Influential advisory panel asks CMS to reject $1.65 billion in cuts to 340B

A panel that advises HHS on outpatient hospital payments wants the CMS to drop a draft rule that could cut up to $1.65 billion out of the 340B discount drug program.

On Monday, the Advisory Panel on Hospital Outpatient Payment asked the CMS to rescind its proposal to pay hospitals 22.5% less than the average sales price for drugs acquired under the program. 340B aims to reduce operating costs for hospitals that see a disproportionate share of low income patients.

The outpatient payment panel was created by a federal law that dictates HHS must assess how policies affect hospitals. The panel, made up of industry leaders, has proved influential. In 2013, the CMS took its advice to reduce the required level of physician supervision for some procedures.

The current 340B payment calculation mimics Medicare's long-standing policy—6% on top of the average sales price. Under the proposed changes, if a drug costs $84,000, the CMS would pay just over $65,000, instead of the current $89,000. Vaccines would continue to be paid at the current rate. The move would save approximately $900 million in 2018, according to the CMS.

An analysis revealed during the panel meeting on Monday estimated that number could be much higher.

Hospitals could see as much as $1.65 billion less next year, according to Watson Policy Analysis, which was hired by the American Hospital Association to analyze the proposal.

The reduction is intended to be budget-neutral, so the CMS said it would redistribute the savings by increasing Medicare payments to participating hospitals by 1.4% next year. However, Tiffany Swygert, CMS' acting director in the division of outpatient care, said that was just one idea of what to do with the savings. Another idea is to send all money to the Medicare trust fund, which is estimated to run out of money in 2029.

Swigert said the CMS is getting feedback on how to distribute savings.

But hospital officials are worried they might not see any savings that have historically been used to create programs to benefit low income patients, such as shoring up preventive-care efforts or caring for the homeless.

"These hospitals are taking care of a high amount of indigent people that are very much in need," said Mike Schroyer, a panel member and regional president for St. Vincent Health, an Indianapolis-based health system. The CMS "is looking at taking away from their savings and put into a pot that we're not quite sure how it's going to be used."

Panel members also rejected another plan by the CMS to introduce a billing modifier to help the agency better understand which drugs are purchased under the 340B program. The change would begin Jan. 1, 2018.

Modifiers do not always lead to accurate reporting of information and are administratively burdensome to implement, said Dr. Scott Manaker, a panel member and professor of medicine at the Hospital of the University of Pennsylvania.

The CMS is still accepting comments on the proposed rule. The final rule is expected this fall.