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Financially distressed critical access hospitals should be allowed to keep their 340B drug discounts if they opt under a new federal law to downgrade into emergency hospitals to remain solvent, rural health advocates told CMS in comments on proposed rules to implement the law.

Advocates Urge Feds to Allow Distressed Rural Hospitals to Remain 340B Eligible

Congress and the White House should let financially distressed critical access hospitals keep their 340B drug discounts if they opt under a new law to downgrade into emergency hospitals to remain solvent, rural health advocates told federal health officials in comments on proposed rules to implement the law.

Letting the hospitals stay in 340B would make conversion a more attractive option and avert more rural hospital closures, the rural health stakeholders said.

Yesterday was the deadline for comments on the U.S. Centers for Medicare & Medicaid Services’ proposed conditions that the new class of Rural Emergency Hospitals (REH) would have to meet to participate in Medicare and Medicaid.

According to the federal Regulations.gov portal this morning, CMS received almost 3,600 comments. It will take several days for all to be posted. Only a few of those posted so far mentioned the 340B program. But those that did emphasized letting CAHs that become REHs keep their 340B drug pricing.

A federal spending bill passed and signed in December 2020 included a lifeline for CAHs and other rural acute care hospitals with fewer than 50 beds at risk of closing. It will let them become REHs—a new hospital designation. Under the law, these new hospitals cannot have inpatient beds, must have a fully staffed emergency department at all times, and cannot exceed an annual per patient average admission of 24 hours.

Under the law, REHs can elect to offer additional medical and outpatient services. CMS’s proposed rule said these services may include:

  • radiology
  • laboratory
  • outpatient rehabilitation
  • outpatient surgical services not requiring hospitalization and lasting less than 24 hours
  • prenatal care, low-risk labor and delivery, and postnatal care
  • behavioral health services including substance use disorder treatment.

Other additional services beyond these should be based on a community health needs assessment, CMS proposed.

CMS proposed requiring all REHs to offer pharmacy services and to have a pharmacy or drug storage area supervised by a registered pharmacist “or other qualified individual.” 

Researchers at the University of North Carolina last year predicted that fewer than 70 rural hospitals out of more than 1,600 eligible would convert themselves into REHs. Some commenters told CMS part of the reason may be critical access hospitals’ reluctance to give up their 340B savings and revenues.

The U.S. House original bill that was the template for language in the spending bill that created REHs would have preserved converted CAHs’ 340B eligibility.

“340B is a valuable program for rural hospitals,” National Rural Health Association told CMS in its comments. “Several member hospitals have expressed to us their concern over converting without 340B funds. While NRHA recognizes that a change to the 340B statute would likely be required to allow REHs to participate [in 340B], we stress the importance of this action and urge the Administration to work within its statutory authority and alongside Congress to ensure this change is made. Without REH participation in 340B far fewer hospitals will consider converting as 340B payments are vital to financial viability of rural hospitals.”

The Nebraska Hospital Association echoed NRHA’s points about 340B in its comments.

The American Hospital Association submitted comments to CMS, but they did not address REH access to 340B pricing. Hospital group 340B Health said it did not submit comments on the proposed rule.

CAHs and prospective payment system rural hospitals with fewer than 50 beds can start to be paid by Medicare as REHs beginning Jan. 1, 2023. CMS said it will finalize the process for CAHs and PPS rural hospitals to convert into an REH in its calendar year 2023 hospital outpatient prospective payment system final rule, due to be released in early November.

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