The 340B program is intended to help safety net hospitals, but some others have taken advantage. A lack of transparency and accounting led to deep cuts for all participants.
Hospitals receiving drug discounts will take a big financial hit in January when the federal government sharply reduces the Medicare payment for outpatient drugs, effectively cutting a subsidy that some hospitals use to provide needed medications to those who cannot afford them.
The affected hospitals are bracing for a significant drain on their bottom lines, and some serve the neediest populations. However, some other hospitals have used the program to increase profits rather than to help underserved populations.
The U.S. Department of Health and Human Services, Centers for Medicare & Medicaid Services released a final Medicare Outpatient Prospective Payment System (OPPS) rule November 1 that cuts Medicare reimbursement for separately payable outpatient drugs purchased by hospitals under the 340B program, which helps certain hospitals and other healthcare entities pay for covered outpatient drugs. The 340B program requires pharmaceutical companies to sell drugs to these hospitals at a discount, but CMS reimburses the hospitals as if there were no discount.
CMS will cut the reimbursement rate from the current average sales price (ASP) plus 6% to ASP minus 22.5%, starting January 1, 2018.
CMS estimates that the change will result in a $1.6 billion reduction in OPPS payments to 340B hospitals for separately payable drugs. The new reimbursement rate was derived from a May 2015 Medicare Payment Advisory Commission (MedPAC) Report to Congress, which estimated that the ASP minus 22.5% rate was the "lower bound of the average discount" on drugs paid under the Medicare OPPS. However, MedPAC's March 2016 Report to Congress recommended a less drastic reduction in payment to ASP minus 10%. Under that rate, most 340B hospitals could still see a financial benefit from the program.
Instead, the adopted rate will negatively affect all 340B hospitals, says Keely Macmillan, general manager of bundled payments for care improvement with Archway Health, a Boston-based firm that works with providers to manage bundled payments.
Gregory A. Freeman is a contributing writer for HealthLeaders.