A federal cross-subsidy, Section 340B Drug Pricing Program of the Public Health Service Act of 1992, requires Medicaid-participating pharmaceutical manufacturers to sell outpatient drugs at discount prices to hospitals serving uninsured and low-income patients. Clinics are too small to participate, hence the incentive to consolidate into hospital conglomerates. Intended to keep hospitals open in low-income and rural areas, it ends up being an economic incentive to consolidate. The patient base isn’t valuable to keeping a hospital in business. Instead, it’s valuable for access to the cross subsidy. The benefit can go to hospitals in higher-income areas. The low-income patients themselves don’t have access to the drugs at discounted prices but if they are on Medicaid, they don’t have co-pays.
If hospitals and clinics consolidate into tax-exempt hospital conglomerates, this takes valuable land off the tax rolls, shifting the burden of higher property tax bills onto residents.
Dan Snow, a University of Chicago Harris School graduate in Prof Christopher Berry’s program and formerly of Assessor Fritz Kaegi’s office, has quantified this tax shift in the near western suburbs of Chicago. His case study of the acquisition of for profit MacNeal Hospital in Berwyn by tax-exempt Loyola Medicine whose main hospital, Loyola University Medical Center, is in Maywood, took $23 million equalized assessed valuation off tax rolls, cutting their tax bill by $2.5 million. That shortfall was absorbed by roughly 15,000 surrounding properties, resulting in an average annual tax increase of $100 per property.
Fact Sheet: The 340B Drug Pricing Program, American Hospital Association
Drugmakers push back on Illinois 340B drug discount bill
by Jon Asplund
Crain’s Chicago Business
May 23, 2025 05:16 AM
The 340B program has gone off the rails
An Illinois case study of one federal program’s unchecked growth and unintended consequences
by Dan Snow
Jul 17, 2025
Property taxes going up? The 340B Program might be partly responsible
by Dan Snow, Lars Doucet, and Greg Miller
Feb 17, 2026
one page
Methodology at GitHub
