340B Round-Up: $9 Billion Payment Remedy, More Lawsuits
One hospital will receive 72 cents while another will get over $122 million in repayments under the Centers for Medicare and Medicaid Services (CMS) final remedy on repaying hospitals for earlier cuts. The $9 billion in repayments will come in lump sums in late 2023 or early 2024, and stems from a 2022 U.S. Supreme Court decision in favor of hospitals. Two other lawsuits also have implications for 340B programs. The first relates to the definition of a 340B “patient.” The second revolves around reinstated registration requirements for hospital child sites. We have your round-up in today’s blog.
CMS Finalizes $9 Billion Remedy
From 2018 through 2022, CMS reduced reimbursements to certain 340B hospital covered entities. There were some exemptions to the 340B payment cuts policy: critical access hospitals, rural sole community hospitals, PPS cancer hospitals, children’s hospitals, drugs with pass-through payment status, and vaccines.
Affected 340B hospitals and the American Hospital Association sued under American Hospital Association v. Azar, and in September 2022, they won at the U.S. Supreme Court. [Review CLA’s earlier blog on the U.S. Supreme Court ruling for additional background.]
“The 340B program continues to take unexpected turns with each new lawsuit or ruling. The $9 billion lump-sum payments are expected by early 2024. On the other hand, lawsuits and ongoing changes by pharmaceutical companies means covered entities must remain vigilant in monitoring and testing their programs. Reach out if CLA can help you,”
Kim Doud, CLA Health Care Consulting Director-340B
On November 2, 2023, CMS finalized how it will repay some 1,650 impacted hospitals.
- CMS states the original reimbursement cuts amounted to $10.6 billion in affected Outpatient Prospective Payment System (OPPS) payments. Of the $10.6 billion, CMS has already addressed $1.6 billion by stopping the policy in 2022 and reprocessing most of those claims.
- CMS states there is $9 billion left to repay, which CMS will do via a one-time, lump-sum payments.
- CMS creates a technical corrections period until November 30 to address any issues with how a hospital’s lump sum amount is calculated.
- CMS will instruct Medicare Administrative Contractors (MACs) to make payments within 60 days of receiving instructions. CMS expects this process to be complete by early 2024. CMS states MACs will continue to follow normal accounting processes for collecting repayment amounts that follow from provider-specific overpayment obligations, as well as other unique situations such as provider bankruptcy or payment suspension, any of which may impact the provider’s net payment amount.
- CMS finalizes a budget neutrality impact of $7.8 billion. CMS will offset this amount prospectively. The agency will reduce the OPPS conversion factor by a negative 0.5% each year beginning in 2026. CMS estimates it will take 16 years to recoup the amount.
The hospital industry is not pleased with the budget neutrality policy. It remains to be seen whether the industry will file another lawsuit related to it. Additionally, the issue of reduced 340B reimbursements from Medicare Advantage plans during the years in question will need to be negotiated directly with the plans, per CMS.
Two Lawsuits: Definition of Patient, Child Site Registration
In recent weeks, several lawsuits have also been decided or filed.
- Genesis Ruling: Definition of a Patient. On November 3, a federal Court of Appeals ruled in favor of Genesis Healthcare related to HRSA’s definition of a 340B “patient.” The lawsuit originated in 2018 when, during an audit, HRSA found Genesis violated the diversion statute by using the program for ineligible patients. At issue was the definition of a patient HRSA used in the audit, which rested on where a prescription originated. Genesis sued and said individuals were patients when they received services at the facility regardless of where a prescription originated. The Court of Appeals ruled in favor of Genesis, using a broad definition of patient that reflects the underlying statute. The full extent of this ruling is unknown though analysis is ongoing. The government has yet to indicate whether it will appeal the ruling.
- HRSA Policy Reinstatement: Child Site Registration Requirements. HRSA waived its registration requirements for off-site hospital clinic locations during the pandemic. Specifically, HRSA waived requirements that these child sites be (1) listed as reimbursable on the hospital’s Medicare Cost Report prior to participating in the 340B Program; and (2) registered and listed in 340B Office of Pharmacy Affairs Information System (OPAIS) prior to participating in the 340B Program. In late October, HRSA issued a notice [PDF] reinstating the requirements. Going forward, offsite, outpatient hospital facilities must (1) be listed on the hospital’s most recently filed Medicare Cost Report and registered in OPAIS by the next 340B Program quarterly registration period, or (2) the covered entity must notify HRSA within 90 days of the publication of the notice that they have initiated the process of listing the offsite, outpatient facility on the hospital’s Medicare Cost Report and registering it in OPAIS. HRSA is providing a 90-day grace period before non-compliant entities may be subject to audit and compliance action. On October 31, hospitals sued [PDF] to stop the requirement, stating its reinstatement was “arbitrary,” “abrupt” and “capricious.”
How CLA Can Help
The 340B program is very complicated, even more so with the multitude of court cases. You need (and are expected) to have another set of eyes and ears for your program, including annual audits by an independent auditing firm. Look no further. Reach out to CLA if you have any 340B questions, want to have us review your program, wonder how much your lump sum repayment will be or need assistance with the technical corrections process. CLA can help.
Jennifer Boese is the Director of Health Care Policy at CLA. She is a highly successful public policy, legislative, advocacy and political affairs leader, including working in both the state and federal government as well as the private sector. She brings over 20 years of government relations and public policy knowledge with her to CLA. Well over half of her career has been spent dedicated to health care policy and the health care industry, affording her a deep understanding of the health care market and environment, health care organizations and health care stakeholders. Her role at CLA is to provide thought leadership, policy analysis and strategic insights to health care providers across the continuum related to the industry's ongoing transformation towards value. A key focus of that work is on market innovations and emerging payment models. Her goal is to help CLA clients navigate and thrive in an increasingly dynamic health care environment.
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