Hospital groups criticize HHS remedy for 340B payments

Photo: Jose Luis Pelaez/Getty Images

Hospital groups are unhappy with the U.S. Department of Health and Human Services after the agency released a final rule to fix the now-defunct 340B-acquired drug payment policy for 2018 to 2022.

Last year, the Supreme Court ruled in favor of the American Hospital Association and other plaintiffs who claimed that HHS unlawfully withheld funding from 340B hospitals. The groups were disappointed, however, that the court allowed HHS to propose the remedy.

HHS' final rule contains two central components. First, HHS will repay 340B hospitals that were underpaid from 2018 to 2022 in a single-lump sum payment. The final rule contains the calculations of the amounts owed to the roughly 1,600 affected 340B covered entity hospitals.

Second, HHS finalizes a policy to recoup funds from those hospitals that received increased rates for nondrug services from 2018 to 2022. HHS will recoup these funds by adjusting the outpatient prospective payment system conversion factor by minus 0.5% starting in calendar year 2026 – one year later than HHS had originally proposed, and as the AHA had advocated.

HHS will make this adjustment until the full amount is offset, which could take about 16 years, according to CMS.

WHAT'S THE IMPACT?

"Following years of litigation and a unanimous Supreme Court win, the AHA is very pleased that 340B hospitals finally will be reimbursed in full for what HHS unlawfully withheld from them for five years," said AHA president and CEO Rick Pollack.

Pollack said the lump-sum payments hospitals will receive soon will help them continue to provide high-quality care, but decried other aspects of the rule.

"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," he said. "HHS decided to ignore hundreds of comments from hospitals and other providers explaining why this Medicare cut is both illegal and unwise. The AHA will continue to review this rule and consider all available options going forward."

Premier echoed this sentiment, specifically singling out the Centers for Medicare and Medicaid Services, which is run by HHS, for "giving with one hand and taking away with the other."

"Premier strongly supports CMS' decision to make a one-time lump sum payment to 340B hospitals for the amounts they are owed based on past shortfalls, and appreciates CMS committing to doing so swiftly," said Soumi Saha, senior vice president for government affairs at Premier. "However, Premier had hoped CMS would own up to the fact that clawing back these payments over 16 years is inconsistent with the law and CMS' long-standing past precedent regarding application of budget neutrality adjustments."

Saha said Premier would continue to press CMS to "hold hospitals harmless."

THE LARGER TREND

Section 340B of the Public Health Service Act allows participating hospitals and other providers to purchase certain covered outpatient drugs or biologicals from manufacturers at discounted prices. 

Prior to 2018, the Medicare payment rate for Part B covered outpatient drugs provided in outpatient hospitals was generally the statutory default of average sales price plus 6%. 

In the payment rule finalized in 2017, CMS adjusted the payment rate for 340B drugs to the average sales price minus 22.5% to more accurately reflect the actual costs incurred by 340B hospitals when acquiring 340B drugs, CMS said. This rate applied from 2018 through approximately the third quarter of 2022. 

To comply with statutory budget neutrality requirements, CMS made a corresponding increase to payments to all hospitals (340B hospitals and non-340B hospitals) for nondrug items and services, which was also in effect from 2018 through 2022.

On June 15, 2022, the Supreme Court unanimously ruled that the differential payment rates for 340B-acquired drugs were unlawful because, prior to implementing the rates, HHS failed to conduct a survey of hospitals' acquisition costs under the relevant statute. 

On September 28, 2022, the District Court for the District of Columbia vacated the differential payment rates for 340B-acquired drugs going forward. As a result, all CY 2022 claims for 340B-acquired drugs paid on or after September 28, 2022, were paid at the default rate of ASP plus 6%.

In the 2023 final rule, CMS finalized a general payment rate of ASP plus 6% for drugs acquired through the 340B Program, which is consistent with the agency's policy for drugs not acquired through the 340B program. 

As required by statute, CMS implemented a 3.09% reduction to the payment rates for nondrug items and services to achieve budget neutrality for the 340B drug payment rate change for 2023. This budget neutrality change ensured the conversion factor was equivalent to the conversion factor that would have been in place had the 340B drug payment policy never been implemented.
 

Twitter: @JELagasse
Email the writer: Jeff.Lagasse@himssmedia.com