Hospitals blast report that Medicare 340B cuts will help beneficiaries
Hospital groups are pushing back against a new analysis that predicts reimbursement cuts to 340B hospitals will benefit the industry overall and lead to lower costs for patients.
The report, released Monday by the consulting firm Avalere, plays down the concerns of hospitals that led to the American Hospital Association lawsuit against HHS that seeks to overturn the estimated $1.6 billion in 340B cuts that went into effect Jan. 1.
A federal judge dismissed the lawsuit in late December and the AHA immediately appealed the decision. On Jan. 17, the association filed an emergency request for the courts to expedite the appeal, but so far there's been no new action.
The Avalere study shows that in aggregate hospitals will see a 1.5% increase in payment rates in 2018 as the rule goes into effect: 85% of hospitals will see a net increase in Part B reimbursements, and 1% of hospitals will see more than a 10% net cut.
In a model of the new payment rule, the study shows that a 340B provider that gets the 23.1% discount on a drug with the average manufacturer price of $900 would make just under $2 in profit when it sells the drug to a patient. Prior to the new rule, the hospital profit would have been almost $252.
Avalere's study notes that because rural hospitals are exempt from the rule's cuts, they will also benefit the most from the redistribution of the monies pulled in through the payment cuts.
Beneficiaries will also win, Avalere says, because they will see lower drug co-pays.
Avalere looked into the overall impact of the 340B costs in part due to a study in the New England Journal of Medicine that showed hospitals have used acquisition of physician practices to grow their 340B program, according to Matt Brow, executive vice president at Avalere.
The 340B program is frequently criticized for its growth and how hospitals spread the savings garnered through the discounts. That criticism is driving House legislation aimed at reforming the program.
Proponents of the program as it currently works say the money hospitals saved with discounts fund safety-net programs and increase access for poor patients.
The Avalere study links the hit to 340B hospitals' ledgers to lower costs for beneficiaries—the HHS changes "reduce the financial benefit of 340B drugs to hospitals while increasing overall hospital payments and reducing beneficiary costs," Brow says—but hospital groups say Avalere overlooks the harm to poor patients.
The payment rule cuts drug reimbursement to 340B providers by almost 30%, says Joanna Hiatt Kim, AHA's vice president of payment policy.
For 340B hospitals that weren't exempted like rural hospitals, this is a "very big cut," Kim says.
"The funds are meant to expand access to care, so this cut will hurt those people who need the care," Kim said. "It completely undermines the intent of program."
The study's argument that beneficiaries will gain from lower copays is "an example of Avalere missing the big picture," Kim says.
While beneficiaries will pay less for their share of the drug, their cost-sharing for other Part B services will go up because the CMS is implementing the payment cut in a way that doesn't change aggregate costs.
Most copays will go up, Kim argued, because even though the 340B costs go down the cost for every other service will go up.
As efforts to ramp back the 340B program gain steam on Capitol Hill, hospitals and the pharmaceutical industry face off with dueling advertising and public-facing campaigns with battle lines drawn.
The study is likely to fuel both sides' arguments as the House Energy and Commerce Committee gears up to release new legislation that includes defining 340B-eligible patients and new reporting requirements for 340B hospitals.
"The pharmaceutical industry has an agenda to mislead the public and policymakers about what's really going on with 340B," Kim says. "It helps assure access to low-income individuals, whereas when you look at the pharmaceutical industry for instance, you see them increasing prices for existing drugs. I see a new example coming across my desk every day."
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