Author: HP McLovincraft

When Vice President J.D. Vance and Federal Trade Commission (FTC) Chairman Andrew Ferguson launched the White House Fraud Task Force earlier this year, they promised that the federal government would stop being a piggy bank for grifters and start being a steward of the taxpayer’s dollar. They’re off to a great start, freezing billions in suspect payments, exposing operators that billed Medicare for patients who don’t exist, and putting all 50 states on notice.

But one of the most brazen scams in American health care is still sitting in plain sight. The 340B Drug Discount Program, on track to become the largest government drug program in the country, was created to help low-income patients. All too often it instead helps multibillion dollar “non-profit” hospitals to fund ad campaigns, pad executive pay, and push out independent competitors.

One angle of this 340B scandal has gone unreported: many of these same hospitals have been cited by the Department of Justice for Medicare and Medicaid fraud. This trend warrants a closer look from Vance and Ferguson.

A review of Justice Department recent settlements identifies 340B-registered hospital systems that have agreed to pay tens—even hundreds of millions—of dollars to settle allegations of Medicare or Medicaid fraud. Across a subset of particularly egregious cases, aggregated settlements collectively exceed half a billion dollars. Cases range from physician kickbacks and billing services never rendered, to manipulating Medicaid matching funds and charging for medically unnecessary procedures.

CHRISTUS St. Vincent, the same Santa Fe hospital documented for its anti-competitive campaign against Nexus Health, paid $12.24 million in 2017 to settle Medicaid False Claims Act allegations after manipulating county donations to inflate federal matching funds. It separately settled a second case for billing services a physician never performed.

Bon Secours St. Francis Health System paid $36.5 million to resolve kickback allegations tied to physician referral volume. A Virginia lawsuit separately alleged 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 directing resources elsewhere.

Indianapolis-based Community Health Network (CHN) paid $345 million in 2023 to settle False Claims Act allegations that it systematically violated the Stark Law by overpaying recruited specialists to capture their downstream Medicare referrals. The government alleged that CHN knowingly exceeded fair market value in physician compensation to capture downstream Medicare referrals, then awarded bonuses directly tied to referral volume.

These cases are not representative of every 340B hospital. Many covered entities use the program exactly as Congress intended. But the bad actors are unfortunately common. They are large, well-resourced systems that have claimed the program’s benefits while defrauding the federal programs it was designed to complement.

And because 340B has no mechanism to distinguish between good actors and bad, the entire program pays the price. A fraud settlement triggers no automatic review of a hospital’s eligibility. There is no coordination between the Justice Department, the Centers for Medicare & Medicaid Services (CMS), and the Health Resources and Services Administration (HRSA) 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. This is the type of coordination challenge that the White House Fraud Task Force can help to solve.

The Trump administration has already gotten the ball rolling. In July 2025, HRSA launched a pilot program to test a rebate model that would require hospitals to submit data on how 340B drugs are dispensed before receiving reimbursement, building in a layer of accountability the program has never had. Hospital lobbying groups sued to block it, and a federal court issued an injunction in December 2025. HRSA 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: no strings attached, 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.

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