The public has three weeks remaining, until September 13, 2022, to submit comments on the Centers for Medicare and Medicaid Services’ proposed changes to hospital outpatient prospective payment system (“OPPS”) reimbursement for separately payable drugs and biologics acquired through the 340B program. The program requires pharmaceutical manufacturers to provide outpatient drugs to eligible facilities at substantially reduced prices.
In its CY 2023 OPPS proposed rule, CMS stated that it “fully anticipate[s]” applying a payment rate of average sales price (“ASP”) plus 6% for 340B drugs, bringing the rate back in line with that paid for non-340B drugs. This will restore the rate in effect prior to January 1, 2018, when CMS implemented a substantial reduction in reimbursement on the basis that the participating safety net hospitals acquire 340B drugs at significantly discounted prices. CMS estimates that this change will result in approximately $1.96 billion in additional OPPS payments for 340B drugs.
The announcement comes in response to the Supreme Court’s ruling in American Hospital Association v. Becerra that reversed the rate cuts for CYs 2018 and 2019. The Court held that the reimbursement rates were unlawful because CMS was required to conduct a survey of hospital acquisition costs as a statutory prerequisite to varying the rates by hospital group.
Neither CMS nor the Supreme Court has established how participating hospitals will be reimbursed for the payment differential caused by the rate cuts for CYs 2018 - 2022. CMS is required by statute to maintain budget neutrality when it adjusts OPPS rates. Thus, when CMS implemented the 340B rate cuts, it increased OPPS rates for other services accordingly by raising the OPPS conversion factor. Because the conversion factor is used to calculate payment rates for all hospitals, the 340B cuts had the effect of increasing reimbursement to non-340B hospitals. It is unclear whether making the 340B participating hospitals whole will lead to controversial takebacks from non-participating hospitals to maintain budget neutrality.
Increasing the 340B reimbursement rate for CY 2023 will also result in a corresponding decrease to the OPPS conversion factor to make up for the estimated $1.96 billion in payments to participating hospitals.
Among other issues, CMS is soliciting public comments on the best way to craft a remedy for CYs 2018 – 2022, and for the proposed conversion factor adjustment for CY 2023. All comments should be submitted by the September 13, 2022, deadline. The final rule is expected to be published in November.
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For more information on the proposed 340B OPPS rate adjustment and its impact on providers, please contact Felicia Szeor Kyle Brierly.