NASH Comments on Proposed Medicare Outpatient Payment Regulation (part 2 of 4)

The National Alliance of Safety-Net Hospitals has submitted extensive comments to the Centers for Medicare & Medicaid Services about its proposed changes in the Medicare outpatient prospective payment system for 2020.

In its letter to CMS, NASH focuses on four issues:

  • CMS’s price transparency proposal
  • Reimbursement for 340B-covered prescription drugs
  • Medicare site-neutral payment policy
  • Proposed updates of the inpatient-only list of medical procedures

Today this blog features NASH’s comments about reimbursement for 340B-covered prescription drugs.  Yesterday we presented NASH’s views on CNN’s price transparency proposal; on Friday we present NASH’s views on Medicare site-neutral payment policy; and on Monday we present NASH’s perspective on CMS’s proposal to permit Medicare to pay for certain medical services on an outpatient basis rather than limiting them to being performed only on patients admitted to a hospital.

See the complete NASH letter to CMS here.

Reimbursement for 340B-Covered Prescription Drugs

The 340B prescription drug discount program helps improve access to high-cost prescription drugs for low-income patients and helps put additional resources into the hands of qualified providers so those providers can do more for such patients:  provide more care that their patients might otherwise not be able to afford, offer more services that might otherwise by unavailable to such patients, and do more outreach into communities consisting primarily of low-income residents.  Only providers that care for especially large numbers of low-income patients qualify to participate in the 340B program.

In this year’s proposed rule, CMS calls for reimbursing 340B-eligible providers at average sale price less 22.5 percent for 340B-covered prescription drugs.  NASH strongly opposes this proposal.

For the past two years CMS also has reimbursed 340B-eligible providers at average sale price less 22.5 percent for 340B-covered prescription drugs, a break from past policy, which reimbursed eligible providers at average sale price plus six percent.  This policy change was implemented even though Congress, which created the program, did not direct CMS to reduce payments to 340B providers that serve especially large numbers of low-income patients just to save money and certainly did not direct CMS to introduce new policies that seek to reduce the federal government’s commitment to serving low-income Americans.

Shortly after implementation of the reimbursement reduction that took effect in calendar year 2018, various stakeholders sued CMS over the payment cut and the courts agreed with the stakeholders and rejected the cut.  Despite the court’s ruling, CMS did not restore payments to average sale price plus six percent but continued to pay average sale price less 22.5 percent even though the court rejected this payment.

Despite the court’s rejection, CMS proposed the same payment cut for calendar year 2019:  average sale price minus 22.5 percent.  The stakeholders again sued and the courts again sided with stakeholders and rejected the payment cut.  Despite this, CMS again did not restore payments to average sale price plus six percent but continues to pay average sale price less 22.5 percent even though the court had now twice rejected this payment.

In light of these continued rejections by the courts, NASH encourages CMS to restore 340B payments to their previous level of average sale price plus six percent.  The courts have spoken and it is time to respect their verdict.

This leaves the question of how to reimburse providers for the revenue they lost when CMS continued to make essentially illegal underpayments for two full years, refusing to adjust its payments in the face of its losses in court – a question posed in the proposed regulation.  NASH believes the best way, the only way, to repair the damage done to safety-net providers by two years of underpayments is to restore those payments retroactively through a one-time, lump-sum payment that compensates them for every underpaid claim, every under-reimbursed prescription drug during the two-year period during which CMS continued to pay eligible providers average sale price less 22.5 percent despite not one but two court rulings that it must not do so.  These lump-sum payments, NASH believes, should be made in their entirety to all affected hospitals by the end of calendar year 2020.  To do this, NASH urges CMS to identify the amount of individual hospitals’ underpayments based on data hospitals have already submitted rather than requiring additional action by the injured parties.

As explained by the web site of the Health Resources and Services Administration, which operates the 340B program,

The 340B Program enables covered entities to stretch scarce Federal resources as far as possible, reaching more eligible patients and providing more comprehensive services.

Federal policy should enhance this program and help it achieve its objectives, not make it harder for low-income patients and the providers that serve them.  NASH urges CMS to heed the federal government’s own rationale for the program and restore 340B payments to their previous level

See the complete NASH letter to CMS here.

Tomorrow:  NASH addresses CMS’s proposed changes in site-neutral payment policy

New Web Site Shows Maximum 340B Prices

Providers can now see the maximum prices for 340B-covered drugs on a new web site established by the federal Health Resources & Services Administration.

The web site, mandated by Congress after the U.S. Department of Health and Services’ Inspector General found that some providers are being overcharged, will enable 340B-eligible providers to identify the maximum price they can be charged for covered drugs.  This, HRSA believes, will help providers avoid being overcharged in the future.

Most private safety-net hospitals participate in the 340B program and consider it a vital tool in helping them serve their low-income communities.

Learn more in the Becker’s Hospital Review article “HRSA launches 340B ceiling price website” and visit the new web site itself (registration required).

Pressure Off 340B?

