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Lawyers say there might be a way for CMS to keep paying ASP minus 22.5% for 340B drugs at some hospital outpatient departments, but they don't think the agency will use it.

Is There a Loophole That Might Let CMS Keep Paying Some Hospital Departments ASP Minus 22.5% for 340B Drugs?

There could be a loophole in Tuesday’s Medicare hospital outpatient payment final rule for 2023 that lets the government keep paying hospitals for 340B-acquired drugs at average sales price minus 22.5% at some hospital offsite locations, healthcare lawyers said yesterday. But it would take chutzpah for federal health officials to use it and they probably will not, they said.

While the Centers for Medicare & Medicaid Services (CMS) did not directly respond to our specific inquiry, it did tell 340B Report late this morning that it is finalizing a general payment rate of ASP plus 6% for drugs and biologicals acquired through the 340B program.

The specific issue, though, is how 340B drug reimbursement under Medicare Part B next year will be handled at non-excepted hospital off-campus provider-based departments (PBDs) that began billing after Nov. 2, 2015.

Under 2015 federal budget legislation, CMS began paying for all non-emergency non-drug services furnished at such locations under the Medicare physician fee schedule (PFS) rather than under the hospital outpatient prospective payment system (OPPS). These payments are 40% less under PFS than payments under OPPS. PFS and OPPS are separate Medicare payment systems. 

Starting in 2018, CMS lowered Medicare reimbursement for hospitals’ 340B-acquired drugs under OPPS from ASP plus 6% to ASP minus 22.5%. For one year, Part B reimbursement for hospitals’ 340B drugs stayed at the higher ASP plus 6% rate at departments subject to the new 40% lower site-neutral payment rate for non-drug services. Then, in its OPPS final rule for 2019, CMS extended the ASP minus 22.5% Part B reimbursement rate for 340B-acquired drugs to medicines furnished in off-campus provider-based departments paid under PFS.

Hospital groups sued to reverse the payment cuts for 340B drugs. In June, the U.S. Supreme Court declared the cuts illegal.

CMS on Tuesday released its final OPPS rule for 2023. In it, CMS said, “For [calendar year] 2023, we are finalizing the reversion to a payment rate of, generally, ASP plus 6 percent as the default payment rate for drugs and biologicals acquired under the 340B program and will pay for these drugs and biologicals no differently than we pay for those drugs and biologicals that are not acquired under the 340B program.” CMS said it will issue a separate proposed rule, presumably before July 2023, explaining how it intends to remedy illegal lower payments to hospitals for 340B drugs from 2018 through late September 2022. CMS said it is already paying the higher rate for 340B drugs billed Sept. 28 and later.

Applicability to All PBDs Unclear

Healthcare lawyers reached yesterday said it is unclear whether the Supreme Court decision in June applies to CMS payments to hospitals for 340B-acquired drugs furnished in non-excepted off-campus provider-based departments paid under PFS.

These lawyers also observed that CMS in the final OPPS rule for 2023 never said explicitly that it was reversing its 2019 policy decision to apply the lower reimbursement rate to 340B drugs furnished in non-excepted off-campus provider-based departments paid under PFS.

CMS released its 2023 PFS final rule also on Tuesday. In it, in a response to a comment it received focused mainly on new refunds for discarded amounts of certain single-dose drug containers, it said, “Regarding the commenter’s concern about future reductions in OPPS payment for 340B drugs, we note that, for CY 2023, we are finalizing a policy to pay for separately payable drugs at a default rate that is generally ASP plus 6 percent under the OPPS, regardless of whether a drug is acquired under the 340B program.”

Again, CMS’s response to the commenter is ambiguous on whether it has reversed its policy decision in the OPPS final rule for 2019 to pay ASP minus 22.5% for 340B-acquired drugs furnished in non-excepted off-campus provider-based departments paid under PFS.

340B Report yesterday asked CMS how it will handle 340B drug reimbursement under Part B next year at non-excepted hospital off-campus PBDs. It answered late this morning, “For CY 2023, in light of the Supreme Court’s decision in American Hospital Association v. Becerra, CMS is finalizing a general payment rate of ASP plus 6% for drugs and biologicals acquired through the 340B Program, consistent with our policy for drugs not acquired through the 340B program.”

Other OPPS Final Rule Features

CMS’s OPPS final rule for 2023 also addressed:

Biosimilars

CMS said that next year it will pay for 340B-acquired biosimilars at ASP plus 6% of the reference biological product’s ASP.

Claims modifiers

CMS said it will continue to require hospitals to use the “JG” and “TB” claims modifiers in 2023 to identify drugs acquired with the 340B discount “to allow us to track the utilization of 340B acquired drugs and biologicals under the OPPS.”

New Rural Emergency Hospital provider type

The 2023 OPPS final rule implements a 2021 federal law that lets critical access hospitals (CAHs) and certain other rural hospitals with 50 or fewer beds convert to a rural emergency hospital (REH)—a new Medicare provider type that furnishes outpatient services, emergency services, and observation care.

CAHs are eligible to participate in 340B but REHs are not. Multiple commenters told CMS that loss of 340B eligibility would dissuade many financially beleaguered CAHs from taking advantage of the option to downgrade into REHs to stay open. 

Many commenters asked CMS if 340B program requirements could be modified to let REHs participate in the drug discount program. CMS replied, “These comments are out-of-scope as [the Health Resources and Services Administration], and not CMS regulates the 340B program. HRSA is responsible for determining whether a healthcare provider is eligible for the 340B program, and managing the 340B-eligible provider types that are listed in the 340B statute.”

Remedy for Past Illegal Underpayments 

CMS explained that it will address its remedy for illegally withheld 340B drug payments from 2018 to 2022 in a separate proposed rule next year that it will issue in advance of its OPPS proposed rule for 2024. CMS normally releases its OPPS proposed rule for the coming year in July.

CMS said it agreed “with commenters who suggested that we should give stakeholders an opportunity to comment on a proposed remedy.” It also observed that there is a motion pending before a federal district judge in Washington, D.C., to remedy the reduced payment amounts to 340B hospitals under the 2018–2022 reimbursement rates.

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