On December 27, a federal judge in Washington, DC, ruled that HHS’ reimbursement cuts to the 340B program exceeded the HHS secretary’s authority. The cuts, which took effect January 1, 2018, reduced the reimbursements that hospitals would receive from the government for drugs covered under the 340B program from average sales prices plus 6% to average sales price minus 22.5%. This reduced the amount of reimbursement that safety net hospitals would receive by about $1.6 billion.
The lawsuit, filed jointly by the American Hospital Association, the Association of American Medical Colleges and America’s Essential Hospitals, was first dismissed in December 2017, but the hospital groups later appealed that decision.
As Healthcare Finance News reports, “While the secretary is permitted to make ‘adjustments’ to those rates for whatever reasons he deems ‘necessary,’ adjustments are all he can make,” the judge wrote. “He cannot fundamentally rework the statutory scheme—by applying a different methodology than the provision requires.”
“America’s 340B hospitals are immeasurably pleased with the ruling that the Department of Health and Human Services unlawfully cut 2018 payment rates for certain outpatient drugs,” the hospital groups said in a joint statement. “The court’s carefully reasoned decision will allow hospitals and health systems in the 340B Drug Pricing Program to serve their vulnerable patients and communities without being hampered by deep cuts to the program.”
Much remains to be seen
While covered entities and hospital groups are celebrating the court’s decision for the victory it is, there are still several unknowns with regards to Medicare Part B.
The hospital groups have requested that covered entities receive retroactive payments for all of 2018, the time during which the now-unlawful cuts were in effect. However, the judge has asked for briefings with more information and suggested remedies from both sides before he makes a decision on retroactive payments or any other changes in policy, Modern Healthcare reports. The court has requested that the briefings be submitted within 30 days from the ruling.
“As the court correctly recognized, its judgment has the potential to wreak havoc on the system,” HHS spokesperson Caitlin Oakley said in a statement, according to HealthLeaders. “Importantly, it could have the effect of reducing payments for other important services and increasing beneficiary cost-sharing. We look forward to briefing the court on this important matter.”
In the meantime, as of the time of this publication, no retroactive payments have been promised to covered entities, and the CMS cuts remain in place. This means that covered entities must continue to utilize appropriate modifiers, applying TB or JG codes to drug purchases as they have done for the past year based on their covered entity type and 340B eligibility. Sentry worked quickly in January of last year to ensure that our customers would have the most up-to-date tools needed to seamlessly adjust to the reimbursement cuts, and those tools remain effective today.
Additionally, the recent court ruling does not affect the Outpatient Prospective Payment System (OPPS) and Ambulatory Surgical Centers (ASC) for 2019 that took effect January 1 of this year, which extended the 340B payment cuts to previously exempt off-campus providers, so appropriate modifiers must still be applied for these sites as well.
New House bill introduced
On January 10, Morgan Griffith (R-VA) introduced the first 340B-specific bill that would focus on covered entities’ ability to assist sexual assault victims, increasing the availability of sexual assault forensic exam (SAFE) services at those hospitals. The bill will be introduced through the House Energy and Commerce Committee and currently has two co-sponsors: Greg Walden (R-OR) and Buddy Carter (R-GA). Sentry will continue to monitor this bill for additional insights and potential additional requirements of 340B hospitals over the coming months. Our focus remains on the House and Senate committee member assignments that were finalized January 18, 2019.
Drug Pricing Conversations will continue into 2019
On October 25, CMS released an advance notice of proposed rulemaking (ANPRM) to seek feedback on a proposed new drug payment model that, if accepted, would go into effect in a “test” phase from Spring 2020 to Spring 2025, in select, randomized geographic areas across the country. Comments on the ANPRM closed on December 31, 2018.
The proposed International Pricing Index (IPI) model for Medicare Part B drug reimbursement would encourage private-sector vendors (such as specialty pharmacies, co-op groups of hospitals or health systems, or GPOs) to negotiate with pharmaceutical manufacturers for the purchase of Medicare Part B drugs, including specialty drugs, infusion drugs and biologics. Hospitals would then purchase drugs from whichever private vendor they choose as opposed to buying directly from manufacturers.
There were a total of 3,946 comments received on the ANPRM, 104 of which mentioned 340B specifically. Of those that addressed the 340B program directly, the majority appeared to be opposed to the IPI model, with concerns raised regarding potential group purchasing organization 340B violations, inefficiency in access and operations, and ultimately the impact on the 340B price.
Sentry Data Systems also submitted comments on the ruling, which read, in part, “Upon review of the ANPRM, participating 340B hospitals could lose access to 340B discounts not only for Medicare Part B but for all covered outpatient drugs dispensed to eligible patients, including Medicaid … While we are encouraged that the Administration wants to consider ways to lower drug prices, while minimizing harm to 340B hospitals that ‘invest in significant resources into serving vulnerable populations,’ we would ask that 340B hospitals have a voice and a choice in participating in the model.”
CMS has said that the next step following the ANPRM would be a proposed ruling, to be released sometime this Spring.
Sentry will continue to monitor the aftershock from the judge’s decision regarding the Medicare cuts, the upcoming IPI proposed ruling, and any other regulatory and administrative changes on the horizon with an eye to how they will affect covered entities, and will continue to ensure that its 340B customers have the management and compliance tools needed for success.