On July 13, the Centers for Medicare and Medicaid Services (CMS) submitted an early release for two proposed rules that may affect major health care reimbursement provisions regarding 340B and provider-based departments. CMS is seeking comments regarding the impact anticipated by providers. It is imperative that providers present comments to CMS regarding the overall impact the changes present prior to September 11, 2017.

Below is a summary of the proposed changes to the 340B program and Provider-based reimbursement. (Please Note: These proposed changes only affect Medicare reimbursement).

Proposed Changes to the Medicare 340B Program

CMS proposes a reduction in payments from Average Sales Price (ASP) +6 to ASP -22.5% for 340B drugs reimbursed under the OPPS. The proposed provision excludes Critical Access Hospitals. The payment changes are anticipated to apply to separately payable drugs under the OPPS, with other additional exclusions, such as: (1) drugs on pass-through status, which are required to be paid for based on the ASP methodology and (2) vaccines, which are excluded from the 340B program. CMS is accepting comments on other drugs that should be excluded from the reduced payment proposal.

CMS has defended the proposal due to a perceived irregularity in the copayment amounts due for 340B drugs. CMS expressed concern that the current payment rate results in unnecessary utilization and potential overutilization of separately payable drugs. CMS identified that the data relied upon, (MedPAC Report Congress, Appendix A; May 2015), has several limitations. CMS welcomes provider insight and interpretation of the data.

As addressed above, CMS is accepting comments on the proposed ASP -22.5% in proposed payments. Specifically, CMS invited comments regarding whether they should adopt a different reduction amount, whether the reduction should be phased over a period of time (i.e., 2 to 3 years), and whether certain provider types should be excluded (i.e. rural sole community and PPS exempt cancer hospitals).

In addition to the reduced payment provision, CMS is proposing to adopt a modifier to be used for drugs acquired under the 340B program in order to increase the available data on the program. CMS indicated that they will provide more details in CY2018 OPPS final rule regarding the modifier.

Proposed Changes to Medicare Provider-based Facilities

 CMS also proposes to reduce Medicare payments for nonexcepted provider-based departments to 25% of the OPPS. In the CY2017 interim final rule CMS proposed a “PFS Relativity Adjuster” that reduces payments under the Medicare OPPS to 50%. This adjuster applies only to nonexcepted off-campus PBDs (meaning only those providers not billing as a provider-based department prior to November 2, 2015). The intent of the proposed reduction to 25% is an effort by CMS to make the overall payment site-neutral between physician offices and nonexcepted provider-based departments. The proposal issued by CMS only affects payments by Medicare.

CMS has indicated they welcome stakeholder input throughout the comment period with regard to its analysis of payment rates and the resulting reduction in the relativity adjuster. Furthermore, they requested comments on whether a different PFS Relativity Adjuster, such as a proposed 40 percent, that represents a relative middle ground between the CY 2017 PFS Relativity Adjuster and the new proposal should be adopted. Advis has provided the following analysis on the impact of the proposed adjuster reduction:

E&MPhysician OfficeHospital Outpatient Department
100% OPPSExcepted50% OPPSNonexcepted25% OPPSProposed40% OPPSComments Requested
99211$  20.46$ 115.94$  62.64$  35.98$  51.97
99212$  44.14$ 132.45$  79.15$  52.49$  68.48
99213$  73.93$ 158.29$ 104.99$  78.33$  94.32
99214$ 108.74$ 186.28$ 132.98$  106.32$  122.31
99215$ 146.43$ 219.30$ 166.00$  139.34$  155.33

*“Physician office” assumes “non-facility” rate per the MPFS. “100%” combines “facility” rate per the MPFS plus the OPPS rate for the CPT.  “50%” combines “facility” rate per the MPFS plus 50% of OPPS rate for the CPT, etc. 

Within the proposed rules CMS also addresses the recent comments received regarding the originally proposed provider-based service line expansion limits. After consideration of the public comments received, CMS again determined that they will not make any proposals to limit clinical service line expansion or volume increases at excepted off-campus provider-based departments. CMS has indicated a willingness to continue to monitor claims data for changes in billing patterns and utilization, and continue to invite public comments on this issue.

Advis recommends that providers submit comments to CMS on the matters addressed in the proposed rule. The comment period for both of these rules is through September 11, 2017. These changes have the power to significantly affect both the 340B and provider-based programs.

The 340B program helps vulnerable or uninsured patients gain access to needed prescription medicines. It also allows the system to create additional opportunities, such as cancer centers and other outpatient facilities to its patient population due to the savings experience of 349B. Under provider-based status, hospitals have the ability to take advantage of economies of scale by operating an ambulatory services network under the parent hospital license to increase efficiency and quality. Capital costs can also be spread among the various subordinate facilities. Operating costs will be lower as a result of increased integration. Administrative efficiency will be increased as the administrative processes of the various facilities are centralized. It is therefore essential for providers to submit comments to CMS to maintain the integrity of these programs.

Responding quickly and thoroughly to these CMS proposals is important. Advis is available to assist with drafting comments to CMS to ensure the specific aspects of the proposed rule that may directly affect your hospital are addressed. Please contact Advis at (708) 478-7030 if you would like to discuss the implications of the proposed changes for your hospital.