Medicare’s proposed remedy for 340B-acquired drug underpayments: Addressing only half at best?

On July 7, 2023, CMS released a proposed rule, identified as CMS-1793-P, which outlines the agency’s intended actions to address the adjustment of Medicare payment rates for drugs acquired under the 340B Drug Pricing Program. This proposed rule pertains to the period spanning from calendar year 2018 through Sept. 27, 2022. The necessity for this remedy arises from a remand by the U.S. District Court for the District of Columbia and the subsequent decision by the U. S. Supreme Court in American Hospital Association vs. Becerra.

Template rule comment letter due date

HFMA is set to release its template rule comment letter during the week of Aug. 21, 2023, intended for thoughtful deliberation and incorporation by its membership. We invite HFMA members to join us, along with fellow colleagues, in submitting industry guidance to CMS by the comment deadline on Sept. 5, 2023. These contributions will undoubtedly wield a meaningful influence on the future direction of the 340B program and the impact it has on the communities our hospitals serve.

Approximately 1,650 hospitals participating in the 340B program are poised to receive portions of the $9 billion allocated from the shortfall of Medicare fee-for-service (FFS) payments. CMS clarified that each hospital’s payment would be calculated based on the claims they filed for drugs acquired through the program between Jan. 1, 2018, and Sept. 27, 2022, as outlined in the rule.

During that time frame, the Medicare payment rate for those drugs stood at average sales price (ASP) minus 22.5%. The objective of the lump-sum payment is to raise the compensation for those drug purchases to ASP plus 6%. This rate was in place until 2017 and was reinstated last Sept. 28, following the Supreme Court decision.

By providing this additional compensation, CMS states it aims to remedy the payment discrepancies and bring the payment rates for these drugs back in line with the rate in effect before 2018, ultimately benefitting the participating hospitals in the 340B program.

Shawn Stack’s take

Considering the circumstances, the agency’s proposed remedy for reimbursing hospitals for the unjust payment cut appears to be a rather complex and intricate process and addresses only about half of the underpayments, those to be paid by Medicare FSS.

Currently, as per CMS’s proposed “remedy,” hospitals find themselves in a challenging position. They not only have to take matters into their own hands when pursuing the 340B underpayments from Medicare Advantage (MA) plans but also face the daunting possibility of having to pay an additional estimated $9 billion on top of the initial $18 billion that was originally underpaid by FFS and MA combined.

The situation is of utmost importance, and the financial implications are substantial, placing a significant burden on hospitals.

Therefore, it becomes paramount for hospitals and providers to accomplish either one of the following strategic aims:

• Advocate for CMS oversight in the final rule, mandating that MA payers reimburse hospitals and providers for the inequitable MAP portion of the 340B underpayment spanning from 2017 to September 2022.

• Alternatively, to independently recover the 340B underpayments from MA payers, all the while averting the implementation of a detrimental adjustment to the MAP Outpatient Prospective Payment System conversion factor.

The latter scenario, if allowed, would precipitate a 0.5% reduction in outpatient reimbursement from 2025 through 2041, compounding the unjust recoupment by an additional $9B for community hospitals. This imposition would be compounded atop the pre-existing burden of CMS’s 340B unlawful cuts.