Section 340B of the Public Health Service Act establishes a program under which certain hospitals may obtain significant discounts on drugs furnished to outpatients. The program was first adopted in 1992, and in its early years, the 340B drug discount was available only to a limited group of hospitals, mainly consisting of public and private, not-for-profit hospitals in urban areas that treated a large proportion of low-income patients (disproportionate share hospitals (DSH) ). Following 2003 amendments to the Medicare DSH statute and more recent changes to the 340B statute, a broader group of hospitals may qualify for the discount, including some rural hospitals and children's hospitals. The 340B program provides an opportunity for hospitals to achieve significant cost savings on outpatient drugs. Ongoing disputes surrounding the Medicare DSH payment calculation, and potential misunderstandings of the Medicare provider-based reimbursement rules, pose obstacles to hospitals that wish to continue or gain participation in the program.