Hospitals’ fight to boost Medicare Advantage reimbursement has extended to plans' pay for 340B drugs.
The hospitals’ plea to adjust Medicare Advantage pay stems from regulation aimed at making providers that participate in the drug discount program whole after the Supreme Court reversed 340B rate cuts that were in place from 2018 to 2022. Hospitals argue the Centers for Medicare and Medicaid Services needs to address the regulation’s effects on Medicare Advantage, although CMS has been wary of wading into contracts between providers and commercial insurers that manage Medicare Advantage payments.
Related: 340B Medicare Advantage lawsuit pits Baptist Health against Humana
“CMS has punted by saying this issue is subject to individual contracts between hospitals and MA plans,” said Jeffrey Davis, a healthcare attorney at Bass Berry & Sims who advises hospitals. “CMS got it wrong. The Supreme Court and a federal district court found the rate reduction to be unlawful, and the reality is those unlawful payment reductions extended downstream into MA plan reimbursement.”
Hospitals say CMS should compel Medicare Advantage plans to increase prior 340B payment rates as a result of the Supreme Court ruling. However, hospital and Medicare Advantage plan contract terms vary, and may prevent any retroactive reimbursement changes.
Limited public information exists on Medicare Advantage contracts, making it hard to verify connections between Medicare policy and plans' payment rates. That, in part, is why CMS in January put out a request for information on how to improve Medicare Advantage transparency.
"It's not clear to me there is any hard-coded connection between CMS policy and Medicare Part B, and what gets done in Medicare Advantage," said Sayeh Nikpay, associate professor of health policy and management at University of Minnesota who studies the 340B program. "MA is a black box."
AHIP declined to comment.
Hospitals are particularly concerned they'll be saddled not only with cuts tied to previous years' lower 340B reimbursement rates, but additional Medicare Advantage rate cuts for outpatient services, as well.
CMS finalized a rule in November to pay hospitals back for 340B cuts the Supreme Court overturned, but the regulation also will reduce reimbursement for other outpatient products and services since federal law requires spending to be budget-neutral. Since Medicare Advantage plans typically tie rates to Medicare reimbursement, hospitals are concerned the plans will also reduce payments for other items and services.
“An issue that both hospitals and MA plans should be addressing with CMS and potentially as needed with Congress, is ensuring there isn’t a budget-neutral downward [reimbursement] adjustment to offset a payment remedy they did not make,” said Emily Cook, a healthcare attorney at law firm McDermott Will & Emery who advises hospitals.
The hospital-led push to boost Medicare Advantage payments may hinge on whether CMS' 340B remedy regulations apply to those plans.
In the Medicare Advantage rate adjustment finalized on April 1, CMS said it expects to address “how aspects of the 340B remedy rule might impact MA rates for other years in future policymaking.”
If CMS were to intervene, the agency would likely do so in hospital regulations published in the next month, said Sue Harris, a healthcare attorney at Norton Rose Fulbright who advises hospitals. Still, Harris said she doesn’t expect CMS to get involved in Medicare Advantage contracts.
Medicare Advantage plans are generally required to pay providers traditional Medicare rates for out-of-network care, so providers could seek higher 340B payments for that type of care, said Matthew Fiedler, a senior fellow at the Brookings Institution's Center on Health Policy.
Some hospitals are pursuing litigation amid the uncertain regulatory landscape. Baptist Health, the nonprofit health system based in Montgomery, Alabama, filed a lawsuit in February against insurer Humana, kickstarting the legal debate. A spokesperson for Humana said the company does not comment on ongoing litigation.
Similar lawsuits are likely coming, lawyers who represent hospitals said.
“Hospitals are filing demand letters with insurers and starting to look seriously at litigation,” said Janice Suchyta, a healthcare attorney at the law firm Baker Donelson who advises hospitals. “We will see more litigation in the next six months.”
More hospitals may sue if they don't expect a potential regulatory proposal would meet their requests.
If hospitals' legal challenges are successful, it would further tilt negotiations in hospitals' favor, said Darbin Wofford, senior health policy advisor at Third Way, a centrist Democratic think tank.
"It would be an unprecedented interference in the competitive nature of MA that makes it so strong," he said. "To require plans to give hospitals extra money because they were bad negotiators would be terrible for seniors and the program, and to limit negotiations for other services to make up for the costs would totally throw out competition altogether."
The evolving 340B debate represents one of many areas where providers have challenged Medicare Advantage payment policies. Providers have taken issue with declining reimbursement rates, claim denials and prior authorization requirements. The financial repercussions of these policies will continue to grow as Medicare Advantage enrollment expands, hospitals claim.
“It is a constant battle between providers and MA plans, whether it’s prior authorization, claim denials, underpayments or failure to pay claims on time,” Harris said.
