February 18, 2018

February 16, 2018

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HELP ACT Would Do Little to Help Ease Concerns of 340B-Participating Hospitals

Summary

The Helping Ensure Low-income Patients have Access to Care and Treatment (HELP ACT) is the third 340B-related legislation to be introduced this month. The HELP ACT goes well beyond the 340B PAUSE Act in the scope of its proposed changes to the 340B Program, particularly as they relate to the requirements for eligible child sites, contracts with state/local government and claim modifier reporting requirements.

In Depth

On January 16, Senator Bill Cassidy introduced the third 340B-related legislation in the past month, the Helping Ensure Low-income Patients have Access to Care and Treatment (HELP ACT). Like the 340B PAUSE Act introduced in the House by Rep. Larry Bucshon in late December 2017, the HELP ACT would impose a moratorium on certain new 340B hospitals and outpatient locations and require data reporting for certain 340B-participating hospitals. The HELP ACT goes further than the 340B PAUSE Act, in that it would also provide additional regulatory authority to the US Department of Health and Human Services (HHS) to clarify requirements for eligible hospital locations (including the addition of new charity care requirements) and would expand and codify in statute requirements for identifying 340B drugs on claims for payment to all third-party payors.

HELP ACT Moratorium

Similar to the 340B PAUSE Act, the HELP ACT would impose a two-year moratorium (subject to extension, as discussed below) on new hospitals participating in the 340B Program as Disproportionate Share Hospitals (DSH), as well as new outpatient locations of such hospitals (known as “child sites”). While the 340B PAUSE Act would impose the moratorium on new registrations after the effective date of the legislation, the HELP ACT moratorium would apply to registrations after December 31, 2017. Importantly, this means that the HELP ACT moratorium would apply to hospitals and child sites that registered to participate in the 340B Program during the two most recent registration periods, including those that became eligible January 1, 2018, and those that would have otherwise been eligible to participate in the 340B Program effective April 1, 2018.

Consistent with the 340B PAUSE Act, the HELP ACT moratorium would not apply to hospitals participating in the 340B Program under the eligibility categories for Cancer hospitals, Children’s hospitals, Rural Referral Centers (RRCs), Sole Community Hospitals (SCHs) or Critical Access Hospitals (CAHs), nor would it apply to any of the entities participating in the non-hospital eligibility categories.

Regulations on Hospital Eligibility

Unlike the 340B PAUSE Act, the HELP ACT includes a provision granting HHS regulatory authority to promulgate regulations covering the requirements for eligible child sites of 340B-participating DSH hospitals, Cancer hospitals and Children’s hospitals, as well as the contracts with state or local governments for such hospitals. The HELP ACT would require that HHS implement the regulations with an effective date prior to the end of the two-year moratorium on new enrollments, or that the moratorium be extended until the effective date of the regulations.

Specifically, the HELP ACT would limit child site eligibility to those outpatient locations that met the following requirements:

  1. Location is listed on the hospital’s most recently filed Medicare cost report on a Medicare-reimbursable line;

  2. Services provided at the location have reported Medicare costs and charges;

  3. Location is wholly owned by the hospital;

  4. Location meets Medicare provider-based rules, as demonstrated through an approved Medicare provider-based attestation;

  5. Location provides “a full range of outpatient services,” in addition to drugs; and

  6. Location adheres to the charity care policy and any sliding fee scale policy of the hospital.

Of these requirements, the first and second are generally consistent with current 340B Program requirements, but the remainder go beyond current the definition of 340B-eligibile child sites.

In addition to the regulations for child site eligibility, the HELP ACT would also require HHS to issue regulations regarding the scope and content of contracts between state and local governments for non-profit DSH hospitals, Cancer hospitals and Children’s hospitals. Non-governmental hospitals and those not “formally granted governmental powers” that participate in the 340B Program are required under the current 340B statute to enter into contracts with a state or local government to provide health care services to low-income individuals who are not eligible for Medicare or Medicaid.

The HELP ACT would direct HHS to clarify through regulations what it means for a hospital to have been “formally granted governmental powers” such that it is not subject to the contract requirement. The HELP ACT requirements would direct HHS to require that hospitals seeking to be considered to have been formally granted governmental powers submit certification from a state or local governmental entity confirming such delegation, as well as the specific authority to grant such powers. The HELP ACT would limit the types of delegated powers to the power to tax, issue government bonds or quarantine individuals with communicable diseases. The certifications would be made publicly available.

For non-profit hospitals that are not formally granted governmental powers under the HELP ACT definition, HHS would be required to issue regulations to implement new requirements as to the contracts with state or local governments. Such contracts would be required to be submitted to HHS for review to confirm that the contracts are enforceable and require direct provision of medical care to low income individuals not eligible for Medicare or Medicaid. The HELP ACT would further impose a requirement that such care be provided in an amount equal to at least 10 percent of the hospital’s “total cost of care.” The contracts would also be made publicly available.

