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February 11, 2020

CMS says hospitals will have to answer new survey on their 340B costs

Daily Briefing

    CMS on Friday finalized a survey intended to reveal what hospitals paid for drugs purchased under Medicare's 340B Drug Discount Program—despite hospital groups' concerns about the assessment.

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    CMS finalized the survey as part of HHS' response to a legal ruling against the department in a lawsuit regarding hospital payment cuts 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%. The program, created by Congress in 1992 and expanded under the Affordable Care Act, focuses its discounts on hospitals with disproportionately low-income patient populations.

    On Jan. 1, 2018, a final rule took effect that changed the way CMS reimburses hospitals for drugs purchased under the program. Previously, hospitals purchased drugs at a discounted rate and were reimbursed at 6% on top of a drug's average sales price. But as of Jan. 1, 2018, hospitals were reimbursed at average sales price minus 22.5%, a change CMS estimated would cut payments by $1.6 billion.

    The American Hospital Association (AHA), the Association of American Medical Colleges (AAMC), America's Essential Hospitals (AEH), and three health systems sued CMS over the cuts in September 2018, arguing the agency lacked the authority to lower the payments. The groups asked the court to have CMS reimburse hospitals for the difference between what they were paid under the 2018 rule and what they would have been paid without the cut.

    U.S. District Judge Rudolph Contreras in January 2019 ruled HHS unlawfully cut Medicare Part B reimbursements for drugs purchased under the 340B program in part because the department hadn't collected the data it needed on hospitals' acquisition costs to set the new payment rates. Contreras later blocked the rule, but instead of granting hospitals a permanent injunction against the payment cuts, he ordered HHS to come up with a remedial measure to address the cuts.

    In response to the decision, CMS in September 2019 released a proposal to survey hospitals to find out their acquisition costs for certain covered outpatient drugs. CMS said the survey would help the agency determine payment amounts for drugs hospitals acquired under the 340B program, but hospital groups pushed back on the proposal.

    HHS finalizes 340B survey

    CMS on Friday announced it finalized the survey. The agency in a notice published in the Federal Register said the survey will ensure Medicare "pays for specified covered outpatient drugs purchased under the 340B program at amounts that approximate what hospitals actually pay to acquire the drugs."

    The agency intends to collect data from hospitals via the survey from March 23 to April 10, Inside Health Policy reports. According to Inside Health Policy, CMS said the survey will be mandatory for "[a]ny hospital that was enrolled in the 340B program as a covered entity in the last quarter of 2018 and/or the first quarter of 2019." CMS also said the data should be readily available because hospitals participating in the 340B program are required to meet certain reporting and documentation standards.

    CMS said it will accept public comments on the survey until March 9.

    Hospital group urges CMS to drop survey plans

    But hospital groups are calling on CMS to halt its plan to move forward with the survey, FierceHealthcare reports.

    Hospital groups have said the 340B program is intended to allow eligible hospitals to purchase certain drugs at a discounted rate—not at acquisition costs. The groups argued that CMS should pay back hospitals in full for the payment cuts instead of administering the survey.

    Maureen Testoni—president and CEO of the advocacy group 340B Health, which represents more than 1,400 hospitals—said CMS "should withdraw this plan, restore Medicare payments to their statutory levels, and reimburse all affected hospitals for the revenue they have lost since January 2018" (King, FierceHealthcare, 2/7; Stein, Inside Health Policy, 2/7 [subscription required]; King, FierceHealthcare, 12/3/19; McGrail, RevCycleIntelligence, 12/11/19).

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