Medicare Payment and Reimbursement

CMS’s 340B-acquired drug payment policy final rule is here

November 8, 2023 3:27 pm

The 340B Drug Pricing Program final rule was published[DF1] [SS2] [SS3]  in the Federal Register Nov. 8, 2023, after CMS released details of it (CMS-1793-F) on Nov. 2, 2023.

The rule details the agency’s actions, and in some cases non-actions, to adjust Medicare payment rates for drugs acquired under the 340B program from calendar year 2018 through Sept. 27, 2022, following a remand from the United States District Court for the District of Columbia (the District Court) and the United States Supreme Court’s decision in American Hospital Association v. Becerra.

Reimbursement adjustment resolution

The agency states that it will be resolving the reimbursement adjustments in the following ways:

  • Repay 340B hospitals for money owed under Medicare fee-for-service claims from Jan. 1, 2018, through Sept. 27, 2022, through a lump sum payment less amounts already paid through claims reprocessing for services furnished between Jan. 1, 2022, through Sept. 27, 2022. Downloads of the list of 340B hospitals and estimated lump sum payment allocations are available.
  • Provide the repayment amount to hospitals inclusive of any additional beneficiary coinsurance as to not require or allow hospitals to collect additional coinsurance.
  • Maintain budget neutrality for these corrective payments to 340B hospitals through a -0.5-percentage point adjustment to the annual outpatient prospective payment system (OPPS) update that applies to non-drug OPPS services beginning Jan. 1, 2026, until such time as the full amount of the additional payment is recouped (currently estimated at 16 years).

What to expect from MACs and MAOs

The CMS has announced its intention to instruct the Medicare administrative contractors (MACs) to disburse a one-time lump sum payment within 60 calendar days. CMS has projected that the additional payments to 340B hospitals will likely be disbursed towards the end of 2023 or the beginning of 2024. However, the agency has distanced itself from any responsibility for instructing their contracted Medicare Advantage Payers to underpay 340B hospitals for drugs acquired through the 340B program during this period. CMS states that in accordance with section 1854(a)(6)(B)(iii) of the Act, CMS may not require Medicare Advantage Organizations (MAOs) to contract with a particular healthcare provider or use pricing structures with their contracted providers. Therefore, MAOs that contract with a provider or facility eligible for 340B drugs can negotiate the terms and conditions of payment directly with the provider or facility and CMS cannot interfere in the payment rates that MAOs set in contracts with providers and facilities. As a result, substantial underpayments are left unaddressed, accumulating in the coffers of Medicare Advantage Payers.

While hospitals across the United States are struggling to maintain their operations with slim profit margins and no relief in sight, McKinsey & Company recently published a report revealing that the payer profit pool decreased from $54.7 billion in 2019 to $40.01 billion in 2021, with an expected rebound to $57.4 billion by 2025. This development comes at a time when healthcare leaders are endeavoring to rebuild trust and interoperability between insurance companies and healthcare providers. Regrettably, the latest policy only serves to deepen the divide between these two major players in the U.S. healthcare market.

In the final rule, the agency clarified that the lump sum payments to 340B hospitals will not include any interest. Additionally, the agency is formalizing a budget neutrality adjustment, reducing the OPPS conversion factor by 0.5% over an estimated 16-year period. This adjustment aims to offset a total of $7.8 billion in fee schedule increases for non-drug OPPS services that were introduced to achieve budget neutrality between 2018 and 2022, starting in 2026. The specific impact on OPPS payment rates resulting from this reduction will be outlined in the annual OPPS/ASC proposed rules, and the payment recoupment will be spread out over 16 years, commencing in 2026.

HFMA action

HFMA intends to submit comments on the final rule to CMS. This action aims to convey the concerns of our members as further directives are developed and as hospitals embark on addressing underpayments with Medicare Advantage health plans. Our comments will also seek to advocate for the inclusion of future safeguards in Medicare Advantage contracts to prevent similar occurrences in the future.



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