In Brief: Hospitals in the 340B Drug Pricing Program will receive $9 billion under a proposed ruling.
On July 7, 2023, the Centers for Medicare & Medicaid Services (CMS) released its proposed ruling to repay 340B covered entity hospitals for the nearly 30% reimbursement cuts to outpatient 340B drugs that were incurred from 2018 to 2022. Under this newly proposed rule, CMS will make a one-time, lump sum payment to the approximately 1,600 affected hospitals in late 2023 or early 2024
The payment will be calculated as the amount the hospital would have been paid for 340B program-acquired drugs (including Medicare beneficiary coinsurance) under the outpatient prospective payment system (OPPS) from calendar year 2018 through September 27, 2022, less the amount hospitals were actually paid for 340B program-acquired drugs during the same time period.
In addition, any remedy payments already made to hospitals as a result of reprocessed claims from January 1, 2022, to September 27, 2022, will be reduced from the lump sum repayment accordingly. During the period from January 2018 to September 2022, when 340B drug reimbursement cuts were in place, CMS estimates hospitals received $10.5 billion less in reimbursement. However, CMS also estimates that $1.5 billion in remedy payments have already been made through reprocessed claims from January 2022 to September 2022.
Remedy Comes with Payment Cuts to OPPS Conversion Factor
While this proposed rule represents a favorable outcome for 340B covered entity hospitals, the payment remedy plan is intended to be budget neutral. As a result, the CMS proposed rule will reduce all payments for non-drug items and services to all OPPS providers by 0.5%, beginning in CY 2025, every year for the next 16 years until the 340B repayment is offset.
While all hospitals will need to assess the financial implications of this proposed ruling, non-340B covered entity hospitals will be particularly challenged and will need to proactively strategize around tactics to offset the reduced cut to the OPPS conversion factor.
Payments Will Vary Considerably
Data provided by CMS indicates that both historical utilization of the program and the resulting remedy payments vary considerably by hospital. The schedule of proposed payments by hospital may be found here. Despite an average payment per hospital of less than $1 million, several hospitals will see remedy payments in excess of $100 million. This data underscores both the financial importance of the program to many hospitals and the highly varied utilization of the program.
Comments on the proposed rule are requested by September 5, 2023.
If you’re looking to improve the utilization of the program at your hospital or want to learn more about how the ruling could affect your hospital, contact our healthcare strategy experts.
Edited by: Matt Maslin
Published July 12, 2023
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