OPPS proposed rule cuts 340B payments; industry groups outraged, dismayed

The Centers for Medicare & Medicaid Services is seeking changes that would significantly cut 340B payment rates to hospitals and may harm safety-net hospitals' ability to treat low-income patients. 

The proposed Outpatient Prospective Payment rule, posted Thursday on Federal Register, would significantly slash 340B Drug Discount Program payment rates.

The agency has proposed paying hospitals 22.5% less than the average sales price for some drugs purchased under the 340B program, which requires drug manufacturers to provide outpatient drugs to eligible healthcare organizations and covered entities at significantly reduced prices. At present, CMS pays up to 6% more than the average sales price in the 340B program, and the rate is a long-standing Medicare policy.

Industry groups quickly came out against the proposal. 340B Health, an association of more than 1,300 hospitals that advocates participation in the 340B program, said that most of its members would likely withdraw from the program if CMS cuts payments that would take away most if not all of their savings on Part B drugs. 

“With the uninsured rate rising again and so much uncertainty about the healthcare marketplace, this is no time to cut reimbursement to hospitals that serve patients in need,” 340B Health CEO Ted Slafsky said in the statement.

The Association of American Medical Colleges echoed the sentiment, with CEO Darrell G. Kirch, M.D., saying the group is “dismayed” by the proposal. Tom Nickels, the American Hospital Association’s executive vice president for government relations and public policy, said the proposal “punishes hospitals for a policy outside of CMS’ jurisdiction.”

“It is unclear why the administration would choose to punitively target 340B safety-net hospitals serving vulnerable patients, including those in rural areas, rather than addressing the real issue: the skyrocketing cost of pharmaceuticals,” Nickels said. “CMS repeatedly cites the fact that Medicare expenditures on drugs are rising due to higher drug prices as an impetus for its proposal. … Yet, its proposed 340B policy change does nothing to directly tackle this issue.”

But CMS Administrator Seema Verma said the proposed rule works toward the Trump administration’s goals, including reduced drug costs. “CMS is committed to transforming the Medicare program and updating our policies to provide high-quality and affordable patient-centered care,” Verma said. “Additionally, the proposed rule takes a critical step towards fulfilling President Trump’s promise to lower the cost of drugs, particularly for Medicare beneficiaries.”

The proposed rule also:

  • Updates OPPS rates by 1.75% for 2018. The change is based on the projected hospital market basket increase of 2.9% minus both a 0.4 percentage point adjustment for multifactor productivity and a 0.75 percentage point adjustment required by law. After considering all other policy changes proposed under the OPPS (except for the 340B drug payment proposal), including estimated spending for pass-through payments, CMS estimates an overall impact of 2.0% payment increase for hospitals paid under the OPPS in CY 2018.
  • Seeks a two-year moratorium on direct supervision requirements at critical access hospitals and rural facilities, which CMS says will ease some of the burdens these providers face when recruiting new physicians.
  • Asks for additional ideas that CMS can use to advance flexibility, reduce administrative burdens and foster innovation. Verma said these ideas could be incorporated into the final rule, set to be released this fall.

CMS will accept comments on the proposed rule until Sept. 11.