CMS Proposes Rectifying 340B Payments in Lump Sum

The Centers for Medicare and Medicaid Services (CMS) has offered its suggestion for a solution to the Supreme Court decision that would return $9 billion to hospitals that were paid less than rates the court said were set unconstitutionally.

Last year, the U.S. Supreme Court (SCOTUS) ruled unanimously that the differential payment rates for the 340b drug discount program were unconstitutional because the agency failed to conduct a survey of relevant hospital costs from which to build the discount, even though the statute required them to do so. CMS was then ordered to pay for claims for 340b-acquired drugs at the default rate, and the agency proposed a rule that would try to reimburse lost money to participating hospitals.

In the CMS press release on the final rule to correct payments between 2018 and 2022 related to the drug discount program, the agency offered to make a one-time lump-sum payment to any hospital that was paid less due to the struck-down policy:

CMS estimates that for CY 2018 through the approximate third quarter of 2022, certain OPPS 340B providers received $10.6 billion less in 340B drug payments than they would have without the 340B policy. However, many CY 2022 340B drug claims have been processed, or reprocessed through standard claims processing, at the higher default payment rate since the 340B payment policy was vacated on September 27, 2022. As a result, affected 340B providers have already received from Medicare and beneficiaries $1.6 billion of the $10.6 billion that would otherwise have had to be remedied through these reprocessed claims. For the remaining $9.0 billion owed to affected 340B providers for claims covering CYs 2018 through 2022, CMS is making a one-time lump-sum payment to each 340B-covered entity hospital that was paid less due to the now-invalidated policy.

According to RAC Monitor, CMS is including the lost money that was included under beneficiary copayments, which is expected to amount to 20% of the sum owed to hospitals. The agency said that those payments were estimated and would be included in the lump sum payment. The agency also stressed that this was necessary due to Congressionally-required budget neutrality.

CMS also intends to maintain that budget neutrality by reducing future non-drug item and service payments by adjusting the Outpatient Prospective Payment System (OPPS) conversion factor by -0.5% beginning in 2026, according to Becker’s.

Already incensed by lower-than-expected conversion factor boosts for the CY2024 OPPS, in addition to the pressing concerns of inflation, high labor costs and staffing shortages, the hospital industry is strongly pushing back against the proposal, which Modern Healthcare notes could spark yet another legal battle related to the 340b program.

For example, Federation of American Hospitals President and CEO Chip Kahn called the OPPS conversion factor adjustment a “rate cut” and released a statement that was at once alarmed and forceful:

Congress was clear in framing the law setting up the outpatient prospective payment system: The annually determined payment rate is final and hospitals rely on it to deliver care to America’s seniors. The law does not allow Medicare to go backwards, and this statutory predictability and stability of payment is mission critical to sustain patient access to care…

In disregarding the law, the final rule erodes the ability of hospitals to deliver lifesaving services that patients depend on, especially in rural areas where many hospitals are already struggling to survive.