CMS Finalized Significant Payment Cut to Certain 340B Hospitals

Rule includes direct supervision enforcement moratorium, IP only change

November 03, 2017

On November 1, 2017, the Centers for Medicare & Medicaid Services (CMS) released the final 2018 Outpatient Prospective Payment System (OPPS) rule, including a significant reimbursement cut to certain 340B “covered entities” billing under the OPPS. In doing so, CMS ignored the voice of a majority of both the U.S. Senate and U.S. House of Representatives and unified opposition from 340B providers when it finalized this payment cut.

“WHA strongly opposes all aspects of the CMS change to the 340B payments for our safety-net hospitals,” said WHA President/CEO Eric Borgerding. “We are reviewing all possible actions to fight this cut and believe CMS has overstepped its bounds. We are very pleased to see the American Hospital Association, the Association of American Medical Colleges and America’s Essential Hospitals have already announced they will pursue litigation on this policy.”

Under the new policy, CMS will no longer reimburse certain 340B covered entities at the normal Medicare OPPS reimbursement rate of the Average Sales Price (ASP) +6 percent. Instead, it will now reimburse 340B drugs at ASP -22 percent—an almost 30 percent reduction in reimbursement. This payment change applies to separately payable drugs. It does not apply to vaccines or pass-through payments. 

Impacted 340B providers include those that qualify for the program as a “Disproportionate Share Hospital” or a Rural Referral Center. CMS does exempt two 340B categories of covered entities from the policy: children’s hospitals and sole community providers. Others who are not impacted by this policy include critical access hospitals (CAHs), since they do not bill under the OPPS. CMS explicitly states this in its final rule, “As a point of further clarity, CAHs are not included in this 340B policy change….”  One other caveat, non-grandfathered, provider-based hospital outpatient departments are also not impacted since they are no longer able to bill under the OPPS, but are required to bill under the Physician Fee Schedule.

CMS will require 340B covered entities to submit a modifier on their OPPS claims beginning January 1, 2018. Impacted 340B providers will submit the modifier “JG” while exempted covered entities will submit the modifier “TB.”

In the final rule, CMS doubles the estimate of how much the agency will save under this new policy, going from $900 million to $1.6 billion. CMS indicates it will maintain budget neutrality with this change; therefore, these dollars will be redistributed with the OPPS to all hospitals paid under the OPPS through an increased payment rate of 3.2 percent for nondrug items and services furnished under the OPPS for CY 2018.

“On so many levels, this policy is egregious,” said Jenny Boese, WHA vice president, federal affairs & advocacy. “We believe CMS lacks the statutory authority to implement this change, believe their decision to do so undermines the intent of the program, is negatively redistributive to our safety-net hospitals and ignores facts of policy and statutory authority.”

The final rule removes total knee replacements from the inpatient only list. This means that these surgeries may now be performed in either the inpatient or outpatient setting and still be covered by Medicare. 

A small, bright spot in the final rule is CMS’s decision to reinstate its enforcement moratorium on the direct supervision policy for outpatient therapeutic services furnished in CAHs and small rural hospitals having 100 or fewer beds. This moratorium begins in 2018 and extends through 2019. However, this means the direct supervision policy for these smaller, rural hospital remains in place for 2017.

This story originally appeared in the November 03, 2017 edition of WHA Newsletter