07/18/2023

CMS Proposes Returning $9 Billion to More Than 1,600 Hospitals

The Centers for Medicare & Medicaid Services (CMS) released the Hospital Outpatient Prospective Payment System: Remedy for 340B-Acquired Drugs Purchased in Cost Years 2018-2022 Proposed Rule on July 7, 2023. CMS has published a fact sheet that provides additional information on the Proposed Rule. The 340B program – which refers to Section 340B of the Public Health Service Act requires significant discounts on outpatient drugs for "covered entities," including safety-net providers and programs.

In a 2017 rulemaking, CMS altered Medicare's payment methodology for separately payable outpatient drugs (including biologics) acquired through the 340B Drug Pricing Program. This change, effective calendar year (CY) 2018, reduced reimbursement for these discounted drugs under the hospital Outpatient Prospective Payment System (OPPS) from the default rate of average sale price (ASP) plus 6 percent to ASP minus 22.5 percent, following a Medicare Payment Advisory Commission (MedPAC) recommendation that the cuts would bring 340B payments closer to the drug acquisition costs. CMS continued this policy in CYs 2019 through 2022. Critical access hospitals, rural sole community hospitals, PPS cancer hospitals and children's hospitals were exempt from this policy.

Due to budget neutrality requirements, the savings from these 340B hospital cuts were then redistributed via increased payments to all hospitals under the OPPS. CMS redistributed these savings by increasing the conversion factor to determine the payment amounts for non-drug items and services within the OPPS. That conversion factor increase was 3.19 percent each year.

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