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Analysis

CMS Finalizes 340B, Site-Neutral Cuts for 2020

By John Commins  
   November 02, 2019

Medicare's hospital outpatient prospective payment system rates will increase by a net 2.6% in 2020.

Despite successful legal challenges by stakeholders, hospitals will see continued cuts to the 340B drug savings program and reductions in reimbursements for off-campus clinic visits in 2020 under a final rule issued Friday by the Centers for Medicare & Medicaid Services.

In addition, CMS said it will issue a separate final rule on its requirement that hospitals disclose payer-specific negotiated rates, which was proposed under the Outpatient Prospective Payment System rule.

Overall, Medicare's hospital outpatient prospective payment system rates will increase by a net 2.6% in 2020, compared with 2019.

However, CMS will push ahead with its ongoing 22.5% payment rate cuts for some drugs under the 340B program, even though the policy was vacated by a federal court in May.

In addition, the second year of the two-year phase-in of the site-neutral cuts – which CMS says will save Medicare about $800 million in 2020 –  will continue even though a federal court in September vacated the policy.

"I've never seen anything like what we are seeing now from CMS with OPPS payment policy, where the agency continues to double and triple down on cutting reimbursement to hospitals even when the legal system has spoken in favor of what providers have been saying for years," Jugna Shah, MPH, CHRI, president of Nimitt Consulting Inc., told Revenue Cycle Advisor. 

“Given this, it is quite remarkable that the agency pushed its controversial price transparency proposals to a separate, yet-to-be released final rule,” Shah says.

Site-neutral Payments

The final rule completes the two-year phase-in of the site-neutral rate, which is 40% of the OPPS rate provided for grandfathered off-campus clinics in 2020.

CMS says the site-neutral policy will reduce cost-sharing by Medicare beneficiaries to $9, saving them about $14 for each off-campus clinic visit in 2020.

CMS may appeal the September ruling but said it will ensure that 2019 claims for clinic visits will be paid consistent with the court order.

"We do not believe it is appropriate at this time to make a change to the second year of the two-year phase-in of the clinic visit policy," CMS said. "The government has appeal rights, and is still evaluating the rulings and considering, at the time of this writing, whether to appeal from the final judgment."

American Hospital Association Executive Vice President Tom Nickels said the site-neutral cuts "not only threatens access to care, especially in rural and other vulnerable communities, but it goes against clear congressional intent to protect the majority of clinic services."

"There are many real and crucial differences between hospital outpatient departments and the patient populations they serve and other sites of care," Nickels said.

"Now that a federal court has sided with the AHA and found that these cuts exceed the Administration's authority, CMS should abandon further illegal cuts," he said. "Instead, as we urged in a letter to the Department of Justice (Thursday), CMS should promptly repay the affected hospitals the full OPPS rate to support the work they do for the patients they serve. And CMS should pay the full OPPS rate for all clinic visit claims going forward."

340B Cuts Continue

In May, U.S. District Court Judge Rudolph Contreras again ruled that the 340B drug reimbursement rate under Medicare Part B that Health and Human Services set in the 2019 OPPS rule was unlawful and "in contravention of the Medicare Act's plain text."

CMS has acknowledged the ruling, which it has appealed, but said the cuts would continue even as it "solicited comments for a potential remedy for CYs 2018 and 2019 in the event of an unfavorable decision."

"We also announced in our intent to conduct a 340B hospital survey to collect drug acquisition cost data for CY 2018 and 2019, and data from that survey may be used to craft a remedy," CMS said.  

After finalizing the policy without precise data regarding hospital acquisition costs for 340B drugs in this program, the agency is crowdsourcing ideas for how to reimburse hospitals as ordered by the court, though an appeal is currently pending, Revenue Cycle Advisor reports.

Health and Human Services Secretary Alex Azar says the cuts are needed because the 340B program has created a large profit margin between the price that hospitals pay for 340B drugs and the reimbursement paid by Medicare, which he said incentivizes hospitals to overprescribe the discounted drugs.

That concern was validated by a Government Accountability Office report in 2015 which showed that Medicare Part B drug spending was substantially higher at 340B hospitals.

Maureen Testoni, president and CEO of 340B Health, said CMS has for three years "ignored the needs of patients and the safety-net hospitals that care for them to pursue an unlawful reduction in Medicare payments to 340B hospitals."

"A federal court has ruled repeatedly that these cuts are inconsistent with the Medicare statute and must be reversed," she said. "A bipartisan majority in both houses of Congress has agreed. It's time to stop this unfunny version of 'Groundhog Day' and restore Medicare payments for 340B hospitals to their legal, statutory level."

Beth Feldpush, senior vice president of policy and advocacy at America's Essential Hospitals, blasted CMS for "plowing ahead with damaging cuts to hospitals in the 340B Drug Pricing Program and ignoring clear congressional intent by expanding cuts to grandfathered provider-based outpatient clinics.

"CMS undermines the foundation of care for the nation's most vulnerable people," Feldpush said. "The agency also prolongs confusion and uncertainty for hospitals by maintaining unlawful policies it has been told to abandon in clear judicial directives."

In the 2020 OPPS proposed rule, CMS solicited comment from stakeholders on methods to devise a remedy for hospitals if its appeal is denied. With CMS redistributing money saved from the reimbursement cut throughout the OPPS since 2018, the agency does not want to simply reimburse hospitals at the more traditional ASP plus 6%. CMS says it will consider stakeholder comments and the survey data as it weighs possible new policies and remedies, Revenue Cycle Advisor reports. 

Therapy Services

CMS is also finalizing its proposal to change the required level of supervision for all outpatient therapeutic services provided in outpatient and critical access hospitals from direct to general, according to Revenue Cycle Advisor.

General supervision means that the procedure is furnished under the physician's overall direction and control, but that the physician's presence is not required during the performance of the procedure.

"This is one of the few things that CMS proposed and finalized that should receive three cheers from the hospital community," Shah told the publication.

Hospitals may choose to require higher levels of supervision for certain services as it deems appropriate.

“It's time to stop this unfunny version of 'Groundhog Day' and restore Medicare payments for 340B hospitals to their legal, statutory level.”

John Commins is a content specialist and online news editor for HealthLeaders, a Simplify Compliance brand.


KEY TAKEAWAYS

The final rule completes the two-year phase-in of the site-neutral rate, which is 40% of the OPPS rate provided for grandfathered off-campus clinics in 2020. That reduction was vacated by a federal judge in September.

CMS will push ahead with its ongoing 22.5% payment rate cuts for some drugs under the 340B program, even though the policy was vacated by a federal court in May.

Hospital stakeholders blasted the final rule and said it threatens access to care for vulnerable populations.


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