CMS finalizes 340B remedy plan with one-time payments and cuts to other reimbursement

Wednesday, November 8, 2023

CMS is moving forward with its proposals to address unlawful payment reductions to 340B drug reimbursement, according to a final rule released November 2. The final rule keeps most of the provisions of the proposed rule intact with only a few adjustments based on commenter feedback.

According to CMS’ calculations, affected provider organizations were underpaid by $10.6 billion from 2018, when the reductions to 340B reimbursement were introduced, to 2022, when the Supreme Court ruled the cuts were unlawful. Prior to the release of its plan to remedy the unlawful cuts, CMS had already repaid $1.6 billion. Under the final rule, affected provider organizations will receive one-time lump-sum payments covering the remainder of the underpayments.

Specific information on the amounts owed to each affected provider organization are included in the final rule. Beneficiary cost-sharing will be included in the lump sum payment, so providers should not bill beneficiaries. Beneficiary copayments make up about 20% of the affected 340B payments.

However, CMS maintains that it must uphold budget neutrality, so these payments will come at the cost of reimbursement to non-drug services and supplies paid under the Outpatient Prospective Payment System (OPPS). When CMS enacted the cuts to 340B drug reimbursement in 2018, it kept the cuts budget neutral by redistributing the funds to non-drug services and supplies. Therefore, CMS will offset the $7.8 billion it calculates all provider organizations were paid for non-drug items and services from 2018 to 2022. It will do this by reducing the OPPS conversion factor by 0.5% starting in 2026. CMS had originally proposed starting the conversion factor reduction in 2025 but pushed it back a year based on commenter feedback. The offset will continue until the full $7.8 billion is offset, which CMS estimates will take 16 years. Providers who didn't enroll in Medicare until after January 1, 2018, are excluded from the rate reduction.

On a positive note, beneficiary copayments for non-drug items and services will decrease slightly.

The one-year delay before the cuts to the OPPS conversion factor are enacted is a win and gives hospitals more time to prepare, according to NAHRI Advisory Board member Jugna Shah, MPH, CHRI, president of Nimitt Consulting in Spicer, Minnesota.

Although CMS may intend for this final rule to be the last word on the matter, it’s possible that industry stakeholders, such as the American Hospital Association (AHA), may file lawsuits to halt the cuts to the OPPS conversion factor, she adds.

The AHA supports the one-time lump sum payments, but believes CMS is making the wrong move by cutting the conversion factor, Rick Pollack, president and CEO of the AHA, said in a statement. Pollack noted that in finalizing the cuts, CMS is ignoring numerous comments that explained why they were inappropriate and illegal. The AHA is currently reviewing the final rule and considering its options.