Hospital Outpatient Payment Would Suffer If 340B Cuts Reversed

Outpatient payments would decrease for the majority of hospitals if HHS reversed a controversial policy reducing 340B drug reimbursement, according to a new Avalere analysis.

The analysis examined complete fee-for-service claims for hospital outpatient departments at 3,454 facilities paid under Medicare’s Outpatient Prospective Payment System (OPPS). The data showed that 82 percent of all OPPS hospitals would see net total payment decreases in 2021 as a result of policy reversal.

The impact of the policy’s reversal would also be greater for rural OPPS hospitals, of which 90 percent would see a net payment decrease.

The latter would face greater net payment decreases if the policy was reversed because rural hospitals benefited from increases in OPPS base payment rates for non-drug items and services and were largely not subject to the 340B drug reimbursement cut, researchers stated.

In contrast, only about half (49.4 percent) of OPPS hospitals subject to the 340B drug reimbursement cuts would see a net payment decrease in the event of the policy’s reversal.

CMS finalized cuts to drug reimbursement in a 2017 final rule that implemented a new payment methodology for outpatient drugs acquired by hospitals participating in the 340B Drug Pricing Program run by the Health Resources & Services Administration (HRSA).

 The 340B Drug Pricing Program is meant to help Medicare and Medicaid disproportionate share hospitals and other similar entities to “stretch scarce federal resources as far as possible, reaching more eligible patients and providing more comprehensive services.”

To achieve its goal, HRSA provides discounts to 340B covered entities for certain outpatient drugs, with the discount averaging 34 percent, according to the Avalere analysis.

CMS, however, has raised concerns that the 340B drug discounts have contributed to rising prescription drug costs for beneficiaries seeking hospital outpatient care. The agency, therefore, decided to pay hospitals participating in the program 77.5 percent of the average sales prices for the drugs, rather than the historic 106 percent of the average sales price.

The 340B drug reimbursement cuts would then be offset in a budget-neutral manner via OPPS base payment rate increases for other services.

Medicare beneficiaries were slated to seek an estimated $320 million in copayments for the impacted drugs in the first year of policy implementation, CMS stated.

Avalere’s analysis also showed that beneficiary cost-sharing for separately payable drugs at 340B OPPS hospitals would increase by $472.8 million in 2021 if the policy was reversed.

In response to the Avalere analysis, the Federation of American Hospitals (FAH) said the “current CMS policy works for Medicare and America’s seniors.”

“Reversing it would not only substantially increase Medicare patients’ cost burden for drugs acquired under the 340B program, but also would lower net total payments to most OPPS hospitals, restoring the inefficiencies that the current policy corrects,” the association added.

But other hospital groups have criticized the 340B drug reimbursement cuts, arguing that lower outpatient drug reimbursement rates would severely impact the ability of covered hospitals to provide critical healthcare services to underserved patients.

The groups, including the American Hospital Association (AHA), America’s Essential Hospitals, and the Association of American Medical Colleges (AAMC), estimated that 340B hospitals would see outpatient reimbursement fall by $1.6 billion as a result of the new payment methodology.

The groups also challenged the policy in court, contending that the rate cuts exceeded CMS’ statutory authority to control reimbursement rates.

A federal district court ruled against the 340B drug reimbursement cuts. However, an appeals court overturned the decision last year.

AHA and other national associations have appealed to the Supreme Court to reverse the appeal’s court decision to uphold the new payment methodology, which continues into this year.

FAH has filed an amicus brief with the Supreme Court supporting the 340B drug reimbursement cuts.

The Supreme Court has not announced whether it will take the proposed case.