CMS released the proposed Outpatient Prospective Payment System – OPPS rule for 2018— which includes a major proposed cut for separately payable drugs purchased under the 340B program.
The proposal would reduce reimbursement for separately payable Medicare Part B drugs purchased at 340B prices. Reimbursement would drop from average sales price plus 6% to ASP minus 22.5%. CMS says its goals are to lower Medicare fee-for-service beneficiaries’ out-of-pocket costs which are equal to 20% of Medicare’s payment rate for the drug and to curtail increases in drug spending associated with the expansion of the 340B program.
The 340B proposal would reduce an important source of funding for safety-net hospitals
Congress created the 340B program in 1992 to inject more funds into safety-net providers. The program requires drug manufacturers to sell outpatient drugs to 340B providers known as “covered entities” at significant discounts.
In practice, covered entities continue to bill health plans for outpatient drugs as usual and use the enhanced drug margin to offset the costs of uncompensated care and unprofitable services.
340B hospitals with large infusion centers will experience the biggest reduction in revenues
The proposed cuts would apply only to separately payable drugs covered under Medicare Part B. These are provider-administered drugs, including injected or infused treatments for cancer, rheumatoid arthritis, and multiple sclerosis among other conditions. The cuts would not impact outpatient drugs covered under Part D, which can also be purchased by covered entities at 340B prices.
All hospitals including those without 340B will have to change the coding for separately payable drugs
Although the proposal would not change reimbursement for non- 340B providers, it would increase the risk that non-340B hospitals would lose revenues due to coding errors.
In the proposed rule, CMS specifies that hospitals billing Part B for separately payable drugs would need to add a modifier to claims to indicate that the drug was not purchased at 340B prices. If the modifier is omitted, then Medicare would assume the drug was purchased at 340B prices and would reimburse the hospital at the reduced rate of ASP -22.5%. Thus all hospitals would have to change how they code separately payable drugs, regardless of their 340B status. The burden would fall to hospitals to indicate that they are owed the higher reimbursement rate.
The proposal does not address drug manufacturers’ concerns about 340B
The 340B program has long been controversial, and drug manufacturers are among the biggest critics. They contend that the program has been abused by providers and that HRSA, the agency which administers the program, needs to step up oversight to ensure that providers are allocating their enhanced drug margins to uncompensated care.
Notably, the proposed OPPS rule does not address these concerns or make any concessions to drug manufacturers.
Regardless of whether CMS finalizes its proposal to cut reimbursement for 340B drugs, all hospitals should take steps to improve their infusion centers’ financial performance. Hospitals should invest dedicated financial counseling resources to help uninsured patients enroll in coverage, underinsured patients tap into external sources of financial assistance, and well-insured patients understand and plan for their out of pocket costs.
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