On November 1, CMS released their final rule implementing Part B payment reductions for Disproportionate Share Hospitals (DSH) as well as Rural Referral Centers (RRC). The Final Rule, which will begin January 1st 2018, will reduce payment for most separately reimbursed Part B drugs from a current average sales price (ASP) + 6% to ASP – 22.5%. Under the proposed changes, if a drug’s ASP cost is $50,000, CMS currently pays $53,000, but starting January 1st, CMS will pay $38,750 for the same drug. Payment for vaccines will not change. The estimated savings to CMS is believed to be around $1.65 billion, nearly double from the original estimate of $900 million. The savings will be re-allocated to other OPPS services.
In a comparison of the CMS Oct 2017 payment rates (with a 28.5% reduction) to 340B cost, it appears that the lower reimbursement amount will still cover the cost of a 340B drug. In addition, by remaining in the 340B program, inventory costs will be lower than a non-340B hospital. Therefore, it appears there will continue to be some benefit of remaining in the program, albeit with much less savings opportunity.
Sole Community Hospitals (SCH), Free-Standing Cancer Center (CAN), and Children’s Hospitals (PED) are exempt from this ruling. Since Critical Access Hospitals (CAH) do not fall under the OPPS payment model, they are also excluded from this rule. This means that if a hospital is reimbursed as a SCH from CMS, but are registered as a DSH for 340B, the reimbursement will remain at the higher rate and 340B savings should remain the same.
As part of the implementation, all covered entities that receive OPPS payments will have to report a modifier. For DSH and RRC entities, they will have to begin using a JG Modifier. For the exempt OPPS entities (SCH, CAN, and PED), they will have to use a TB modifier. The TB modifier will not trigger the lower payment.
America’s Essential Hospitals, the American Hospital Association and the Association of American Medical Colleges immediately announced that they will sue CMS over this final rule.
The final Federal Register notice can be found here.