Two key House subcommittees will not hold hearings on the controversial 340B prescription drug discount program in the near future.

The chairs of the House Energy and Commerce Committee’s Oversight and Investigations Subcommittee and its Health Committee have both suggested that House Democrats understand the importance and value of the 340B program and see other health care issues as greater priorities.

This marks a serious departure from the last session of Congress, which saw a number of hearings on the 340B program and doubts cast about the program’s objectives and future.

Most private safety-net hospitals participate in the 340B program and consider it a vital resource in their efforts to serve their communities.  NASH has long advocated for the protection of the program, including in this 2018 letter to congressional leaders.

Learn more from the Lexology article “340B Program Gets Relief from Congressional Scrutiny.”


Court Rejects 340B Cuts

A federal court has ruled that the Centers for Medicare & Medicaid Services overstepped its authority in reducing Medicare payments for prescription drugs covered by the section 340B prescription drug discount program.

While the court conceded that CMS has the authority to address 340B payments, it found that CMS’s drastic payment cuts, introduced in FY 2018, “…fundamentally altered the statutory scheme established by Congress…” for determining 340B payment rates.

The court suggested that CMS either change its methodology for determining 340B payments to justify the specific cuts it proposes or raise its objections with Congress, which created the program and has the authority to change it.

According to documents submitted to the court by the parties that filed the suit, eligible hospitals have seen their 340B payments reduced $1.6 billion since the cuts began in FY 2018.  The court asked the federal government and those who filed the suit to suggest remedies for compensating participating hospitals for their losses.

The ruling has major implications for the country’s private safety-net hospitals, most of which participate in the 340B program.

Learn more about the 340B litigation, the court’s ruling, and its impact in the New York Times story “Court Rejects Trump’s Cuts in Payments for Prescription Drugs.”

Hospitals Ask Congress to Protect 340B Program

The leaders of more than 700 hospitals and health systems have written to congressional leaders to ask them to protect the section 340B prescription drug discount program.

The letter states that

 We are concerned about recent regulatory actions that have reduced the reach of this vital program and by legislative proposals that would undo more than two decades of bipartisan work to preserve the health care safety net.

The letter explains that

 In 2015, 340B hospitals provided $26 billion in uncompensated and unreimbursed care to low-income and rural patients in need. That represented 60 percent of all such care delivered in the U.S. even though our hospitals comprise only 38 percent of all acute care hospitals operating in our country. Because of the savings from 340B, we are able to offer vital but often money-losing services including obstetrics, trauma care, opioid addiction treatment, and HIV/AIDS care. In many rural communities, 340B savings are the difference between hospitals staying open and closing. We do all of this without using taxpayer dollars.


Efforts to reduce the scope of the 340B program would not reduce the cost of prescription drugs in the U.S. and would weaken nonprofit hospitals’ ability to serve patients who often have nowhere else to turn.

NAUH has long advocated protecting the 340B program, writing to Congress to express this view on many occasions, and most recently, earlier this year.

Go here to see the complete letter from the more than 700 hospitals and health systems.

New Reg Pushes Medicare Toward Site-Neutral Outpatient Payments

Medicare would make more payments for outpatient services on a site-neutral basis under a newly proposed regulation just released by the Centers for Medicare & Medicaid Services.

The 2019 Medicare outpatient prospective payment system regulation, published in proposal form, calls for:

  • paying physician fee schedule rates rather than hospital outpatient rates at excepted off-campus provider-based departments;
  • slashing payments for office visits;
  • extending this year’s 340B prescription drug discount payments, already cut nearly 30 percent this year, to additional providers; and
  • raising ambulatory surgical center rates and expanding the list of procedures that can be performed in such facilities so they can compete with hospitals for outpatient services.

The proposed regulation also calls for reducing quality reporting requirements and giving providers financial incentives to prescribe non-opioid pain medicine for surgery patients.

The regulation, which would affect provider payments beginning on January 1, 2019, was published in proposed form and will be finalized later in the year.  Stakeholders have until September 24 to submit comments to CMS.  For further information about what CMS has proposed, see this CMS fact sheet outlining the proposed regulation and the 761-page proposed regulation itself.

GAO Recommends Changes in Oversight of 340B Program

The federal Government Accountability Office is recommending that the Department of Health and Human Services improve its oversight of the 340B prescription drug discount program.

That program was created by Congress to help safety-net providers obtain discounts on prescription drugs they dispense to low-income patients on an outpatient basis.  Those discounts are provided by pharmaceutical companies and not paid for with taxpayer money.

The 340B program has been controversial in recent years, and in response to a request from Congress for the GAO to look into the contract pharmacies that operate the 340B programs for many safety-net providers, the GAO performed an examination of the program.

Its review identified several weaknesses in the manner that HHS’s Health Resources and Services Administration oversees the program.

