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CMS said late this afternoon it will put off until next year its decision on how it will comply with a U.S. Supreme Court decision striking down five years of drug reimbursement cuts for 340B hospitals.

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CMS Says It Will Announce Sometime Next Year How it Will Repay 340B Hospitals for Five Years of Illegal Drug Reimbursement Cuts

The U.S. Centers for Medicare & Medicaid Services said late this afternoon that it will address how it will remedy five years of illegal Medicare Part B underpayments to hospitals for 340B purchased drugs “in future rulemaking,” rather than in its just-released final rule governing Medicare payments in 2023 for hospital outpatient services.

Hospital groups that successfully sued CMS to end the Part B payments cuts are expected to object. They might ask the federal district judge in Washington, D.C., assigned to their lawsuit to order CMS to quickly repay 340B hospitals for improperly withheld payments from 2018 through most of this year. CMS estimates that the cuts currently cost 340B hospitals $1.96 billion a year.

Last month, American Hospital Association General Counsel Melinda Hatton said the AHA “continue[s] to urge the [Biden] administration to promptly reimburse all the hospitals that were affected by these unlawful cuts in previous years and to ensure the remainder of the hospital field is not penalized for their prior unlawful policy.”

CMS confirmed in its hospital Outpatient Prospective Payment System (OPPS) final rule for calendar year 2023 that, next year, it will restore its prior policy of paying the default rate of average sales price plus 6% for hospitals’ 340B-purchased drugs. It has been paying them at a rate of ASP minus 22.5%.

CMS said that to balance the expense of the 340B drug payment rate change for 2023, it is implementing a –3.09% reduction to the payment rates for non-drug services to achieve budget neutrality. As noted above, AHA and other hospital groups that sued CMS have said the agency should not make non-340B hospitals shoulder the financial burden of remedying CMS’s illegal payment cut. For-profit hospitals and other non 340B hospitals are also likely to strongly object to the payment cuts for non-drug services.

CMS said it “will address the remedy for 340B drug payments from 2018-2022 in future rulemaking” before it releases its OPPS proposed rule for 2024. CMS normally releases its OPPS proposed rule for the coming year in July.

Hospital group 340B Health, which was not among the groups that sued CMS, said this afternoon that it is “very pleased to see that CMS has restored equity to the Medicare outpatient prospective payment system.”

“We look forward to working with CMS on compensation for the hospitals that were financially harmed by the unlawful OPPS payment cuts in 2018 to 2022,” 340B Health President and CEO Maureen Testoni said.

This is a developing story. We expect to publish a follow-up article in Thursday’s regular issue.

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