The Rule by CMS changing Medicare Part B payment methodology for OPPS hospitals will go into effect on January 1, 2018.  The excerpt from the rule specific to 340B is as follows:

340B Drug Pricing: “We are changing our current Medicare Part B drug payment methodology for 340B hospitals that we believe will better, and more appropriately, reflect the resources and acquisition costs that these hospitals incur. These changes will lower drug costs for Medicare beneficiaries for drugs acquired by hospitals under the 340B Program. For CY 2018, we are exercising the Secretary’s authority to adjust the applicable payment rate as necessary for separately payable drugs and biologicals (other than drugs on pass-through payment status and vaccines) acquired under the 340B Program from average sales price (ASP) plus 6 percent to ASP minus 22.5 percent. Rural sole community hospitals (SCHs), children’s hospitals, and PPS-exempt cancer hospitals are excluded from this payment adjustment in CY 2018. In addition, in this final rule with comment period, we are establishing two modifiers to identify whether a drug billed under the OPPS was purchased under the 340B Program—one for hospitals that are subject to the payment reduction and another for hospitals not subject to the payment reduction but that acquire drugs under the 340B Program.”

In Summary:

  • This rule WILL NOT change the purchase price of 340B drugs or which drugs can be purchased under the 340B program even for the affected hospitals
  • This rule WILL NOT change the revenue generated through contract pharmacy even for the affected hospitals (These payments are covered for Medicare patients by the Part D program, not the Part B program)
  • This rule WILL decrease payments from Medicare Part B for affected hospitals
  • This rule WILL (supposedly) be budget neutral so as to redistribute any savings by CMS in 340B reimbursement to other outpatient claims at OPPS hospitals
    • Obviously, reduction in payment for 340B drugs will only apply to hospitals participating in the 340B program.  However, the redistribution of savings will be applicable to all OPPS hospitals thereby diluting the increase in reimbursement to 340B participating hospitals
    • Non 340B participating hospitals may notice an increase in outpatient claims reimbursements due to the rule

Ongoing Action:

The American Hospital Association (and others) have filed a lawsuit with CMS citing that CMS does not have the authority to impose these cuts.

The entire rule can be found here, as well as the section specific to this reduction in payment (quoted section above).

What hospitals this will affect:

  • OPPS hospitals receiving Medicare part B payments for covered outpatient drugs purchased on 340B
  • This includes traditional DSH based OPPS hospitals

What hospitals this will not affect:

  • Critical Access Hospitals
  • Sole Community Hospitals (per the excerpt above)
  • The following non-rural hospitals (per the excerpt above):
    • Children’s hospitals
    • PPS-exempt cancer hospitals

Examples of areas of 340B usage this will affect in applicable hospitals: