Court Denies Requests to Revisit 340B, Site-Neutral Payment Cases

According to the American Hospital Association (AHA), an appeals court has declined to reconsider two decisions from the summer, which upheld Medicare reimbursement cuts for 340B drugs and for off-campus hospital outpatient clinic visits.

The hospital group, which was a plaintiff in both of the cases, announced the full US Court of Appeals’ decision earlier this week.

The group reported that the Appeals Court declined to rehear a case challenging a nearly 30 percent reimbursement cut under the Medicare Outpatient Prospective Payment System (OPPS) for certain hospitals participating in the 340B Drug Program.

A three-judge panel upheld the policy cutting reimbursement rates for the drugs in a 2-1 decision released on July 31. Hospitals had argued to the panel that the department overstepped its statutory authority by cutting rates for drugs acquired through the program and that the cuts harm patient access to prescription drugs.

The Appeals Court also refused to rehear a case decided on July 17 concerning the implementation of site-neutral payments for off-campus hospital outpatient clinic visits.

The policy implemented in 2019 reduced Medicare OPPS rates for off-campus provider-based hospital departments delivering the service, even those excepted from site-neutral payments by the Bipartisan Budget Act of 2015.

A court had ruled that HHS had the authority to enact the site-neutral payments across all hospitals paid under the OPPS even though a lower court had twice found that the department did not have the statutory authority to reduce rates for certain off-campus provider-based hospital departments.

The AHA and other plaintiffs in the cases, including the Association of American Medical Colleges, had requested that an appeals court rehear both cases in separate pleas to the court system.

In a statement on its website, the AHA said it is “deeply disappointed in the court’s decisions in both of these cases, which conflict with Congress’ clear intent and defer to the government’s inaccurate interpretation of the law.”

“The association is evaluating all of its options to repeal these unlawful cuts, including petitioning the Supreme Court to hear the cases,” the group continued.

However, it is unlikely the Supreme Court would even consider the petition, according to Caroline Znaniec, a managing director at CohnReznick Advisory.

“The AHA can certainly petition the Supreme Court, but the Supreme Court is not required to hear the petition and it’s unlikely that this would be considered a priority above other cases petitioned to be heard, including the Affordable Care Act,” Znaniec told RevCycleIntelligence.

Therefore, the recent decisions from the Appeals Court pave the way for CMS to finalize plans to move forward with reduced Medicare reimbursement rates for drugs acquired through the 340B Drug Pricing Program.

The agency had proposed the new rates in the Medicare OPPS rule for calendar year (CY) 2021. The rule states, that for CY 2021 and subsequent years, CMS would pay for 340B drugs at the average sales price minus 28.7 percent. However, the agency also proposed to continue its policy of reimbursing hospitals 22.5 percent less the average sales price for drugs acquired through the program.

Under the new formula for 340B drug payment, CMS estimated that reimbursement would decrease by $427 million in 2021 and Medicare beneficiaries would save $85 million in out-of-pocket expenses.

Providers, however, have criticized the new rate in comments on the proposal. They say it will further harm hospitals and patients during the COVID-19 pandemic.

“Cuts to the 340B Program should not only be discussed within the constraints of the payment methodology itself. There are downstream effects,” Znaniec explained. “Cuts to payment can result in the hospital’s inability to meet the financial requirements to increase access to maintenance and specialty drugs to those patient populations that otherwise could not qualify for receipt.”

The decision to uphold site-neutral payments will also have an impact on hospital revenue, including a possible shifting of costs to commercial payers or patients, the healthcare consultant added. But new hospital price transparency rules could make that difficult.

“With the pressure for price transparency, hospitals will be challenged with any increases in charges, and the resulting out of pocket expenses, to demonstrate a higher level of quality,” Znaniec stated. “Cost shifting in the age of price transparency can be easily questioned when compared to quality.”

“Hospitals will need to demonstrate the need for services rendered within a hospital setting with an eye towards improvements in clinical outcomes,” added Znaniec. “Hospitals will also need to revisit the pricing of their services to lessen the financial burden of out of pocket expenses for their patients that are facing rising deductibles and other cost-sharing expectations.”

CMS has yet to finalize the rule cutting 340B reimbursement to hosptials. The comment period on the proposed rule ended October 5.