CMS seeks 340B cost data from providers by Nov. 29.


In 2018, CMS reduced Medicare Part B hospital payments for qualified 340B transactions from Average Selling Price (ASP) plus six percent, to ASP minus 22 percent. The American Hospital Association as well as several other hospital groups promptly filed a federal suit against Secretary Alexander Azar, challenging the rule on the grounds that CMS lacked the authority to implement the cuts under existing statutory framework. In December 2018, the District Court for the District of Columbia agreed with the hospitals. The Court however, did not propose a remedy or vacate the rule. Instead, CMS was ordered to devise a plan to correct the issue. And whatever remedy is ultimately proposed, it must be budget neutral. The situation is made more complex because the 340B rate cuts funded a variety of other Medicare items and services, totaling $1.7 billion across about 3,900 hospitals. So, if the CMS appeal fails, a remedy must (1) make hospitals whole for reduced payments in 2018 and 2019; (2) settle on a lawful reimbursement rate going forward into 2021 and beyond; and (3) find the money to pay for the $1.7 billion spent with 340b savings.

Fast forward to September 29, 2019, CMS released its annual proposed rule announcing changes to the Medicare Outpatient Prospective Payment System (OPPS), extending the 2018 rate cut into FFY 2020. CMS maintains its position that it had the authority to implement the rate cut, and has appealed the District Court decision. However, understanding that it might lose on appeal, CMS anticipates that a proposed remedy for 2018 and 2019 as well as retrospective changes to the 2020 rates, would require a final decision by District Court by March, 2020. With this in mind, the agency has “floated” reimbursement at 103 percent of ASP as an alternative policy that they believe would survive legal challenge.

Hospitals have an opportunity to provide data that could be used in a CMS remedy.

Any remedy proposed by CMS would require data input supporting retrospective payments correcting hospital shortfalls in 2018, 2019 and 2020, as well as a substantiated rate going forward. So on September 30, 2019 CMS announced its intention to survey hospitals about their acquisition costs for qualified 340B drugs. Specifically, CMS is requesting acquisition cost data from hospitals that participated in 340B October 1, 2018 through December 31 2018 and/or January 1, 2019 through March 31, 2019. The deadline for submitting data to CMS is November 29, 2019. CMS would then have until March 2020 to propose their remedy. And the “remedy” could take any number of forms including: a rate increase for all qualified hospitals in 2021 to “make good ”for shortfalls in 2018-2020 (similar to the “2-Midnight” fix; or a negotiated settlements for hospitals that appeal the issue; or something else altogether.

Brian Peterson
Senior Associate
Healthcare Consultants
TEL: (626) 445-5092
Mobile: 586 260-5781
EMAIL: BPeterson@qualityreimbursement.com
Internet Address: http://www.qualityreimbursement.com

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