340B guidance from CMS further inflames worries over reimbursement cuts

Guidance meant to provide more clarity on forthcoming changes to the 340B program has only added anxiety and uncertainty for hospital executives.

Although legislators are considering trying to stop the changes, as the rules stand now payment for drugs in the program are soon going to drop sharply.

Beginning Jan. 1, the CMS will pay for drugs acquired through the 340B program at the average sales price minus 22.5% of that price, which is a significant change from the current rate of the average sales price plus 6%.

The change would reduce payments through the program by $1.6 billion, the agency estimated.

In the same rule that outlined the reduction, the CMS asked hospitals to develop methods to track which drugs are obtained under the program. Little information had been released as to what form the methods—called claim modifiers—should take. To that end, the agency released an under-the-radar guidance to hospitals last week meant to fill in the blanks.

The CMS outlined two modifiers, one called JG, to be placed on claims for drugs or biologicals acquired via the 340B program, and TB, which applies to products purchased under the program that are not subject to the cut. These so-called pass-through drugs tend to include new treatments or ones for rare diseases.

The CMS indicated little flexibility would be given to hospitals if they either forget to use the JG modifier or use the wrong one. "It is the provider's responsibility to submit correctly coded claims," the CMS said in the guidance.

If a mistake is made, federal law permits Medicare to recover its erroneous payments, it said.

The guidance is concerning to hospitals as the FAQs outline requirements that CMS had not previously outlined in rulemaking, according to Richard Sorian, a spokesman for 340B Health, a lobbying group that represents hospitals participating in the discount program.

"We are hearing concerns from hospitals that they may not be able to update their software systems by Jan. 1 to comply with these additional requirements," Sorian said.

From the first mention of the modifiers last summer, hospitals have argued that the concept would be hard to implement.

They said that the CMS erroneously assumed that all of their drugs are purchased under 340B, but the system used for purchasing medications is actually separate from a hospital's pharmacy drug-dispensing system and patient billing system.

As a result, it may be three to 10 days post-dispensing before the hospital knows whether a drug was purchased under 340B or at regular pricing, according to the Provider Roundtable, a group of hospital leaders convened by Nimitt Consulting to comment on federal rulemakings.

During the 340B comment period, some hospitals said it would take up to a year to test and implement a new health IT system.

The CMS acknowledged that hospitals had raised concerns about their inability to upgrade their billing software by Jan. 1, but again said there was nothing that could be done to address the worry.

"If a hospital believes that it will not be able to properly identify and bill accurately for 340B acquired drugs, it should contact its (Medicare administrative contractor) to discuss whether holding claims or rebilling claims may be an option," the CMS said. "Again, hospitals are required to be in compliance with all applicable 340B Program requirements and Medicare billing requirements."

The provider community was dismayed at the unwillingness of the CMS to allow hospitals to upgrade and test new billing systems. "Hospitals must test and monitor claims over an extended period of time to ensure correct coding," said Mary Mullaney, director of hospital payment policies at Association of American Medical Colleges. "The unintentional absence of a modifier could result in that claim being underpaid or denied."

There appears to be no relief in sight for hospitals from the modifiers. Pending litigation from hospitals only addresses the pending cut. The same goes for legislation circling the Hill that also seeks to stop the reduction in 340B reimbursement.

Overall, expecting hospitals to implement a policy with just a few weeks' notice doesn't seem fair and appears counter to the agency's message that it's seeking to reduce regulatory burdens and make it easier for provider to operate under Medicare.

"For something this complex that's going to have such significant ramifications, there should have been a lot more outreach," said Shahid Zaman, senior policy analyst at America's Essential Hospitals, an association for safety net hospitals.