Report: Medicare Part B payment increases could offset 340B cuts for many hospitals

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"Rural hospitals stand to benefit from this payment change, which would alleviate some of the access concerns," Caroline Pearson, senior vice president of policy and strategy for Avalere, told FierceHealthcare in an interview. (Pixabay)

Increased reimbursements under Medicare Part B overall could offset potential losses for hospitals under changes to the 340B discount program, according to a new analysis. 

Consulting firm Avalere Health analyzed (PDF) hospital-level data from the Centers for Medicare & Medicaid Services on reimbursements in 2017 and 2018, and found that 85% of hospitals would receive higher Part B payouts that would minimize the reductions from cuts to 340B discounts. 

CMS finalized changes to 340B in November, changing its payment rate to 22.5% less than the list price for medication. Previously, it had paid up to 6% more than the list price under the program, and the cuts could equal $1.6 billion in lost payments. 

Rural hospitals would especially benefit from CMS' increased Part B payouts, according to Avalere, as those facilities will net an average increase of 2.7%. Urban hospitals will see a 1.4% net increase. 

"If a rural hospital closes, you often have an access problem," Caroline Pearson, senior vice president of policy and strategy for Avalere, told FierceHealthcare in an interview. "Rural hospitals stand to benefit from this payment change, which would alleviate some of the access concerns." 

RELATED: Who wins, who loses under 2018 changes to CMS' 340B drug discount program 

Avalere also found that among the 15% of hospitals facing payment reductions under the changes, the decreases are likely to be limited in most cases. Seventy-six percent face losses that equal less than 5% of their overall outpatient reimbursement. 

"There will be winners and losers" as a result of the change, especially among hospitals that have very large 340B volumes, Pearson said. But the analysis shows that just eight states will see a net decrease in overall Part B payments: Alaska, Arizona, Connecticut, Georgia, Idaho, Kentucky, Louisiana and Tennessee. 

Major hospital groups have taken the fight over 340B changes to court and have expressed particular concern about the impact of the cuts on disproportionate share hospitals that sorely need 340B payments. 

But Avalere's analysis shows that more than half (55%) of disproportionate share hospitals will see payment increases that would offset the 340B cuts. 

Tom Nickels, the American Hospital Association's executive vice president for government relations and public policy, disputed the study's findings in a statement emailed to FierceHealthcare, saying that the study is "an attempt to again justify the industry's agenda to misdirect and mislead" on the 340B issue. He said the study uses "selective measures" to reach its conclusion, and noted that it does not mention the impact of the rising cost of drugs on patients' medical expenses.

He said that the study also fails to recognize that CMS' 340B cuts are "unlawful and in excess of their authority under the law," which is why the AHA is continuing to pursue legal action on the matter.

"The dramatic reduction to 340B drug payments is not permitted by the Medicare statute and the agency cannot concoct its own reimbursement rules that effectively eviscerate the benefits and intent of the 340B program," Nickels said. "That’s why we continue to pursue our legislative and legal strategies, and expect to prevail in holding the agency accountable for its overstepping."

RELATED: Under the Affordable Care Act, hospital revenues up, charity care spending down—report  

The 340B program wasn't always controversial, but in recent years lawmakers and pharmaceutical companies have expressed concern that too many hospitals have enrolled, taking advantage of the program's discounts. A study published last week suggests that hospitals have snapped up physician practices in areas like oncology to boost their 340B discounts but don't often invest those savings in improving care for low-income patients. 

"I think it's undeniable that the 340B program has grown tremendously," Pearson said. "There is [increasing] policymaker attention on whether the program is serving its intended purpose."

Editor's note: This story was updated on Monday afternoon, Jan. 29, to include a response from the American Hospital Association.