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340B, drug administration packaging, and other changes impacting cancer programs in the HOPPS 2018 Final Rule

January 3, 2018

    CMS has projected an overall increase in hospital outpatient department (HOPD) payments of 1.4% from 2017. However, a significant reduction in reimbursement of 340B drugs and drug packaging changes have left many oncology programs concerned about their revenues for the 2018 calendar year. Read on to learn more about these changes and other HOPPS updates impacting cancer care.

    Drug reimbursement for 340B hospitals reduced to ASP -22.5%

    The most significant change finalized in the 2018 HOPPS rule, which has received considerable criticism, is CMS's decision to reduce reimbursement for part B drugs purchased at the 340B rate from average sales price (ASP) plus 6% to ASP minus 22.5%. This will amount to an estimated $1.6 billion reduction in drug payments from CMS, which will be reallocated to non-drug-related services and distributed to all HOPD entities.

    CMS answers some of your top 340B questions

    Although this payment reduction will affect most 340B-covered institutions, non-exempted HOPDs, critical access hospitals (CAHs), children’s hospitals, PPS-exempt cancer hospitals, and rural sole community hospitals are exempted from the cut. They will use a different modifier to help CMS track drugs purchased under 340B at these organizations.

    Packaging of Level 1 and 2 drug administration services

    Although changes to the 340B program have received the most attention, new drug administration packaging changes will also impact cancer program reimbursement.

    According to CMS, this policy is part of their effort to more closely align the payment for drug administration in hospital outpatient departments and physician offices.  The policy finalizes the proposal to package certain Level 1 and 2 Drug Administration Services for 2018. Level 1 and 2 Drug Administration codes with a “Q1” status indicator will be packaged when they are performed with another, more resource-intense service (with a status indicator of S, T, or V). Some Level 1 and 2 Drug Administration codes are exempted from the packaging rule, including vaccinations and add-on services; however, CMS is requesting feedback on whether these procedures should be included in the drug packaging in future years.

    Packaged Level 1 and 2 Drug Administration Codes

    To understand how these packaging changes will impact infusion center reimbursement, we performed a series of analyses using 2016 claims data. Only 0.14% of Level 1 codes billed would have been packaged, while over half (50.5%) of Level 2 codes would have been packaged. Since Level 2 codes make up a substantial proportion of all drug administration codes, our analyses show an estimated 10% reduction in total drug administration reimbursement for HOPDs.

    Almost all drug administration and radiation codes see a minor increase

    Although the 340B cuts will reduce drug payments by an estimated $1.6 billion, CMS will redistribute these savings to other non-drug items and services. Apart from Level 4 Radiation Therapy (APC 5624), most oncology-related codes will see an increased payment rate from the 2017 rule, and expected revenues per patient for all radiation therapy modalities will increase slightly.

    Other notable changes

    Due to stipulations in the 21st Century Cures Act, CMS has decided to reduce their payment-to-cost ratio (PCR) for PPS-exempt hospitals to 0.88. This is estimated to reduce the percentage increase in payments for the majority of PPS-exempt hospitals (find the full list of PPS-exempt hospitals here).

    CMS has finalized its proposal to continue the non-enforcement of direct supervision requirements for CAHs and small rural hospitals with fewer than 100 beds through 2019.

    Finally, CMS has changed their date of service (DOS) policy for advanced diagnostic laboratory tests (ADLTs) and molecular pathology tests excluded from OPPS packaging so that the date of service is the date the test is performed if the following criteria are met:

    1. The test was performed following a hospital outpatient’s discharge from the hospital OPD
    2. The specimen was collected from a hospital outpatient during an encounter
    3. It was medically appropriate to have collected the sample from the hospital outpatient during the hospital outpatient encounter
    4. The results of the test do not guide treatment provided during the hospital outpatient encounter
    5. The test was reasonable and medically necessary for the treatment of an illness

    If a test meets these criteria, laboratories are able to bill CMS directly for the test instead of receiving reimbursement from the hospital.

    Impact on non-excepted HOPDs from the MPFS Rule

    Lastly, in a continued push towards site neutral payments, the Medicare Physician Fee Schedule (MPFS) finalizes an additional rate cut for non-excepted hospital outpatient departments. Last year these HOPDs were reimbursed at 50% of the HOPPS rate, and for 2018 they will be reimbursed at only 40% of the HOPPS rate. However, as stated earlier, non-excepted facilities who are part of the 340B program are still eligible to receive reimbursement for drugs purchased at the 340B rate at ASP +6%.

    For a refresher on non-excepted HOPDs, check out our blog, Your top 12 questions on CMS's first big move toward site-neutral payments—answered


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