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The possible changes and cuts to the 340B projects may impact a wide variety of entities currently participating in the program.

Navigating health reform

Regulatory, Legislative, and Legal Activities Impact 340B

  • Jennifer Boese
  • 3/21/2018

From Congressional hearings and legislation to regulatory payment reductions, attention continues to focus on reducing the size and scope of the 340B drug discount program. In the past six months alone, multiple pieces of federal legislation have been introduced, a Medicare payment cut was finalized, and a lawsuit was filed.

As discussions surrounding the program continue, various proposed changes to the 340B program may impact a wide variety of entities currently participating.

Even if the OPPS cut does not currently impact your program, a prudent provider billing under the OPPS would be wise to assess what the policy would mean financially to their program. Cheryl Hetland, Engagement Director

340B program helps covered entities

The 340B program requires pharmaceutical manufacturers participating in Medicaid to sell outpatient drugs at discounted prices to certain health care providers. The statute was created under Section 340B of the Public Health Service Act outlined in the Veterans Health Care Act of 1992, signed into law by President George H.W. Bush.

To date, there are variety of qualifying entities. Congress has expanded the program over the years to include entities such as children’s hospitals and critical access hospitals under the Affordable Care Act (2010).

Congressional intent for the program has always been for covered entities to use the savings from 340B-purchased drugs to “stretch scarce Federal resources as far as possible.” The Health Resources and Services Administration (HRSA) administers the program.

Regulatory changes: FY 2018 OPPS cuts reimbursements

In its fiscal year (FY) 2018 Outpatient Prospective Payment System (OPPS), the Centers for Medicare and Medicaid Services (CMS) finalized a significant reimbursement cut for separately payable non pass-through drugs (other than vaccines) purchased through the 340B program. The payment reduction is almost 30 percent for certain 340B providers, going from the previous Medicare rate of the average sales price (ASP) plus six percent to a new CMS-set rate of ASP minus 22.5 percent. This new CMS policy took effect on January 1, 2018.

The OPPS policy currently applies only to disproportionate share hospital (DSH) and rural referral center (RRC) covered entities. Other covered entities that also bill under the OPPS (e.g., children’s hospitals, sole community hospitals, and cancer hospitals) are currently exempted from the payment cut.

Entities that do not bill under the OPPS are not impacted. While exempt from the payment cuts, children’s hospitals, sole community hospitals, and cancer hospitals are required to add an informational modifier to all non pass-through drugs submitted for payment. CMS will evaluate the data collected and may impose the payment reduction on these entities in FY19.

Also of interest in the final rule was CMS’ decision to keep the policy change budget neutral. This means that the $1.6 billion CMS says is saved with the policy will be redistributed under the OPPS via increased reimbursement rates to all hospitals. Ironically, this means CMS finalized redistributing the dollars intended for 340B providers to many non-340B providers that statutorily cannot participate in the program.

Legal action: hospital plaintiffs file 340B lawsuit

On November 13, 2017, almost immediately after CMS finalized the 2018 OPPS payment cut, the American Hospital Association (AHA), Association of American Medical Colleges, America’s Essential Hospitals, and several other hospital plaintiffs filed suit against the federal Department of Health and Human Services.

The groups sought an immediate injunction of the OPPS policy to keep it from going into effect. In late December, the court ruled against the injunction and dismissed the case, stating the suit was premature since the cut had yet to go into effect. Plaintiffs appealed the court’s decision and sought an expedited briefing schedule. The court agreed and a hearing schedule is pending.

Additionally, 35 state and regional hospital associations filed an amici curiae in support of plaintiffs’ position and the 340B program. The amicus briefs highlighted the negative impact the payment cuts will have on providers and patients in their states.

Legislation focus: Congress spotlights 340B program

Congressional attention on the 340B program continued this past year, including hearings, the release of a Congressional report, and the introduction of multiple pieces of legislation. Hearings were held by the U.S. Senate Committee on Health, Education, Labor, and Pensions, and the U.S. House Committee on Energy and Commerce.

