{"id":4532,"date":"2017-07-17T00:56:00","date_gmt":"2017-07-17T00:56:00","guid":{"rendered":"https:\/\/www.healthlawpolicymatters.com\/?p=4532"},"modified":"2021-11-03T00:57:28","modified_gmt":"2021-11-03T00:57:28","slug":"six-questions-answers-cms-recommended-changes-340b-medicare-reimbursement","status":"publish","type":"post","link":"https:\/\/www.healthlawpolicymatters.com\/2017\/07\/17\/six-questions-answers-cms-recommended-changes-340b-medicare-reimbursement\/","title":{"rendered":"Six Questions and Answers About CMS\u2019 Recommended Changes to 340B Medicare Reimbursement"},"content":{"rendered":"\n

In March, I posted about the\u00a0Uncertain Future of the 340B Drug Discount Program<\/a>. \u00a0When opining about\u00a0What Could Happen Next\u00a0<\/em>I speculated about possible changes to government reimbursement for 340B drugs \u201cso that government safety net programs share in 340B savings.\u201d<\/p>\n\n\n\n

I reasoned that CMS already knew that \u201cMedicare pays more for 340B drugs than the covered entities\u2019 acquisitions cost.\u201d \u00a0And I noted that \u201cthe profits are especially steep for physician administered drugs\u201d in Medicare Part B where reimbursement is set at Average Sales Price (ASP) plus 6%. \u00a0My authorities for these statements were (i) my\u00a0prior post<\/a>\u00a0on a November 2015\u00a0report<\/a>\u00a0by HHS-OIG analyzing the impact of potential changes to Part B reimbursement for 340B drugs, and (ii) my\u00a0prior post<\/a>\u00a0on the 2016 Medicare Payment Advisory Commission (MedPac) recommendation to reduce \u00a0hospital\u2019s Medicare reimbursement for 340B drugs.\u00a0 Given that CMS had already required the states to cap Medicaid reimbursement for 340B drugs at 340B ceiling prices, I thought that CMS might try to take action to reduce Medicare reimbursement levels.<\/p>\n\n\n\n

I will resist the temptation to say that I told you so, but I will say that late in the afternoon of July 13, 2017, CMS issued a\u00a0proposed rule<\/a>\u00a0on Outpatient Medicare Payment Systems with major implications for 340B covered entities.\u00a0 In extended commentary to the proposed rule, CMS states its intent to implement an alternative payment methodology for Medicare Part B reimbursement for 340B drugs, the effect of which would be to cut Medicare Part B reimbursement for many covered entities by close to 30% starting in January 2018.\u00a0 Interestingly enough, while the substance of the proposal was discussed at length by CMS, the exact text through which the proposal would be implemented was not provided.<\/p>\n\n\n\n

The proposed rule and accompanying commentary won\u2019t be formally published until July 20th<\/sup>, and the Comment Period for the proposal will be open through September 11, 2017.  But I have already heard from many of my contacts about the implications of the CMS proposal to alter Part B reimbursement for 340B drugs.<\/p>\n\n\n\n

Here are the six top questions I have fielded to date about the CMS proposed change to Medicare Part B reimbursement for 340B drugs.<\/p>\n\n\n\n

