Understand how we got here — and how to move forward.


November 16, 2017

Lawmakers unveil bill to restore $1.6B to 340B hospital reimbursements

Daily Briefing

    Reps. David McKinley (R-W.Va.) and Mike Thompson (D-Calif.) on Tuesday introduced a bill (HR 4392) that would prevent CMS from implementing a final rule to cut hospital reimbursements under Medicare's 340B drug discount program by $1.6 billion next year.

    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), which changes the way hospitals are reimbursed for under the 340B program. 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%, which CMS said would cut payments by $1.6 billion. 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. The 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 earlier this week filed a lawsuit seeking to block CMS from implementing the cuts.

    Bill details

    The bill would require CMS to maintain the 340B drug discount program's current hospital reimbursements instead of implementing the cuts called for under the final rule.

    McKinley in a statement said the bill would "ensur[e] that hospitals are able to continue providing affordable services, and giv[e] rural families peace of mind."

    According to CQ HealthBeat, the bill has support from a majority of lawmakers, but it could face hurdles from Republicans who want to crackdown on spending under the program.


    A CMS spokesperson said the agency does not comment on pending legislation, Modern Healthcare reports.

    AHA EVP Tom Nickels thanked "McKinley and Thompson for leading this bipartisan effort to protect patient care by preventing CMS from reducing Medicare Part B payments for some 340B hospitals." He added, "For 25 years, the 340B program has been critical in helping hospitals expand access to lifesaving prescription drugs and comprehensive health care to low-income patients and other vulnerable populations in communities across the country."

    AAMC EVP Atul Grover said preventing CMS from implementing the cuts will allow hospitals "to maintain vital services for patients."

    AEH CEO Bruce Siegel urged House lawmakers to "support access to affordable drugs by supporting this critical legislation" (AHA News, 11/15; Dickson, Modern Healthcare, 11/15; Siddons, CQ HealthBeat, 11/5 [subscription required] McKinley release, 11/15).

    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.

    Register for the Webconference

    Have a Question?


    Ask our experts a question on any topic in health care by visiting our member portal, AskAdvisory.