We detail the major takeaways from the FAQ below, but first, a refresher: In the Hospital Outpatient Prospective Payment System (HOPPS) CY 2018 Final Rule for CY 2018, CMS last month finalized a 27.5% decrease in reimbursement for drugs purchased with 340B discounts starting in CY 2018. CMS also established new modifiers, "JG" and "TB," to flag these drugs on Part B claims. With the modifiers, CMS seeks to better track use of the 340B program, collecting data that could influence rate setting in the future.
New FAQ from CMS clears up lingering questions about implementation
The Final Rule clarified that organizations not reimbursed under HOPPS (critical access hospitals; Maryland waiver hospitals; and non-excepted HOPDs) will not be impacted by the rate change. The Final Rule also explicitly exempted several types of covered entities from the reduced payment rate: PPS-exempt cancer hospitals, children's hospitals, and rural sole community hospitals.
However, the Rule did not answer several key questions about how the 340B changes would be implemented, particularly the new "JG" and "TB" modifiers. Now, two weeks before the new 340B rate and modifiers take effect, CMS has released an FAQ document providing more clarity on many key aspects of the provision. You can access it on CMS's website.
We recommend that all hospitals review the FAQ to better understand how the 340B rate change will impact their facilities. The FAQ also clarifies key aspects of the new 340B drug modifiers. Here are our top takeaways:
1. Critical Access Hospitals (CAHs) and hospitals under the Maryland waiver do not need to report 340B drug modifiers on claims. Reporting is not required for these hospital types, which are not impacted by the changes to 340B payment and reporting. These facilities are allowed to flag drugs purchased with 340B discounts if they would like to—and in that case, they should use the "TB" modifier to indicate that they are not receiving the 340B rate reduction.
2. For all other types of 340B covered entities, drugs purchased with a 340B discount must be marked with a modifier, and the modifier used will either trigger a reduced 340B reimbursement rate of ASP minus 22.5% ("JG") or indicate an unreduced 340B reimbursement rate ("TB"). 340B covered entities must code "JG" if the drug is subject to the reduced 340B discount (drugs with status indicator "K" at most covered entities) and "TB" if the drug will continue to be paid at ASP+6% (all drugs at exempted facilities, and pass-through drugs, packaged drugs, and vaccines at all 340B covered entities). In clarifying that it will make payments based upon the modifier used instead of based strictly upon facility type, CMS places the burden of ensuring appropriate payment for 340B discounted drugs on providers.
3. Non-excepted hospital outpatient departments (HOPDs) paid at 40% of the HOPPS rate under the MPFS must report the "TB" modifier. Although these facilities are not receiving the 340B payment rate reduction in CY 2018, they must report the "TB" modifier on claims to flag drugs purchased with 340B discounts.
4. Consult your MAC or the CMS Impact File to determine your hospital's official designation (DSH hospital vs. rural SCH vs. children's hospital, etc.). In some cases, facilities are enrolled in the 340B program as a different type of facility than their official Medicare designation. Your hospital's official designation is defined in in CMS's CY 2018 Impact File, here. CMS recommends reaching out to your Medicare Administrative Contractor (MAC) if you have questions about your hospital's status. It's important to know your hospital's status because children's hospitals, PPS-exempt cancer hospitals, and rural sole community hospitals (SCHs) are exempt from the 340B rate cut.