CMS Finalizes Reimbursement Cuts for 340B Hospitals

In a striking blow to 340B hospitals, the Department of Health and Human Services, the Centers for Medicare and Medicaid Services (CMS) published a latest outpatient Medicare Payment System Prospective (OPPS) rule adopting its previous proposal to significantly reduce Medicare reimbursement for separately payable ambulatory drugs purchased by hospitals as part of of program 340B. The final rule confirms that CMS will drop the average sales price (ASP) refund rate plus 6 percent to ASP minus 22.5 percent. The payment changes are to take effect January 1, 2018.

Citing the strong growth of vendor participation in the 340B program and the increase in prices of Medicare Part B-administered drugs to inpatients, the stated goal of CMS is to align the Medicare payment on the amounts spent by hospitals to acquire these drugs. CMS relied on a report from the Medicare Payment Advisory Board (MedPAC) from May 2015 to Congress to determine the new formula. While MedPAC estimated that the ASP less than 22.5 percent that CMS ultimately adopted was the "lower limit of the average reduction" on drugs paid under OPPS Medicare, MedPAC March 2016 Report to Congress recommended a reduction of payment to ASP less 10%, which would have allowed 340B hospitals to realize, on average, a financial benefit to participate in the 340B program.

The financial impact of changes to 340B hospitals

The OPPS changes will have a significant impact on 340B participating hospitals. CMS estimates that the change will result in a $ 1.6 billion reduction in OPPS payments to 340B hospitals for drugs payable separately – an additional estimated reduction of $ 700 million on the estimated $ 900 million rule proposed. While CMS had asked for feedback on how to redistribute savings to target hospitals that treat low-income patients, the final rule instead redistributes the amounts saved by 340B payment reductions by increasing OPPS payments for non-fee-based services. medicated

The CMS exempts single rural community hospitals, children's hospitals and anti-cancer hospitals exempted from SPA from the application of new drug payment reductions for the 2018 calendar year; they will continue to be paid to ASP + 6%. Exempt hospitals will have to report the use of 340B to Medicare for information and follow-up purposes.

Anticipated litigation

Medicare payment changes are likely to be challenged in court by one or more stakeholder groups, including the American Hospital Association . In comments submitted on the proposed rule, several groups argued that CMS did not have the authority to implement such payment changes or reduce 340B hospitals for discounts, and could not otherwise contradict the Intention and scope of the 340B program without further action by Congress. These challenges will likely come before the courts as CMS implements the new rule and Congress continues to debate the future of the 340B program.

No impact on outpatient ambulatory hospital services

Changes to Medicare reimbursement also create new incentives for out-of-campus hospital outpatient services (HOPDs). Since 1 January 2017 new off-campus hospital ambulatory services that do not fall under one exception (non-exempt HOPD) are not eligible for payment under the OPPS, and instead benefit a reduced refund rate. CMS has confirmed in the final rule that new payment reductions for 340B drugs will not be applied to non-exempt HOPDs, as their drugs are not reimbursed under OPPS. As a result, the use of 340B drugs by a non-HOPD exception will not have an impact on the Medicare reimbursement of the HOPD.

Challenges of Implementation

In light of the new rule, 340B hospitals should be preparing to come into compliance, which will require the use of a new modifier on every drug billed to Medicare OPPS that was purchased in the framework of the 340B program. In some cases, this will require greater coordination between the hospital's billing and pharmacy divisions to ensure that the modifier is applied accurately.

We will continue to monitor program 340B and we will keep you informed of any other changes that may occur.

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