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CMS to Reduce 340B Drug Payments to Hospitals by $1.6 Billion

On November 13, CMS published the final rule revising the Medicare hospital Outpatient Prospective Payment System for 2018.  Among a number of changes, the final rule dramatically reduces Medicare Part B payments to hospitals for separately payable drugs purchased through the 340B Program.  Currently, Medicare pays hospitals the Average Sales Price (ASP) plus 6% for these drugs regardless of whether the hospital purchased the drug at a discount through the 340B Program.  Under the final rule, Medicare will pay hospitals ASP minus 22% for separately payable drugs purchased through the 340B Program.  The change will reduce payments to 340B hospitals by an estimated $1.6 billion that will be redirected to payment for other services within the OPPS.

CMS’s stated goal in implementing this payment reduction is to better align Medicare payment for separately payable drugs with the resources hospitals actually expend to acquire such drugs.  While CMS acknowledged the intent behind the 340B Program, it also stated its belief that it is inappropriate for Medicare to subsidize other activities through Medicare payments for separately payable drugs.   Notably, not all hospitals will be subject to the payment reductions. SCHs, children’s hospitals and PPS-exempt cancer hospitals are excluded from the 340B Program payment reduction for 2018.  Nevertheless, the 340B Program payment changes will reduce payments to all non-exempted hospitals, and such reductions may have a more dramatic effect on urban, major teaching hospitals with 500 or more beds.


© Copyright 2020 Squire Patton Boggs (US) LLPNational Law Review, Volume VII, Number 340


About this Author

John E. Wyand, Squire Patton Boggs, Healthcare Lawyer, UK

John Wyand, a Partner in our Healthcare policy practice group in Washington DC, focuses on advising healthcare and life sciences companies and providers on legal, policy and regulatory issues. Additionally, he regularly assists hospitals and physician groups in developing strategies for hospital/physician alignment, mergers and acquisitions, and fraud and abuse compliance.

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Robert Nauman, Health Care, Lawyer, Squire Patton Boggs

Robert has extensive experience counselling healthcare clients, including hospitals and health systems, physicians, physician groups, ambulatory surgery centers, insurers, health plans and management companies, in a variety of regulatory and transactional matters.

Robert’s areas of expertise include healthcare fraud and abuse laws, Medicare reimbursement issues, provider alignment strategies, provider enrollment, accreditation and licensure, Accountable Care Organizations, provider acquisitions and affiliations, healthcare antitrust matters, insurance regulation and healthcare transactional matters.

He is a member of the Ohio State Bar Associations and the American Health Lawyers Association.

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