HHS should ensure 340B hospitals remain eligible despite changes in payer mix, AHA says

Hospitals participating in the 340B Drug Pricing Program could be rendered ineligible because of payer mix changes stemming from the COVID-19 pandemic, the American Hospital Association (AHA) wrote in a letter urging that steps be taken to avoid such an outcome.

In a letter to Xavier Becerra, secretary of the U.S. Department of Health and Human Services (HHS), the AHA noted that “a number of 340B hospitals have endured immense financial and operational challenges that have altered their payer mix during the PHE [public health emergency], and as a result are now facing the possible loss of access to the 340B program.”

Program guidelines require participating hospitals — with the exception of critical access hospitals — to have a certain Medicare disproportionate share hospital (DSH) adjustment percentage. That percentage hinges on the number of inpatient days for Medicaid and Supplemental Security Income (SSI) patients.

The AHA wrote, “The COVID-19 PHE resulted in hospitals suspending nonurgent services and shifting resources to enable greater capacity to treat COVID-19 patients. These actions combined with a slow resurgence of patient volumes have changed hospitals’ payer mix — particularly lowering the proportion of hospital patients who are Medicaid or Medicare SSI patients.”

As a result, when hospitals file their 2020 Medicare cost reports, they will be at risk of losing their 340B eligibility. That could leave them unable to provide vital services to their communities, the AHA stated.

As part of the PHE declaration, CMS provided a 60-day extension for hospitals to file their FY20 Medicare cost reports, giving them a total of seven months from their fiscal-year close. Hospitals with a year-end date of Sept. 30 thus face an April 30 deadline.

HHS should provide “a waiver of certain 340B program eligibility criteria for 340B hospitals enrolled during the PHE that may have experienced a temporary change in payer mix due to the COVID-19 pandemic,” the AHA wrote.

Recently introduced bipartisan legislation also could provide a solution. According to a news release from Sen. John Thune (R-S.D.), a cosponsor, the bill “would ensure that any previously participating hospital will be deemed eligible for any cost reporting period during which the public health emergency occurred.”

Precedents for waiving eligibility criteria

The AHA believes HHS has statutory authority to provide waivers under the Social Security Act, specifically Section 1135, which authorizes the secretary to temporarily waive or modify federal healthcare program requirements.

Waivers can be issued to ensure sufficient healthcare items and services are available to meet the needs of beneficiaries during an emergency and that “providers who treat such individuals in good faith can be reimbursed and exempted from sanctions,” according to the letter.

HHS already used Section 1135 waivers to relax classification criteria for Sole Community Hospitals (waiving distance, market-share and bed requirements) and Medicare Dependent Hospitals (inpatient days and discharge criteria).

“The rationale for both of these eligibility waivers was to allow hospitals to meet the needs of the communities they serve during the PHE while also providing increased capacity for treating COVID-19 patients,” the AHA wrote. “This same flexibility should be applied to 340B hospitals that have faced and continue to face similar challenges.”

AHA’s specific recommendation is for HHS to use waiver authority to set a hospital’s DSH patient percentage (DPP) “at the hospital’s DPP prior to the PHE to ensure their continued eligibility for the program. This waiver of the DSH DPP eligibility requirement could apply for any cost reports filed covering time periods during the PHE and only apply to 340B hospitals that are enrolled in the 340B program during the PHE.”