Blog Post

CMS Proposes Massive Payment Reduction to 340B Participating Entities

Blog 340B Drug Opt2 Web

CMS released its proposal for CY 2018 Hospital Outpatient Prospective Payment System (OPPS) payment rules, which contained significant changes to reimbursement for hospitals participating in the 340B Drug Pricing Program.

CMS’s proposal would cut hospital outpatient reimbursement for drugs purchased through the 340B program—from ASP plus 6% to ASP minus 22.5%. In addition, it would require that 340B participating hospitals include a modifier to indicate whether drugs were acquired under the 340B program.

The proposed change in reimbursement would have a significant negative impact on cancer programs and oncology service lines, as well as a negative effect on certain types of hospital and health systems.

CMS is seeking comments on the following issues related to this proposal:

  • Is the underpinning 2015 MedPAC analysis accurate, and is ASP minus 22.5% a reasonable payment rate based on the findings from this report?
  • Should the ASP discount instead be tied to the average minimum discount of OPPS drugs purchased under the 340B program?
  • Should this include all 340B hospitals, or should certain types (e.g., rural or PPS-exempt cancer hospitals) be treated differently? Under the current proposal, all 340B hospitals will be treated the same way.
  • Should this cut be phased in over the course of two to three years?
  • Should certain drugs, such as blood-clotting factors, be excluded from the reduced payment?
  • Should hospitals with owned or affiliated ASCs have access to 340B drugs?
  • Should the savings related to this change be redistributed to hospitals in a certain way, particularly to those hospitals that treat a large number of underinsured patients?

From MedPac’s 2015 report to Congress on 340B, in 2014, almost 45% of all Medicare acute hospitals participated in the program. Participation expanded when certain types of hospitals became eligible for 340B in 2010 through the Patient Protection and Affordable Care Act of 2010. Of the hospitals in 340B that year, 45% were DSH hospitals and 44% were CAHs. Moreover, the MedPAC report estimates that 340B savings average 33.6% but range from 20% to 50%.

This change will have a negative impact on operating margins for all hospital and health systems participating in the 340B program. AMCs, PPS-exempt cancer hospitals, and larger health systems are likely to see a disproportionate impact due to the size of their programs. Maximizing operating efficiencies, improving cost controls, and measuring the impact on cancer patient care resources will be paramount.

ECG will continue to monitor developments related to the proposed policy. Updates will be posted here on our website. In the meantime, if you are interested in speaking with a member of ECG’s cancer program team about your organization’s response to the 2018 OPPS proposed rules, or if you would like to begin exploring strategies to prepare for reductions in payment, please contact Jessica Turgon or Matt Sturm:

Jessica Turgon

Matt Sturm