The Trump administration hasn't given up on its 340B hospital reimbursement cuts, but officials have also come up with a smaller, alternative pay cut in case the CMS loses its ongoing court battle over the original plan.
In the CMS' newly proposed outpatient prospective-payment system, or OPPS, rule released late Monday, the administration walked a careful line. The steep Medicare Part B cuts to 340B hospitals will continue for now, even though a federal judge has blocked them and demanded a government remedy to providers that saw the cuts.
But stakeholders have also been asked to weigh in about a new potential payment rate for 340B hospitals that would almost undo the challenged 22.5% cut. Instead of getting reimbursed at a drug's average sales price, or ASP, plus a 6% administration fee, the 340B providers could get the average sales price plus 3%.
"We are soliciting public comments on the appropriate OPPS payment rate for 340B-acquired drugs, including whether a rate of ASP plus 3% could be an appropriate payment amount for these drugs, both for (calendar year) 2020 and for purposes of determining the remedy for CYs 2018 and 2019," the proposed rule said.
A federal judge demanded the "remedy" the CMS referenced earlier this summer. U.S. District Judge Rudolph Contreras halted the cuts for both 2018 — when they first went into effect — and in 2019.
Instead of granting the permanent injunction against the cuts that the hospitals and hospital groups had wanted, Contreras asked HHS to take "first crack" at devising a remedy.
The CMS made it clear in the proposed rule that the Trump administration will appeal the decision. And one hospital group—the Federation of American Hospitals, which represents investor-owned hospitals—supports the original cuts and plans to file an amicus brief in the appeal. The group filed a brief in the lawsuit earlier this side, but didn't take a side.
The group's CEO, Chip Kahn, said the CMS' original cut is an equity issue for hospitals that aren't eligible for the steep 340B discounts because they're for-profit.
"There's a set of issues here," Kahn said. "On the one hand Medicare patients receive full payment, and the whole point of 340B is to help hospitals for their uncompensated-care patients."
Crucially for the 340B hospitals in question, the CMS has asked for responses on whether the remedy should be retrospective or prospective through increases to future 340B claims, "and whether there is some other mechanism that could produce a result equitable to hospitals that do not acquire drugs through the 340B program while respecting the budget-neutrality mandate."
Hospitals don't want a remedy that makes up for past losses elsewhere. This is a major issue for Kahn and the for-profit hospitals that don't want to see a cut to any future payment as a result of the push on 340B hospitals.
"Our position is that for remedies going forward we just want to make sure we're not required to dig back in any payment — which means going forward we believe they shouldn't make an adjustment to affect us because of a court decision," Kahn said.
American Hospital Association General Counsel Melinda Hatton reiterated this position as well. She said the AHA doesn't deem the proposed remedy "appropriate," and referenced the group's court pleadings where the AHA argued "the government should be required to propose and implement a solution to make those hospitals that were adversely impacted whole and hold others harmless."
If the CMS loses its appeal of the hospital lawsuit, the agency said it would likely propose the specific remedy for 2018 and 2019 and, potentially, 2020 through the 2021 outpatient prospective-payment system rulemaking process. Stakeholder comments would inform those proposals.
The American Hospital Association, America's Essential Hospitals and the Association of American Medical Colleges each blasted the administration for trying to preserve the existing cuts.
"With its proposed rule, the Centers for Medicare & Medicaid Services (CMS) ignores a federal court's unequivocal and explicit finding that the agency acted unlawfully when it imposed deeply damaging cuts to hospitals in the 340B drug pricing program," America's Essential Hospitals CEO Bruce Siegel said in a statement.
The group wouldn't comment on the suggested remedy, citing ongoing litigation.
The AHA and AAMC took a similar tack in emphasizing the court decision.
"Now that the court has ruled that those cuts are illegal and exceeded the administration's authority, we urge CMS to refrain from doing more damage to impacted hospitals with another year of illegal cuts," AHA CEO Rick Pollack said. "Instead, as a remedy, CMS should be offering a plan to promptly restore funds to those affected by the illegal cuts."
Ivy Baer, AAMC's senior director and regulatory counsel, also expressed disappointment "in light of our strong win in the District Court."
Hospitals eligible for 340B include critical-access hospitals, large disproportionate-share hospitals like academic medical centers, rural referral centers, free-standing cancer hospitals and sole community hospitals.
Hospital pay from Medicare Part B also came up last week in the Senate Finance Committee's massive proposal to lower drug costs. One provision targeted the 6% administrative fee for hospitals that both the Obama and Trump administrations have wanted to curb. Under the Senate bill, this fee would be capped at $1,000 per drug per day.
Additionally, the off-campus hospital outpatient departments that have had their higher Part B reimbursements "grandfathered" in would lose their special status.