  • HRSA audits do not fully assess compliance with the 340B Program prohibition on duplicate discounts for drugs prescribed to Medicaid beneficiaries. Specifically, manufacturers cannot be required to provide both the 340B discount and a rebate through the Medicaid Drug Rebate Program. However, HRSA only assesses the potential for duplicate discounts in Medicaid fee-for-service and not Medicaid managed care. As a result, it cannot ensure compliance with this requirement for the majority of Medicaid prescriptions, which occur under managed care.
  • HRSA requires covered entities that have noncompliance issues identified during an audit to assess the full extent of noncompliance. However, because HRSA does not require all the covered entities to explain the methodology they used for determining the extent of the noncompliance, it does not know the scope of the assessments and whether they are effective at identifying the full extent of noncompliance.
  • HRSA does not require all covered entities to provide evidence that they have taken corrective action and are in compliance with program requirements prior to closing the audit. Instead, HRSA generally relies on each covered entity to self-attest that all audit findings have been addressed and that the entity came into compliance with 340B Program requirements.

To address these concerns, the GAO recommends that the HRSA administrator:

  • require covered entities to register contract pharmacies for each site of the entity for which a contract exists
  • issue guidance to covered entities on the prevention of duplicate discounts under Medicaid managed care, working with CMS as HRSA deems necessary to coordinate with guidance provided to state Medicaid programs
  • incorporate an assessment of covered entities’ compliance with the prohibition on duplicate discounts, as it relates to Medicaid managed care claims, into its audit process after guidance has been issued and ensure that identified violations are rectified by the entities
  • issue guidance on the length of time covered entities must look back following an audit to identify the full scope of noncompliance identified during the audit
  • require all covered entities to specify their methodology for identifying the full scope of noncompliance identified during the audit as part of their corrective action plans, and incorporate reviews of the methodology into their audit process to ensure that entities are adequately assessing the full scope of noncompliance
  • require all covered entities to provide evidence that their corrective action plans have been successfully implemented prior to closing audits, including documentation of the results of the entities’ assessments of the full scope of noncompliance identified during each audit. The Administrator of HRSA should provide more specific guidance to covered entities regarding contract pharmacy oversight, including the scope and frequency of such oversight

Private safety-net hospitals typically participate in the 340B program and consider it an essential tool in the work they do serving the low-income residents of their communities.

Go here to see highlights from the report and here to see Drug Discount Program: Federal Oversight of Compliance at 340B Contract Pharmacies Needs Improvement, the full GAO report.

NAUH Endorses 340B Bill

In a letter to the leaders of the House Energy and Commerce Committee, NAUH has endorsed H.R. 6071, the Stretching Entity Resources for Vulnerable Communities Act (SERV), which was introduced earlier this week by Representative Doris Matsui (D-CA).

H.R. 6071 seeks to clarify the intent of the 340B prescription drug discount program and restore $1.6 billion in funding that was eliminated from the program effective January 1.

See NAUH’s letter to the House Energy and Commerce Committee here.


S&P: 340B Cuts Will Hurt

Payment cuts in the 340B prescription drug program will most likely hurt hospital financial performance, and among those most likely to be hurt are DSH hospitals, small hospitals, and rural hospitals.

These are among the conclusions in a report recently issued by S&P Global Ratings.

The report concludes that

…the impact of the cuts to the 340B Drug Pricing Program on not-for-profit hospitals that rely on 340B drug savings will likely weaken their operating performance at a time of already tightening margins.

Effective the beginning of 2018, the Centers for Medicare & Medicaid Services cut the 340B program 16 percent, or $1.6 billion, reducing the reimbursement 340B-eligible hospitals receive for dispensing prescription drugs on an outpatient basis to eligible patients.

The hospitals most affected, according to S&P, are those that

…depend more on the margin they receive from 340B medications to sustain their bottom line and overall financial profiles.  In these cases, cuts to the program are likely to further stress already-constrained operating performance, adding to financial pressure and possible negative rating actions.

Most private safety-net hospitals participate in the 340B program and will be affected by the recent cut.  NAUH conveyed to CMS its opposition to the cut when it was proposed last fall and earlier this year asked Congress to intervene and reverse it.

Learn more about the possible financial impact on hospitals of recent 340B payment cuts in this S&P Global report.


The 340B Issue Explained

The section 340B prescription drug discount program has grown increasingly controversial in recent years.

The program, established in the 1990s to help hospitals with the cost of the prescription drugs they provide to low-income patients on an outpatient basis, has grown considerably since its inception.  Pharmaceutical companies argue that it is too large, that it contributes to the growing cost of prescription drugs, and that hospitals are not using the savings they reap from the program to serve more low-income patients, as was envisioned when Congress created the program.

Eligible providers, on the other hand, note that much of the program’s growth was mandated by Congress and that 340B continues to serve its original purpose of helping hospitals serve low-income outpatients while using the savings the program generates to provide even further assistance to low-income patients.

Recent federal efforts to address some of these issues have satisfied neither side.

Most private safety-net hospitals participate in the 340B program and consider it to be a vital tool in helping them serve their communities.

The Vox news web site has published an article that describes the program and outlines both sides of the argument.  Find it here.