Medicare Fraud, Kickbacks Rampant at 340B Hospitals
A federal drug discount program for low-income patients is enriching hospital systems that have paid over half a billion dollars to settle Medicare and Medicaid fraud allegations.
The 340B Drug Discount Program, on track to become the largest government drug program in the country, was established to provide a financial lifeline for vulnerable patients. According to Breitbart News, the initiative has instead become a cash cow for multibillion-dollar hospital networks that use the funds to finance advertising blitzes, inflate executive compensation, and eliminate independent competitors.
A previously unreported dimension of the 340B scandal has now emerged. Many hospitals enrolled in the program have been formally cited by the Department of Justice for defrauding Medicare and Medicaid, Breitbart News reports.
Half a Billion in Fraud Settlements
A review of recent Justice Department settlements reveals that 340B-registered hospital systems have paid tens or even hundreds of millions of dollars to resolve allegations of Medicare or Medicaid fraud. In a subset of especially severe cases, the combined settlements surpass half a billion dollars.
The alleged violations include physician kickbacks, billing for services never provided, manipulating Medicaid matching funds, and charging for medically unnecessary procedures.
CHRISTUS St. Vincent, the Santa Fe hospital previously documented for its anti-competitive actions against Nexus Health, paid $12.24 million in 2017 to settle Medicaid False Claims Act allegations. The case centered on accusations that the hospital manipulated county donations to artificially inflate federal matching funds. The facility separately settled a second case involving billing for services a physician never performed.
Bon Secours St. Francis Health System paid $36.5 million to resolve kickback allegations linked to physician referral volume. A separate Virginia lawsuit alleged that Bon Secours credentialed an OB/GYN later convicted of fraud for performing bogus procedures. A 2022 New York Times investigation found the system extracting profit from a low-income Richmond neighborhood while redirecting resources to wealthier areas.
Community Health Network (CHN), based in Indianapolis, paid $345 million in 2023 to settle False Claims Act allegations that it systematically violated the Stark Law. The government alleged that CHN knowingly overpaid recruited specialists to capture their downstream Medicare referrals, then awarded bonuses directly tied to referral volume.
No Accountability Mechanism
These cases do not represent every 340B hospital. Many covered entities use the program exactly as Congress intended. But the bad actors are disturbingly common, as Breitbart News reports. They are large, well-resourced systems that have claimed the program’s benefits while defrauding the federal programs it was designed to complement.
The 340B program has no mechanism to distinguish between good actors and bad. A fraud settlement triggers no automatic review of a hospital’s eligibility. There is no coordination between the Justice Department, the Centers for Medicare and Medicaid Services, and the Health Resources and Services Administration that would prompt a second look.
Hospitals can defraud Medicare and Medicaid, pay hundreds of millions to resolve those allegations, and continue receiving 340B benefits without interruption.
Trump Administration Takes Action
The Trump administration has already begun addressing the problem. In July 2025, the Health Resources and Services Administration launched a pilot program to test a rebate model requiring hospitals to submit data on how 340B drugs are dispensed before receiving reimbursement. The initiative would build in a layer of accountability the program has never had.
Hospital lobbying groups sued to block the effort, and a federal court issued an injunction in December 2025. The agency has since restarted the effort, issuing a new request for information in February 2026.
The 340B program was built on a simple premise: give hospitals a financial advantage and they will use it to care for patients who have nowhere else to turn. For many, that is exactly what happens. But for others, the program has functioned as an open tab with no strings attached and no mechanism to screen out institutions with documented records of federal fraud.
As Vance and Ferguson turn the spotlight on fraud and scams across the healthcare system, 340B hospitals with a track record of bad behavior should be in their sights, Breitbart News reports.
With information from Breitbart News
