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November 14, 2017

Hospitals sue HHS over planned $1.6B in 340B cuts

Daily Briefing

    Several hospital groups and health systems on Monday filed a lawsuit against HHS over the department's plan to reduce hospital reimbursements under Medicare's 340B drug discount program.

    A proposed $900M cut to 340B payments—and other early impressions from the 2018 OPPS rule

    About the 340B cuts

    CMS earlier this month issued its final rule for the Hospital Outpatient Prospective Payment System (OPPS). The final rule reduces hospital reimbursements under the 340B program by $1.6 billion. The program requires drug manufacturers to provide outpatient drugs to eligible health care providers at discounts ranging from 20% to 50%. About 40% of U.S. hospitals are eligible to participate in the program.

    Currently, hospitals under the program purchase drugs at a discounted rate and are reimbursed at 6% on top of a drug's average sales price, but beginning in calendar year (CY) 2018 hospitals will be reimbursed at average sales price minus 22.5%. CMS said Prospective Payment System-exempt cancer hospitals, children's hospitals, critical access hospitals, rural sole community hospitals, and non-excepted hospital outpatient departments reimbursed under the Medicare Physician Fee Schedule will be exempt from the payment cuts. The reimbursement cuts also will not apply to vaccines, according to a CMS fact sheet.

    CMS said it would redistribute the $1.6 billion in savings by raising Medicare payments to hospitals for non-drug items and services under OPPS in CY 2018. The agency said it might revisit the payment rate changes in CY 2019.

    CMS previously said the changes would address rising costs under the program. However, hospital groups have said the cuts could jeopardize services at safety-net hospitals.

    Lawsuit details

    The lawsuit was filed by American Hospital Association (AHA), Association of American Medical Colleges (AAMC), and America's Essential Hospitals (AEH), as well as Eastern Maine Healthcare Systems, Henry Ford Health System, and Park Ridge Health. The organizations filed the lawsuit in the U.S. District Court for the District of Columbia.

    The organizations in the suit claim that the 340B cuts violate the Social Security Act and exceed the HHS secretary's authority because Congress had intended for hospitals to receive discounts under the program. The groups are seeking an injunction to stop HHS from implementing the cuts pending the lawsuit's resolution.


    AHA President and CEO Rick Pollack in a statement said, "From its beginning, the 340B Drug Pricing Program has been critical in helping hospitals stretch scarce federal resources to enhance comprehensive patient services and access to care." He added, "CMS' decision to cut Medicare payments for so many hospitals for drugs covered under the 340B program will dramatically threaten access to health care for many patients, including uninsured and other vulnerable populations." Pollack said the "lawsuit will prevent these significant cuts from moving forward."

    AEH President and CEO Bruce Siegel in a statement said, "This lawsuit underscores the serious threat CMS' policy poses for millions of Americans who depend on affordable drugs and health care services made possible by 340B savings." He continued, "The imminent harm these cuts will cause demands a quick and strong response to protect our patients, hospitals, and communities."

    According to Bloomberg Technology, HHS did not respond to a request for comment on Monday (Dickson, Modern Healthcare, 11/13; Ellison, Becker's Hospital CFO Report, 11/13; Ehley, "Pulse," Politico, 11/14; AHA release, 11/13; Rausch, Bloomberg Technology, 11/13).

    Next: Streamline PA processes for provider-administered drugs

    Prior authorization (PA) processes have long been an administrative burden for providers. In recent years, securing PAs has become even more difficult due to increasing requirements and greater variation in health plan benefit structure.

    Join our experts on Thursday, Nov. 30 at 3 pm ET to learn best practices for staffing, process redesign, improving information flow, and working with payers to reduce PA requirements.

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