CMS Will Issue OPPS Providers Lump-Sum Payments to Remedy 340B Losses

Hospital Outpatient Prospective Payment System (OPPS) providers participating in the 340B drug pricing program will receive a one-time lump-sum payment to offset losses between calendar years (CYs) 2018 and 2022, according to a final rule provision from CMS.

Before 2018, the Medicare payment rate for 340B drugs provided to outpatient hospitals was the average sales price (ASP) plus 6 percent. The CY 2018 OPPS/ASC final rule changed the payment rate to ASP minus 22.5 percent to reflect the costs incurred by 340B hospitals when acquiring 340B drugs. This rate was effective for drugs purchased from CY 2018 through the third quarter of CY 2022.

To achieve budget neutrality, CMS increased payments to all hospitals for non-drug items and services, effective from CY 2018 to CY 2022.

After the Supreme Court ruled that the payment cuts for 340B drugs were unlawful, all CY 2022 claims for these drugs paid on or after September 28, 2022, were paid at the rate of ASP plus 6 percent. In the CY 2023 OPPS/ASC final rule, CMS reverted to the default rate and implemented a 3.09 percent reduction to payment rates for non-drug items and services.

To account for the payments that hospitals lost while the unlawful cuts were in effect, CMS has finalized a policy to provide them with a one-time lump-sum payment. The agency estimates that between CY 2018 and the third quarter of CY 2022, OPPS 340B providers received $10.6 billion less in 340B drug payments.

However, some CY 2022 claims have been processed with the default payment rate, meaning providers have already received $1.6 billion of the $10.6 billion owed. Each 340B hospital affected will receive a lump-sum payment from CMS of the remaining $9.0 billion owed. The final rule includes the specific amounts owed to the 1,700 hospitals that were impacted by the cuts.

Between CY 2018 and the third quarter of CY 2022, hospitals were paid $7.8 billion more for non-drug items and services. To maintain budget neutrality, CMS is further offsetting payments for non-drug items and services by reducing the OPPS conversion factor by 0.5 percent starting in CY 2026.

The agency initially proposed that the offset start in CY 2025, but stakeholders requested a CY 2026 start date to give hospitals more flexibility as they face financial challenges and workforce shortages. The reduction will continue until the full $7.8 billion is offset, which CMS estimates to be 16 years.

Hospital groups, including the American Hospital Association (AHA), expressed mixed feelings about the two policies that CMS finalized.

“Following years of litigation and a unanimous Supreme Court win, the AHA is very pleased that 340B hospitals finally will be reimbursed in full for what HHS unlawfully withheld from them for five years. The one-time, lump-sum repayment hospitals will soon receive will help them to continue providing high-quality care to their patients and communities,” Rick Pollack, president and CEO of AHA, said in a statement.

“However, HHS made a grievous mistake in choosing to claw back billions of dollars from America’s hospitals, especially those that serve rural, low-income, and other vulnerable communities,” Pollack continued. “HHS decided to ignore hundreds of comments from hospitals and other providers explaining why this Medicare cut is both illegal and unwise. The AHA will continue to review this rule and consider all available options going forward.”