October 18, 2019

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340B Covered Entities Beware: CMS Proposes Drastic Drug Reimbursement Rate Cuts

In its Outpatient Prospective Payment System proposed rule ("Proposed Rule"), CMS outlined a significant Medicare Part B payment reduction for separately payable, nonpassthrough drugs provided in the hospital outpatient settings. You can find the Proposed Rule here. The proposal comes at a time when 340B stakeholders continue to face pressure to increase audit and program integrity efforts. Here are five things you should know about CMS's Proposed Rule:

  • CMS proposes to pay 340B covered entities at a roughly 28 percent lower rate than all non-340B hospitals for the same drugs (Average Sales Price minus 22.5 percent)
  • The proposal is budget neutral – meaning CMS proposes to take the savings generated from this payment cut and increase OPPS rates; either across the board for all services, or for a subgroup of services
  • CMS may complicate 340B covered entity billing processes by implementing a modifier to roll out its proposal – this could pose compliance challenges and enhance False Claims Act risk
  • CMS requested comments in a few key areas, including whether the rate reduction should be phased in over time and whether the amount of the reduction is appropriate
  • CMS previously proposed a Part B demonstration that included a payment reduction for physician administered drugs – that program was eliminated due to significant industry pushback

CMS's proposal could result in a tremendous effect on 340B entities with specialty clinics (such as cancer centers) with high Medicare populations. It is critical that all covered entities assess the effect of CMS's proposal, and submit comments that include data to show CMS that such a significant payment reduction could all but eliminate the resources covered entities need in order to fulfill the 340B program's intent – to stretch scarce federal resources to reach more patients and provide more services.

Comments are due by Sept. 11. We encourage covered entities to comment on the Proposed Rule before the comment window closes. Stakeholders can submit comments here. To learn more about CMS’s Proposed Rule, or to discuss how it could affect your community, please contact the authors or your Polsinelli attorney. 

© Polsinelli PC, Polsinelli LLP in California


About this Author

Neal Shah, Polsinelli Law Firm, Healthcare Law Attorney

Neal Shah applies his experience in government, private practice, and health care delivery to help identify practical legal solutions to complex regulatory and transactional problems, including:

  • Helping clients comply with the Stark Law, Anti-Kickback Statute, and similar federal and state fraud and abuse laws
  • Establishing and operating Accountable Care Organizations and other coordinated care arrangements
  • Completing self-disclosures of over payments of fraud and abuse liability, including through the CMS Voluntary Self-Referral Disclosure Protocol (SRDP) and...

Emily Shaw approaches problems with diligence, creativity, and enthusiasm. She combines her passion for health care law with her commitment to each client’s individual business needs to identify legal options to help them overcome challenges within their organizations, as well as within the industry. She assists a broad range of health care organizations with complex transactional and regulatory matters. Prior to joining the firm, Emily gained health care administrative experience through an internship with a large non-profit hospital.

Emily is committed to providing outstanding health care representation for her clients in areas that include:

  • Complex health care mergers and acquisitions

  • Health care facility licensure

  • 340B Drug Pricing Program

  • mHealth and telehealth

  • Health Insurance Portability and Accountability Act (HIPAA) and state privacy laws

  • Physician and other provider contracts

  • Compliance with the Stark Law and Anti-Kickback Statute

  • Medicare and Medicaid reimbursement

Kyle A. Vasquez, Polsinelli, Compliance Support Lawyer, Health Care Reform Attorney

Kyle Vasquez provides pragmatic legal and compliance support to a wide range of health care clients. He utilizes his background in health law and his prior experience as a health care consultant to develop creative approaches that address the unique challenges that health care providers face. Kyle works collaboratively with health care stakeholders to assist in identifying forward-thinking models that meet their financial and operational needs. Kyle represents a broad set of health care entities including multi-hospital health systems, community hospitals, FQHCs,...