  1. What is the Proposed Change in Medicare Part B Reimbursement?  <\/strong>Effective January 2018, CMS would reduce Part B reimbursement for 340B drugs from ASP plus 6% to ASP minus 22.5%.  The reduction would only be applicable to covered entities which are hospitals, Community Mental Health Centers, and Ambulatory Surgical Centers, and would be implemented as part of changes to the Outpatient Prospective Payor System (OPPS).  Drugs which are on pass-through status and vaccines would be excluded from the payment reduction.  In order to implement the change, CMS would also establish a new modifier that would be used to identify whether a drug billed through the OPPS was purchased through 340B.<\/li>
  2. Does the Proposed Change Apply to All 340B Covered Entities? <\/strong>It appears the change would not be applicable to all 340B Covered Entities.  The mechanism for the change is a revision to the OPPS and CMS is explicit that the change is intended to impact reimbursement for hospitals, Community Mental Health Centers, and Ambulatory Surgical Centers.  Further, as discussed below, the legal basis for the change is statutory authority specific to hospital outpatient reimbursement.  However, it is difficult to know for sure because the change was not codified in a proposed rule and the exact text of the proposal was not provided.<\/li>
  3. Is this CMS\u2019 Idea or Did it Adopt an Outside Recommendation? <\/strong>The CMS proposal is actually a hybrid of previous recommendations made by MedPac and HHS-OIG.  MedPac proposed reducing Part B reimbursement to hospitals for 340B drugs by 10% of ASP.  HHS-OIG had offered several proposals, ranging from minor to extreme.  The middle-of-the-road HHS-OIG proposal reduced Part B reimbursement for all 340B drugs to ASP minus 14.4% so that \u201c340B savings are approximately equally split between covered entities, Medicare and its beneficiaries.\u201d<\/li><\/ol>\n\n\n\n

    CMS adopted parts of both proposals, limiting the reduced reimbursement to just certain types of covered entities but increasing the discount in an attempt to align Medicare reimbursement with the estimated (and confidential) 340B ceiling price.   At the end of the day, CMS justifies its proposed reimbursement reduction because \u201cwe do not believe that Medicare beneficiaries should be liable for a copayment rate that is tied to the current methodology of ASP +6 percent when the actual cost to the hospital to purchase the drug is much lower.\u201d<\/p>\n\n\n\n

    1. How Much Would Medicare Reimbursement Be Reduced and What Does CMS Propose to Do with the Money Saved Under its Proposal? <\/strong>Because this proposal is part of the OPPS rule, technically it has to be budget-neutral.  CMS estimates that the covered entities impacted would see a reduction in Medicare reimbursement of approximately $900 million, but the Medicare savings would be used to increase reimbursements for other items and services paid under the OPPS.<\/li>
    2. Does CMS Have Legal Authority to Unilaterally Implement the Change? <\/strong>Really good question.  As noted above CMS did not publish the text of this proposal.  Additionally, although the proposed change was included as part of a propose rule, CMS is not <\/strong>proposing to implement it through rulemaking.<\/li><\/ol>\n\n\n\n

      Medicare Part B reimbursement is set by statute \u2013 the reimbursement rate of ASP plus 6% was implemented as part of the\u00a0Medicare Modernization Act of 2003<\/a>\u00a0(MMA).\u00a0 In its commentary to the proposed rule, CMS states it will implement the proposed reimbursement reduction for 340B drugs under\u00a042 U.S.C. \u00a71395I(t)(14)(A)(iii)(II)<\/a>, which gives the Secretary authority to \u201cadjust\u201d hospital payments for outpatient drugs, including those based on ASP methodology, based on the hospital acquisition cost data or if such is not available, by the average price for the drug \u201cas calculated and adjusted by the Secretary as necessary for purposes of this paragraph.\u201d\u00a0 \u00a0Because CMS does not have 340B drug acquisition data from hospitals, and given the various published reports on hospitals\u2019 340B profits, CMS believes its adjusted Part B reimbursement rate is an appropriate calculation of the average price of the drug.<\/p>\n\n\n\n

      However, when CMS proposed a controversial \u201cmodel\u201d to modify Part B drug reimbursement for physicians in 2016, it did so through a proposed new rule that would be part of 42 CFR Chapter 511 \u2013 a proposal that was never finalized or implemented.  In the absence of Congressional action, I expect that any attempt by CMS to unilaterally alter the MMA-established Part B reimbursement methodology will be the subject of legal challenges.<\/p>\n\n\n\n

      1. Is CMS Open to Alternatives? <\/strong>CMS indicated that it wants to receive comments from stakeholders on a variety of issues, including:<\/li><\/ol>\n\n\n\n