CMS Will Issue OPPS Providers Lump-Sum Payments to Remedy 340B Losses

November 03, 2023 - Hospital Outpatient Prospective Payment System (OPPS) providers participating in the 340B drug pricing program will receive a one-time lump-sum payment to offset losses between calendar years (CYs) 2018 and 2022, according to a final rule provision from CMS.

Before 2018, the Medicare payment rate for 340B drugs provided to outpatient hospitals was the average sales price (ASP) plus 6 percent. The CY 2018 OPPS/ASC final rule changed the payment rate to ASP minus 22.5 percent to reflect the costs incurred by 340B hospitals when acquiring 340B drugs. This rate was effective for drugs purchased from CY 2018 through the third quarter of CY 2022.

To achieve budget neutrality, CMS increased payments to all hospitals for non-drug items and services, effective from CY 2018 to CY 2022.

After the Supreme Court ruled that the payment cuts for 340B drugs were unlawful, all CY 2022 claims for these drugs paid on or after September 28, 2022, were paid at the rate of ASP plus 6 percent. In the CY 2023 OPPS/ASC final rule, CMS reverted to the default rate and implemented a 3.09 percent reduction to payment rates for non-drug items and services.

To account for the payments that hospitals lost while the unlawful cuts were in effect, CMS has finalized a policy to provide them with a one-time lump-sum payment. The agency estimates that between CY 2018 and the third quarter of CY 2022, OPPS 340B providers received $10.6 billion less in 340B drug payments.

READ MORE: Healthcare Orgs Address Price Transparency, 340B Policies in OPPS

However, some CY 2022 claims have been processed with the default payment rate, meaning providers have already received $1.6 billion of the $10.6 billion owed. Each 340B hospital affected will receive a lump-sum payment from CMS of the remaining $9.0 billion owed. The final rule includes the specific amounts owed to the 1,700 hospitals that were impacted by the cuts.

Between CY 2018 and the third quarter of CY 2022, hospitals were paid $7.8 billion more for non-drug items and services. To maintain budget neutrality, CMS is further offsetting payments for non-drug items and services by reducing the OPPS conversion factor by 0.5 percent starting in CY 2026.

The agency initially proposed that the offset start in CY 2025, but stakeholders requested a CY 2026 start date to give hospitals more flexibility as they face financial challenges and workforce shortages. The reduction will continue until the full $7.8 billion is offset, which CMS estimates to be 16 years.

Hospital groups, including the American Hospital Association (AHA), expressed mixed feelings about the two policies that CMS finalized.

“Following years of litigation and a unanimous Supreme Court win, the AHA is very pleased that 340B hospitals finally will be reimbursed in full for what HHS unlawfully withheld from them for five years. The one-time, lump-sum repayment hospitals will soon receive will help them to continue providing high-quality care to their patients and communities,” Rick Pollack, president and CEO of AHA, said in a statement.

READ MORE: CMS to Resolve 340B Payment Mixup With $9B Lump-Sum Fix

“However, HHS made a grievous mistake in choosing to claw back billions of dollars from America’s hospitals, especially those that serve rural, low-income, and other vulnerable communities,” Pollack continued. “HHS decided to ignore hundreds of comments from hospitals and other providers explaining why this Medicare cut is both illegal and unwise. The AHA will continue to review this rule and consider all available options going forward.”

payment rates & behavioral healthcare updates

CMS also finalized a 3.1 percent increase in OPPS payment rates for hospitals and ASCs, reflecting a 3.3 percent market basket update and a 0.2 percent reduction for productivity. This exceeds the 2.8 percent update the agency proposed in July.

AHA voiced concern that the payment increase is still inadequate.

“Most hospitals across the country continue to operate on negative or very thin margins that make providing care and investing in their workforce very challenging day to day,” said Stacey Hughes, executive vice president of AHA. “Hospitals’ and health systems’ ability to continue caring for patients and providing essential services for their communities may be in jeopardy, which is why the AHA is urging Congress for additional support by the end of the year.” 

The final rule included policies to improve access to behavioral healthcare services. CMS established payment for intensive outpatient program (IOP) services under Medicare to resolve a coverage gap patients face when they require more intensive care than outpatient therapy but less than inpatient care that hospitalization would provide.

READ MORE: OPPS Rule to Update Outpatient Payments, Hospital Price Transparency

IOP services can be furnished in hospital outpatient departments, community mental health centers (CMHCs), federally qualified health centers (FQHCs), rural health clinics, and opioid treatment programs.

The rule also included updates to Medicare payment rates for partial hospitalization program services provided in hospital outpatient departments and CMHCs, adjusted CMHC conditions of participation, and finalized changes to OPPS payments for remote mental health services and dental services.

Price transparency policies

CMS finalized policies to improve hospital price transparency, including an adjustment that increases standardization of machine-readable files. Standardized machine-readable files will make it easier for hospitals to comply with the rule and for consumers to understand pricing information. Hospitals must display their standard charge information by following a CMS template layout, data specifications, and data dictionary, a fact sheet stated.

Additionally, CMS finalized provisions to improve accessibility. For example, hospitals must place a footer at the bottom of their homepage that links to their machine-readable files.

The rule also builds on earlier enforcement policies from CMS. Hospitals may be required to submit certification that an authorized hospital official reviewed the accuracy and completeness of their machine-readable file to determine compliance. Hospitals must also submit an acknowledgment of receipt if they receive a warning notice from CMS.

In addition, CMS can publicize information on its website related to assessments of a hospital’s compliance, compliance actions taken against a hospital, and notifications sent to a health system leadership.

Editor’s note: This article was originally published on 11/2/2023.