Industry Insights

CMS Proposing Reduced Reimbursement for 340B Program Participants

October 2017
Authors:  Brenda Christman

Brenda Christman

Managing Director

Consulting

Health Care

Telecommuting

 & Brian Bell

Brian Bell

Director

Consulting

Health Care

Telecommuting

The Centers for Medicare & Medicaid Services (CMS) recently released the proposed Outpatient Prospective Payment System rule for 2018. The rule proposes to change how Medicare reimburses hospitals for drugs acquired under the 340B Drug Pricing Program (340B Program). It’s expected CMS will finalize the rule by November 1, 2017.

CMS proposes to reimburse hospitals that participate in the 340B Program average sales price (ASP) minus 22.5 percent, as opposed to the current reimbursement of ASP plus 6 percent. This proposed change excludes vaccines and drugs not purchased at 340B pricing. These drugs would continue to be reimbursed at the current rate of ASP plus 6 percent. The proposed change will lead to an approximately 28.5 percent reduction in reimbursement for 340B Program drugs. If finalized, this change will be effective January 1, 2018.

In addition to the proposed change, the U.S. House Committee on Energy and Commerce (the Committee) sent a series of letters to 19 340B Program participants. An excerpt from the letter states, “Over the years, however, the program has grown substantially and reports indicate that some hospitals may be abusing the program and may be failing to pass program savings on to the intended beneficiaries.” The letters ask covered entities to assist the Committee in its oversight of the 340B Program and how covered entities use 340B Program savings. The Committee asked the covered entities to provide the following by September 22, 2017:

  1. In a chart or similar format, each of the following items for 2012–2016:
    1. Number of 340B Program drugs your organization, and all associated sites and offsite outpatient facilities registered as child sites, purchased for each year
    2. Percentage of 340B Program drugs purchased and dispensed that fall into each of these categories:  analgesics, antidepressants, oncology, antidiabetic agents and antihyperlipidemic agents
    3. Number of 340B Program drugs your organization purchased that were dispensed to insured patients, including Medicare and Medicaid beneficiaries and commercially insured individuals
    4. Number of 340B Program drugs your organization purchased that were dispensed to uninsured patients
    5. Amount of savings, as compared to group purchasing organization price for the same drug that your organization generated through participation in the 340B Program
    6. Amount of charity care your organization provided
    7. Number of patients that received charity care from your organization
  2. How does your organization calculate the amount of savings it generates through 340B Program participation? How does your organization track the amount of money it receives when patients’ insurance reimbursement exceeds the 340B Program price paid for the drug?
  3. How does your organization use program savings to care for vulnerable populations? Are program savings used for any other purposes?
    1. Does your organization provide any additional charity care to uninsured and underinsured patients with funds derived from sources other than the 340B Program? If so, please elaborate.
    2. What percentage of total health care services provided by your organization is charity care?
  4. Does your organization have any policies to help uninsured and underinsured patients directly benefit by receiving discounts on 340B Program drugs? If so, please elaborate.
  5. How many child sites does your organization have registered to participate in the 340B Program? Please provide a list of all child sites, including the location and date program participation began.
  6. How many pharmacies has your organization contracted with to dispense drugs purchased through the 340B Program on your behalf?
    1. Do your contracts with these pharmacies require program savings be passed on to the intended beneficiaries, including requiring that uninsured or underinsured patients receive discounts on 340B Program drugs?
    2. Does your organization share any program savings with these contract pharmacies? If so, please elaborate.

With this interest from Congress, BKD recommends hospitals participating in the 340B Program update their policies and procedures to help track savings and monitor how the savings provide services to our nation’s most health care-vulnerable population. It’ll be critical to be able to routinely track and provide this information if requested by the federal government.

For information on this and other matters, contact your trusted BKD advisor today.

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