On July 7, 2023, CMS issued a proposed rule outlining the proposed remedy for the 340B-acquired drug payment policy for calendar years (CY) 2018–2022. CMS published this rule to remedy the payment rates previously determined invalid under the U.S. Supreme Court’s decision in American Hospital Association v. Becerra, 142 S. Ct. 1896 (2022). Aspects of this proposed policy will affect nearly all hospitals that were paid under the outpatient prospective payment system (OPPS) during the time of the now-invalidated payment policy.
The following summarizes the issue and proposed remedy:
Issue
- Prior to 2018, the Medicare payment rate for Part B-covered outpatient drugs provided in outpatient hospitals was generally the statutory default of average sales price (ASP) plus 6%.
- In the CY 2018 CMS OPPS/ASC final rule, CMS adjusted the payment rate for 340B drugs to ASP minus 22.5% with the “intent” to more accurately reimburse at levels commensurate with the actual costs incurred by 340B hospitals when acquiring 340B drugs.
- The ASP minus 22.5% payment methodology applied from CY 2018 through the fall of 2022, at which time the courts vacated this payment change.
- To comply with budget neutrality requirements, CMS increased payments to all hospitals for non-drug items and services for the period CY 2018 through CY 2022.
- CMS estimates that for CY 2018 through the third quarter of 2022, certain OPPS 340B providers received $10.5 billion less in 340B drug payments than they would have without the 340B policy.
Proposed Remedy
- CMS began reprocessing claims effective September 27, 2022 forward; thus, CMS estimates $9 billion is owed to affected 340B providers.
- CMS proposes a one-time lump sum payment to each 340B covered entity that was underpaid due to the now-invalidated payment policy from CY 2018 through CY 2022.
- To again maintain budget neutrality, CMS proposes to offset future non-drug items and services payment by adjusting the OPPS conversion factor minus 0.5% in CY 2025 until the estimated $7.8 billion in non-drug items and services overpayment is recouped from impacted providers. CMS estimates it could take up to 16 years.
- Lump sum provider payment estimates are located on the CMS website.
Providers should review the methodology and estimates prepared by CMS with comments due by September 5, 2023. Although the current settlement estimates are only for traditional Medicare services, providers should consider if similar calculations should be estimated for other payors.
Stay tuned for more updates. If you have any questions or need assistance with evaluating these computations, please reach out to a professional at Forvis Mazars or use the Contact Us form below.