340B Drug Pricing Program Threats: Implications for Your Hospital

Recently announced proposed drug payment cuts to 340B hospitals have many safety net facilities and industry associations concerned about the long-term consequences for vulnerable patients. Last month, the Centers for Medicare & Medicaid Services (CMS) announced new cuts to the 340B Drug Pricing Program as part of the 2021 Medicare Hospital Outpatient Prospective Payment System.

While a lower court decided that changes CMS made in 2018 to reduce reimbursement for drugs purchased through the 340B program exceeded the agency’s authority, a federal appeals court ruled in August that the Department of Health and Human Services has the legal authority to reduce outpatient drug payments to 340B hospitals.

Under the new proposal, CMS would reduce payment to hospitals from the current rate of averages sales price (ASP) minus 22.5 percent to ASP minus 28.7 percent. The public comment period for the proposed rule is open until Oct. 5. and the changes would take effect. Jan. 1, 2021.

Covering Thin Margins

Under the 340B program, CMS is planning on reducing net reimbursement by an additional 6.2% from an already drastic discount in reimbursement. For many of these safety net hospitals, the reduction will have significant impact on their ability to deliver vital services to underserved patients.

“These hospitals already have very thin or negative margins and many are dealing with the high costs of responding to COVID-19,” says Kenneth Maxik, MBA, MBB, FACHE, RPh, CompleteRx Vice President, Support Services. “This proposed policy change ultimately would jeopardize access to care for high risk patient populations, which, of course, is the exact opposite impact of what we want the 340B program to have.”

Many healthcare organizations, including the American Hospital Association (AHA), American Society of Health System Pharmacies and 340B Health, which represents public and private nonprofit hospitals that participate in the 340B program, are critical of the decision. Many feel the decision couldn’t have come at a worse time, as the COVID-19 pandemic places added financial strain on many hospitals.

AHA Executive Vice President Tom Nickels criticized the proposed rule in a public statement: “We adamantly oppose the proposed rule’s deepening of cuts in payments for 340B drugs. These cuts decimate the intent of the 340B program and only exacerbate the strain placed on hospitals serving vulnerable communities. These cuts also conflict with Congress’ clear intent and defer to the government’s inaccurate interpretation of the law. For more than 25 years, the 340B program has helped hospitals stretch scarce federal resources to reach more patients and provide more comprehensive services to vulnerable communities. Today’s proposal will result in the continued loss of resources for 340B hospitals at the worst possible time.”

The path forward

CMS offers a fact sheet that explains the proposed 340B payment methodology, as well as other changes to the 2021 Medicare Hospital Outpatient Prospective Payment System proposed rule. It’s important to understand the proposed rule’s policies and what payment impact they could have on your hospital.

The proposed payment cuts could result in hospitals being underwater on a number of drugs, potentially calling into question the viability of participating in the 340B program for some organizations. “Hospitals need to assess the administrative burdens and costs of their 340B program and make informed decisions about their participation in the program,” adds Maxik.

To assess the impact, organizations must understand not only their reimbursement  from the 340B program, but also the costs of being in the program. Costs of running the program range from staffing and education to split billing software and internal audits.

Maxik emphasizes that managing a compliant 340B program and keeping up with the latest policies is complex. Further, each 340B program is unique. Hospitals should be prepared to meet these challenges with a well-run 340B program backed by the right resources and expertise. CompleteRx can support your hospital’s 340B program to ensure it is optimized and audit-ready.

Annual 340B audits, on-site support from 340B experts, corrective action plans and compliance training help hospitals maintain a culture of compliance. CompleteRx’s 340B specialists also help optimize your program with advanced purchase and utilization analysis, 340B procurement, billing and dispensation practices, and technology administration management.

To find out more about these services or to learn how CMS’ proposed rule may affect your hospital, connect with us today.

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