CMS Proposes More Than 22% Drop in 340B Drug Reimbursement in 2018 OPPS Rule

CMS intends a significant drop in reimbursement for 340B drug payment program participants, along with potentially burdensome reporting requirements for non-participants.

This article was originally published on Revenue Cycle Advisor, July 14, 2017.

The 2018 OPPS proposed rule is one of the shortest, and latest, in recent memory, being released July 13 at only 663 pages, but it contains major proposed policy changes for the 340B drug discount program, new modifiers, and expands packaging to drug administration for the first time.  

“This is the first Fourth of July I recall being able to enjoy since the rule had not come out, which made me wonder what it would contain, given it had been sitting at the Office of Management and Budget for months,” says Jugna Shah, MPH, president and founder of Nimitt Consulting.

“What’s clear is this rule packs a punch, so no one should be misled by how short it is,” she adds. “There are several significant proposals providers will need to pay attention to and comment on to CMS.”

Payment changes for 340B

One proposal that would have an enormous impact on a large number of hospitals is CMS’ proposal to reduce the payment to hospitals who acquire their drugs through the 340B drug discount program. The program allows eligible hospitals, such as disproportionate share, rural, and cancer centers, to purchase drugs at a reduced price to allow those resources to be used elsewhere. CMS currently reimburses all hospitals for separately payable drugs at the standard average sales price (ASP) plus 6%.

For 2018, the agency proposes a dramatic decrease in what it would pay hospitals participating in the 340B program for separately payable drugs, excluding those with pass-through status and vaccines, at ASP minus 22.5%, basing that deduction on an estimate from the Medicare Payment Advisory Commission.

The agency admits it does not know how much hospitals actually pay for these drugs, but predicts it could decrease such payments by up to $900 million. Since the proposal is to be budget neutral, this money would be redistributed throughout the OPPS for other items and services. In the rule, CMS notes that it may need to adjust the conversion factor in future years as it did previously due to a billion-dollar miscalculation in its clinical laboratory packaging policies.

To gather data about which drugs are purchased under the 340B program, CMS proposes to introduce a modifier, but the Executive Summary of the rule doesn’t indicate which providers would need to report this new modifier. In the text of the rule, CMS notes that it is asking those providers who do not receive drugs at discounted rates to be the ones reporting the new modifier.

“I wonder if this is a typo,” says Shah. “Asking providers who do not get a discount to report a modifier seems to fly in the face of the very administrative burden the agency and this administration says it’s interested in reducing. Providers will want to weigh in with their comments.”

CMS is soliciting input on multiple facets of its 340B proposal, including the amount of the payment reduction, how to collect data, over what timeframe to implement the policy, and whether certain types of hospitals should be excluded.

Packing for drug administration

After years of leaving drug administration services out of its expanding packaging policies, CMS finally proposes plans to package low-level services for 2018.

“It’s not surprising that CMS is continuing to examine additional services that it can package, as it continues moving the OPPS to more of a bundled payment system”, says Shah. “What is curious is that CMS is including chemotherapy services in its proposal, which may not be appropriate at this time and needs to be reviewed in detail.”

CMS notes that APC 5691 (Level 1 Drug Administration) and APC 5692 (Level 2 Drug Administration) are often reported on claims with other separately payable services and have geometric mean costs that are low. CMS believes these types of services are good candidates for packaging.

“The description of CMS’ proposal in the rule is a little confusing, since CMS talks about the drug administration packaging at the APC level,” says Shah. “An examination of Addendum B is necessary to see that not all of the codes in these APCs would be packaged, only a handful, but they should be reviewed by providers.”

For 2018, the agency proposes to conditionally package a number of CPT/HCPCS codes associated with these APCs when reported with other separately payable services, but will still pay for them when performed alone. Vaccine administration will still be separately paid, as preventive services are excluded from packaging.

“What jumps out at me beyond CMS’ proposal is the head’s up the agency is giving the industry about the fact that it plans to forward, possibly as early as next year, on packaging for far more drug administration services, including all of the additional hour codes and others,” says Shah. 

She urges providers to review this part of the rule and submit comments if they believe these services need to remain separately payable, otherwise CMS could propose comprehensive APCs (C-APC) for drug administration in the near future.

Modifier changes proposed

In addition to the proposed modifier to identify drugs not purchased under the 340B program, CMS has proposed other modifier changes for 2018.

The agency is required by the 2016 Consolidated Appropriations Act to reduce payments for certain imaging services, which led to previous modifiers such as -CT (computed tomography services furnished using equipment that does not meet each of the attributes of the National Electrical Manufacturers Association XR–29–2013 standard) and -FX (x-ray taken using film).

Payments for imaging services taken using computed radiography are required to be reduced by 7% in 2018-2022 and 10% in 2023 and subsequent years. To identify these services, CMS is proposing a new modifier to be appended to applicable HCPCS codes.

Since the agency won’t be collecting data on procedures related or adjunctive to stereotactic radio surgery services in 2018, it proposes to delete modifier –CP (adjunctive service related to a procedure assigned to a C-APC procedure, but reported on a different claim).

Providing feedback

As with other CMS rules released this year, the agency is broadly requesting provider feedback on methods for improving program efficiency and flexibility to reduce administrative burden, but is also looking for feedback on specific proposals.

“CMS is broadly asking for comments on open-ended topics that providers may want to consider,” says Shah. “But it is also asking for comments on really specific topics, like which procedures to remove from the inpatient-only list. That’s an easy section for providers to review and weigh in on especially because the two procedures proposed for removal seem like good ones.”

For more information on the proposed rule, see the fact sheet and press release.  Comments on the proposed rule are due by September 11.