When the Centers for Medicare & Medicaid Services (CMS) reduced the payment rate for drugs acquired under the 340B discount drug program in 2018, covered entities were greatly impacted. During 2023, CMS and the U.S. justice system contemplated remedies for the 2018 adjustment, and beginning in 2024, lump-sum payment remedies were made for traditional Medicare drug claims for certain affected covered entities. However, Medicare Advantage Organizations (MAOs) did not make lump-sum payments, and therefore, covered entities must follow a separate process to seek repayment.
What adjustments were made to 340B, and what are the remedies?
In CY 2018, CMS adjusted the payment rate for 340B drugs from the average sales price (ASP) plus 6% to ASP minus 22.5%. This adjustment significantly reduced the reimbursement rate applied to separately payable covered outpatient drugs acquired under the 340B discount program.
On June 15, 2022, the Supreme Court determined the payment rate could not vary by hospital group but did not opine on the remedy, sending the case to the U.S. Court of Appeals for the District of Columbia Circuit.
On Sept. 28, 2022, after motions to vacate were contemplated regarding the CY 2022 OPPS reduced rate and the remedy for the prior reduced payments, the U.S. District Court for the D.C. Circuit ruled to vacate the reimbursement rate for 340B-acquired drugs for the rest of 2022. This allowed reimbursements to return to the previous ASP plus 6% rate.
On Jan. 10, 2023, the district court issued a remand “without vacatur ruling” to allow CMS to determine the remedy for reduced payments for amounts previously received by 340B-covered entity (CE) hospital providers (CE Hospitals) from 2018 through Sept. 27, 2022.[1]
On Nov. 2, 2023, CMS issued final rule, CMS 1793-F (Final Rule)1, outlining the remedy for the invalidated OPPS[2] 340B-acquired drug payment policy for Calendar Years (CY) 2018 -2022. Within the Final Rule, CMS states the final rule can be viewed as a retroactive adjustment to the payment rates for each of 2018 through 2022.[3]
340B CE Hospitals received repayment for their traditional Medicare patients via a one-time lump sum payment, which began in early 2024.
Since the Final Rule did not specify how CE Hospitals should handle their MAO claims, the entities should take proactive steps to address repayment with their MAOs.
How does a CE Hospital know if it is eligible for a potential remedy?
The eligibility elements below will help determine if a CE Hospital may qualify for a potential reimbursement remedy for previously received reduced payments:
- Eligibility: 340B participating CE Hospitals paid under the Medicare OPPS
- Eligibility time period: For dates of service between Jan. 1, 2018, and Sept. 27, 2022[4],5
- Claims: Separately payable covered outpatient drugs acquired under 340B pricing
How does a CE Hospital initiate the repayment process if it qualifies?
- Traditional Medicare: No further action is needed. CMS has initiated lump sum payments to remediate the reduced amounts previously paid. This began during the first quarter of 2024.
- Medicare Advantage Organizations: Historically, CMS has not interfered on matters between MAOs and providers, allowing contractual provider agreements to dictate payment terms between the parties. Thus, each impacted CE Hospital should individually pursue any payment remedies directly with its MAOs. (See options below on next steps.)
What steps should be taken by CE Hospitals interested in initiating a repayment from their MAOs?
CE Hospitals can take these proactive steps to initiate repayments from their MAOs:
- Compute potential reimbursement impact by year and for each applicable MAO
- Review their MAO agreements to determine how underpayments are addressed, including the timelines for the notice period
- Reach out directly to related MAOs to request the recovery pursuant to the agreements
- Contact PYA or the organization’s legal advisor to evaluate the MAO remedies. Since these reduced payments occurred over almost five years, the amount of the potential recoveries could be significant
How can PYA assist with the repayment initiative?
PYA has already been contacted by various organizations to assist with MAO evaluations. We customize our assistance based on each entity’s recovery strategy by employing these and other proactive steps:
- Compute or validate the amount of potential payment recoveries by year by MAO
- Review source files for completeness and accuracy and perform validation claims audit(s) as necessary
- Review MAO agreements regarding the process to address underpayments and timelines for requesting repayments
- Participate in discussions with the entity and the MAOs to finalize and/or negotiate any recoveries
- Provide expert witness services if an entity’s legal representatives pursue action
PYA has more than 40 years of experience with healthcare consulting. We customize our solutions and partner with clients to reach operational goals. If you have questions about the 340B repayment initiative or any other issues regarding financial performance or strategy, our PYA executives can help. Contact them via email or by calling (800) 270-9629
[1] Per CMS Fact Sheet dated November 2, 2023, Hospital Outpatient Prospective Payment System (OPPS): Remedy for 340B-Acquired Drug Payment Policy for Calendar Years 2018-2022 Final Rule (CMS 1793-F), https://www.cms.gov/newsroom/fact-sheets/hospital-outpatient-prospective-payment-system-opps-remedy-340b-acquired-drug-payment-policy.
[2] Outpatient Prospective Payment System
[3] CMS-1793-F, Response page 79.
[4] https://www.federalregister.gov/documents/2023/11/08/2023-24407/medicare-program-hospital-outpatient-prospective-payment-system-remedy-for-the-340b-acquired-drug
5 To comply with District Court ruling, CMS reverted payments for drugs to the default rate (ASP plus 6%) for claims from Sept. 28, 2022, through Dec. 31, 2022.
