CMS Has Finalized its Remedy for 340B Payments, and Hospitals Are Not Happy

From Fierce Healthcare

The Centers for Medicare & Medicaid Services (CMS) has dropped the final rule to remedy the invalidated 340B-acquired drug payment policy for calendar years 2018 to 2022.

Earlier in July, the federal government agreed to pay eligible hospitals in the 340B program $9 billion to offset payment cuts that the Supreme Court had previously ruled unlawful. The prescription drug payment cuts were made by the Department of Health and Human Services (HHS) in 2018 and subsequently opposed in the courts by the American Hospital Association (AHA) and other hospital groups.

In 2022, the Supreme Court rejected the massive payment cuts, ruling them to be unlawful because HHS did not follow the proper procedure.

As part of its final rule, CMS is maintaining budget neutrality. The agency estimates that hospitals were paid $7.8 billion more for non-drug items and services during that time period than they otherwise would have been without the 340B payment policy. To carry out the nearly $8 billion budget neutrality adjustment, CMS will reduce future non-drug item and service payments by adjusting the conversion factor for payments for outpatient services.

The offset was originally proposed for 2025 but faced industry pushback during the comment period. The adjustment will continue until the full $7.8 billion is offset, which CMS estimates will take 16 years.

In a statement, AHA president and CEO Rick Pollack commended the coming repayment to 340B hospitals but condemned HHS’ choice to cut Medicare rates. “HHS made a grievous mistake in choosing to claw back billions of dollars from America’s hospitals, especially those that serve rural, low-income, and other vulnerable communities. HHS decided to ignore hundreds of comments from hospitals and other providers explaining why this Medicare cut is both illegal and unwise,” he said.

Healthcare group purchasing organization Premier Inc. echoed Pollack’s disappointment. “Premier will continue to press CMS to hold hospitals harmless from policy deemed unlawful to preserve patient access to high-quality pharmaceuticals,” Soumi Saha, senior vice president of government affairs at Premier, said in a statement.

In a statement, Chip Kahn, president and CEO of the Federation of American Hospitals, condemned the rule, saying “CMS’s decision to brush aside the Medicare statute and recoup $7.8 billion from hospitals treating Medicare beneficiaries is extremely disappointing. This sets a dangerous precedent by breaking a promise to seniors and their providers that care will be covered.”

The annually determined payment rate is final, Kahn added, and hospitals rely on it to serve their populations. It does not allow Medicare to claw back funds. “This statutory predictability and stability of payment is mission critical to sustain patient access to care,” he said. The recoupment through outpatient rate cuts will also likely reduce Medicare Advantage plan payments to hospitals, per Kahn.