The U.S. Senate Finance Committee is expected to hold a hearing in 2018. The focus of the hearings revolves around the program’s growth, its scope, whether program savings should directly help low-income or the uninsured, and the need for heightened accountability and transparency.

In January 2018, the Energy and Commerce Committee released an 80-page report with recommendations such as:

  • Clarify program intent, including looking at the current health care landscape to see how or if changes in the health care landscape should impact program eligibility
  • Assess whether 340B savings should tie directly to low-income and uninsured patients
  • Consider whether the DSH criteria is an appropriate measure for program eligibility, or whether a better metric is based on outpatient population
  • Increase oversight of the program, including more audits, focusing on contract pharmacies
  • Enhance transparency in the program, including reporting hospital revenues or savings from the program and levels of charity care

A variety of legislation is also currently pending in Congress. The bills reflect many of the items outlined in the Energy and Commerce report.

  • Ensuring the Value of the 340B Program Act of 2018, authored by U.S. Sen. Grassley (R-IA). This legislation requires hospitals to include the aggregate acquisition cost for which the hospital received 340B discounts on their cost reports, and report the aggregate revenues the hospital received from all payors for such drugs, disaggregated by insurance status. (S. 2453)
  • Helping Ensure Low-Income Patients have Access to Care and Treatment Act, or HELP Act, authored by U.S. Sen. Cassidy (R-LA). This legislation would place a two-year moratorium on any new DSH covered entities and respective child sites. The legislation requires HHS promulgate rules on child sites and delineates specific child site criteria, which go beyond current program requirements. These criteria apply to DSH, children’s hospitals, and freestanding cancer hospitals. The bill mandates regulations for state or local government contracts with certain 340B providers, claims modifiers use, and reporting certain 340B revenue, payor-mix, and related data. (S. 2312)
  • Protecting Access for the Underserved and Safety-net Entities Act, or 340B PAUSE Act, authored by U.S. Rep. Bucshon (R-IN). This legislation includes a two-year moratorium on any new DSH hospital covered entities and respective child sites. It requires the reporting of various 340B-related patient, insurance, and revenue statistics with respect to DSH, children’s hospitals, and freestanding cancer hospitals and child sites. (HR 4710)
  • Authored by U.S. Rep. McKinley (R-WV), HR 4392 would halt CMS’ FY 2018 OPPS policy, reducing 340B reimbursements.

Next steps for 340B covered entities

Some members of Congress and others want to see a substantial change in the program, so be prepared to understand potential changes and relay the value of your program to those in decision-making roles. You can start with the following:

  • Review your 340B program regularly to ensure compliance with all program requirements.
  • If affected by the OPPS payment cut, make sure you understand how this policy — both the payment reduction and payment increase due to redistribution within the OPPS — impacts your facility.
  • For those billing under the OPPS but exempted from the cut, consider what impact this policy would have on your program.
  • Stay abreast of pending legislative and regulatory changes.
  • Develop a 340B report and provide it to your members of Congress. Provide real-life examples of how you help individuals access pharmaceuticals and care in order to communicate the value of the 340B program and how your facility is using 340B savings.

Program debate will continue

Opponents of the 340B program contend the program is too large, lacks transparency, and fails to connect savings to low-income individuals. Each of these contentions is refuted by supporters of the program. Expect ongoing Congressional and regulatory attention as the debate plays out.

How can we help

The 340B program is complex. Legislative and regulatory changes would make it even more complicated while substantially impacting some 340B covered entities. Knowing how your organization could be affected and preparing for the potential of any 340B change is important to the future of your program. Knowing how to convey your program’s value to Congress and the public is equally vital. CLA knows the health care industry. Our integrated approach ties our regulatory and legislative experience to deep financial and operations knowledge so we can help you prepare.