On July 7, 2023, Centers for Medicare & Medicaid (CMS) issued a proposed rule outlining the remedy for the 340B-acquired drug payment policy for Calendar Years (“CY”) 2018-2022. This proposed rule would involve a one-time lump sum payment to providers that were paid less during this time due to the now invalidated policy, and is issued in response to the Supreme Court’s decision in American Hospital Association v. Becerra (142 S. Ct. 1896 (2022)). In American Hospital Association v. Becerra, the Court held the 340B-acquired drug payment rates, resulting from utilization of the “JG” modifier, were invalid during the CY 2018-2022 period. The Court unanimously ruled that the differential payment rates were unlawful because HHS failed to conduct a survey of hospitals’ acquisition costs prior to implementing the rates.
CMS posted the expected refund amount to date for each covered entity in an addendum (available for download here). CMS notes that it is still calculating CY 2022 refunds, and expects those results to change prior to finalizing the rule later this year. CMS anticipates the lump sum refunds to be issued at the end of CY 2023 or beginning of CY 2024.
Prior to 2018, the Medicare payment rate for Part B covered outpatient drugs provided in outpatient hospitals was generally the statutory default of average sales price (ASP) plus 6%. In the CY 2018 OPPS/ASC final rule CMS adjusted the payment rate for 340B drugs to ASP minus 22.5%. To comply with statutory budget neutrality requirements under the OPPS, CMS made a corresponding increase to payments to all hospitals (340B hospitals and non-340B hospitals) for non-drug items and services, which was in effect from CY 2018 through CY 2022.
The proposed rule remedies the loss of drug payments to affected providers from CY 2018 to CY 2022 with a one-time lump sum payment, which would include beneficiary copayments. The one-time lump sum payment would be calculated as the difference between what affected providers were paid for 340B drugs (ASP minus 22.5 percent or an adjusted WAC or AWP amount) from CY 2018 through September 27th, 2022 and what they would have been paid had the 340B payment policy not applied. CMS expects the remedy payment to be the same as if CMS manually reprocessed those claims during that period without having to undergo the actual undertaking of reprocessing all claims.
In order to maintain budget neutrality as required by statute, CMS also proposed to reduce future non-drug items and service payments by adjusting the OPPS conversion factor by minus 0.5% starting in CY 2025. Since CMS estimates hospitals were paid $7.8 billion more for non-drug items and services during the CY 2018-CY 2022 period, CMS intends to make this adjustment until the full $7.8 billion is offset, which is estimated at 16 years. CMS also proposed that providers that enrolled in Medicare after January 1, 2018 would be excluded from the prospective rate reduction since these providers did not fully benefit from the increased payment for non-drug items.
The proposed rule will have a 60-day comment period, which will end on September 5, 2023. Advis recommends that covered entities verify their prospective lump sum refund amount, and if inaccurate, submit comments to inform CMS. If you’re an affected provider and would like guidance as to how to respond via comments or would like assistance in verifying your refund amount, please contact an Advis expert or call 708.478.7030.
Published: July 11, 2023
