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The Centers for Medicare & Medicaid Services (CMS) 340B Drug Pricing Program enables covered entities to purchase discounted drugs and outpatient medications, allowing them to provide affordable and essential healthcare services to vulnerable patient populations. It has been a critical lifeline for safety-net hospitals, clinics and other eligible healthcare providers in the United States.
Given the tremendous financial implications of 340B program compliance and reimbursement to covered entities, let’s look at the 340B drug pricing challenges and best practices, including controversies surrounding the program, the status of payments under the program today, the overall complexities healthcare organizations face in program compliance, and what they can implement to help drive successful – and streamlined – reimbursement moving forward.
In 2018, CMS slashed Medicare reimbursement for drugs acquired through the 340B program by nearly 30%. These cuts, which lasted through September 27, 2022, put a tremendous financial strain on U.S. healthcare organizations at a time when they were hit with rising inflation, surging labor costs and negative margins.
A battle ensued with 340B covered entities and hospital associations on one side, and CMS on the other. The definition of covered entities includes certain disproportionate share hospitals, children’s hospitals, rural hospitals, including critical access hospitals (CAHs), rural referral centers (RRCs) and sole community hospitals (SCHs), and free-standing cancer hospitals. Covered entities also include 11 other categories of providers, including federally qualified health centers (FQHCs), FQHC look-alikes, AIDS and tuberculosis clinics, and other outpatient clinics funded under the Public Health Service Act (PHSA).
For four years the fight raged on, culminating in a 2022 decision by the U.S. Supreme Court (American Hospital Association v. Becerra), which determined that CMS exceeded its authority in implementing 340B program reimbursement cuts. As a result, CMS was directed to repay the affected healthcare providers for improperly withheld payments during calendar years 2018-2022.
In July 2023, CMS released its long-awaited proposed rule on how it plans to repay hospitals for 340B program underpayments, which includes a “one-time lump-sum payment to each 340B-covered entity hospital that was paid less due to the now-invalidated policy” – a total of $9 billion. CMS anticipates issuing the final rule “before the Calendar Year (CY) 2024 Outpatient Prospective Payment System/Ambulatory Surgery Center (OPPS/ASC) final rule is published in Fall 2023.”
Even with CMS rectifying the unlawful cuts, navigating the complexities of reimbursement claims and managing the associated administrative tasks for compliance with the 340B Drug Pricing Program is a daunting task for healthcare providers already stretched thin. Here are just a few 340B program nuances that can derail your organization’s drug spending:
In all these situations, if a healthcare organization inadvertently makes eligible drug purchases outside of the 340B program at a higher price tag, it burdens both the organization and its patients with added expense.
While the CMS proposed rule to repay 340B covered entities for the past unlawful cuts is a step in the right direction, organizations must safeguard future drug purchasing under the 340B program by putting into place the right people, partners, processes and technology. Our review of 340B drug pricing challenges and best practices provides a roadmap to rectify past challenges as well as ensure a smoother and more efficient journey for 2023 and beyond.