Covered Entity Reporting Requirements

In addition to data reporting requirements that are similar to the 340B PAUSE Act, the HELP ACT would codify in the Social Security Act the 340B claim modifier reporting requirements implemented under the 2018 Medicare Outpatient Prospective Payment System (OPPS) final rule and significantly expand the scope claim modifier reporting for 340B drugs.

On an annual basis, in a manner to be determined by HHS and to be made publicly available, the HELP ACT would require that the following information be reported:

  1. Net aggregate annual revenue from 340B drugs, by hospital and each child site;

  2. For each child site, patient/payor mix (including at least Medicare, Medicaid, private insurance and uninsured) and costs incurred for charity care;

  3. Percentage of total revenue at each site derived from infusion or injection of physician-administered drugs;

  4. Names of all third-party vendors or similar entities that provide 340B-related services to the hospital, by hospital and each child site.

The HELP ACT would require that claim modifiers be applied to all claims for 340B drugs as follows:

  1. All claims submitted to any public or private payor by DSH hospitals, Cancer hospitals and Children’s hospitals.

  2. All claims submitted by any covered entity to any state Medicaid fee-for-service program or Medicaid managed care organization.

  3. All claims submitted by any covered entity to Medicare and Medicare Advantage.

Government Reports

The HELP ACT would also require certain reports from state and federal government entities as listed below:

  • State Medicaid agencies would be required to issue annual reports on utilization of 340B drugs within the state’s Medicaid program.

  • HHS would be required to issue annual report on utilization of 340B drugs under Medicare Part B.

  • The HHS Office of Inspector General would be required to release a report within two years of enactment of the HELP ACT that would cover charity care provided by 340B-participating DSH hospitals, Cancer hospitals and Children’s hospitals.

  • The Government Accountability Office would be required to issue two reports:

    • The first within one year of enactment of the HELP ACT covering the contracts with state/local governments; and

    • The second within two years of enactment covering the difference between reimbursements and costs for 340B drugs for each covered entity and child site participating in the 340B program.

Analysis

The release of the HELP ACT is consistent with expectations within the 340B stakeholder community that 2018 will see significant congressional activity related to the 340B Program. The HELP ACT will likely not be the last 340B bill to be introduced this year, and it is expected that additional proposed legislation will be coming from the House in the very near future.

The HELP ACT reflects concerns previously stated by many members of Congress, in both houses and from both parties, that the 340B Program would benefit from additional transparency and data reporting requirements. However, the HELP ACT would impose requirements on most 340B-participating hospitals that could create operational and administrative costs that outweigh the benefit of participation in the program. Further, the HELP ACT focuses solely on program reforms to 340B providers and does not include any provisions targeted at additional transparency or data reporting for drug manufacturers.

The HELP ACT goes well beyond the 340B PAUSE Act in the scope of its proposed changes to the 340B Program, particularly as they relate to the requirements for eligible child sites, contracts with state/local government and claim modifier reporting requirements. Notably, while the child site and contract requirements resemble the provisions previously proposed by HHS in the 340B “mega-guidance,” the provisions in the HELP ACT appear to be more restrictive than the HHS proposals, which were widely criticized by the 340B hospital community as being too restrictive. Similarly, the modifier requirements in the HELP ACT appear to create a level of administrative complexity that goes far beyond the provisions of the 2018 OPPS final rule requirements, which were also widely criticized by the 340B hospital community.

© 2018 McDermott Will & Emery

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About this Author

Emily J. Cook, McDermott Will Emery Law Firm, Health Care Attorney
Partner

Emily J. Cook is an associate in the law firm of McDermott Will & Emery LLP and is based in the Firm’s Los Angeles office.  She focuses her practice on Medicare provider certification, reimbursement and regulatory compliance.

310-284-6113
Eric Zimmerman, Life Sciences Lawyer, Government Strategies Attorney, McDermott Will Emery, Law firm
Partner

Eric Zimmerman is a partner in the law firm of McDermott Will & Emery LLP and is based in the Firm's Washington, D.C. office.  Eric is co-chair of the Firm’s Life Sciences Government Strategies team, and is a member of the Firm’s Government Strategies practice and Personalized Medicine team.  Eric is a recognized Medicare law and policy authority who helps clients navigate federal legislative and regulatory processes related to Medicare coverage, coding, reimbursement and compliance.  He primarily counsels and represents hospitals and health systems, ambulatory surgery centers, clinical laboratories, pharmaceutical, biotechnology and device manufacturers and suppliers, and medical trade associations and professional societies.  Eric is a registered lobbyist, representing some of the country’s largest healthcare service providers, life sciences companies, and product manufacturers before Congress, the US Department of Health and Human Services, and federal agencies.

202-756-8148