference generated from marked-up reimbursement rates and reinvest their 340B savings elsewhere.
Will Hild, the executive director of Consumers’ Research, said some of Minnesota’s largest hospital chains generating revenue from the 340B program are, in turn, pouring resources into diversity, equity, and inclusion initiatives, climate alarmism, and gender-transition treatments for minors.
For instance, M Health Fairview, one of the state’s biggest 340B earners, has reportedly carried out transgender procedures on children. Allina Health, which oversees six 340B entities in Minnesota, treats DEI and environmental activism as core priorities.
“Meanwhile, millions of dollars are being funneled into overseas investments instead of being spent where it belongs — on patients here at home,” Hild told the Washington Examiner.
Nonprofit hospitals spending funds on political lobbying, litigation, and other agenda items irrelevant to patient services are facing increasing scrutiny and accusations, including from regulators in Congress, that they are undeserving of their tax-exempt status and the tax benefits that accompany it.
Several studies have found that up to 80% of hospitals classified as charitable organizations are spending less on charity care than they receive in tax breaks.
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“It’s absurd that American hospitals, which benefit from tax exemptions and direct subsidies, turn around and act like multinational investment firms,” Save Our States executive director Trent England said.
“They do this instead of passing savings on to patients or increasing their paltry percentage of charity care,” England told the Washington Examiner. “It’s time for the rampant waste and abuse by nonprofit hospitals to be exposed and for policymakers to demand that they prioritize patient care.”