It has certainly been a year of ups and downs for 340B hospitals. While litigation continues in the manufacturer 340B price restriction space, and 340B hospitals continue to experience financial, legal and operational challenges associated with these policies, 340B hospitals had a few wins in 2022.  Notably, 340B hospitals are seeing Medicare Part B payments restored for certain 340B drugs and biologicals to pre-2018 rates following a rare unanimous SCOTUS decision this summer.

In this article, we discuss the reimbursement changes resulting from the SCOTUS decision, and we provide some suggested next steps that all impacted 340B hospitals should quickly explore. At this stage, 340B hospitals need to act now to consider the full scope of underpayments and applicable dispute resolution and timely filing requirements that may apply considering the recent SCOTUS decision.

Be on the lookout for our comprehensive year-end review of 340B matters in our upcoming Health Care Reimbursement and Payor Dispute Newsletter. We will cover reimbursement updates as well as developments in the Genesis patient definition case, HRSA’s new ADR rule and manufacturer contract pharmacy restrictions.

Traditional Medicare and MA Plan 340B Underpayments

On September 28, 2022, Judge Contreras in the U.S. District Court for the District of Columbia applied the unanimous SCOTUS decision and deemed the 340B reduction contained in the CY 2022 OPPS Final Rule unlawful. As a result, CMS loaded updated price files for Part B drugs to assist in restoring ASP plus 6% for all 2022 claims for separately payable Part B drugs and biologicals (status indicator K). CMS discussed the price file update here.

Likewise, according to notices posted on the Medicare Administrative Contractors’ (MACs) websites, the MACs intend to apply the statutory ASP plus 6% rate to all claims with a date of service of 9/28/2022 or after.  Further, providers can and should initiate adjustments to claims with dates of service from 1/1/2022-9/27/2022. As an example, NGS’s notice is here. We have heard from many of our clients that they are seeing ASP plus 6% restored. It’s critical that 340B hospitals carefully review their Part B 340B drug claims historically and on a go-forward basis to seek timely adjustments to claims that are underpaid. Typically, Part B claims must be appealed within 120 days of the initial determination.

None of the recent publications from the Courts, CMS or the MACs speak directly to underpayments for 340B drugs paid by Medicare Advantage (MA) plans or what plans should be doing on a go-forward basis. These issues are likely contractual in nature, but MA plan payment rates, modifiers and other payment issues often tie back to traditional Medicare.  For example, an MA plan outpatient drug rate may be explicitly tied to the Medicare rate (e.g., 105% of the traditional Medicare rate). In this example, the rate paid by the MA plan applied a traditional Medicare rate that has now been deemed unlawful by SCOTUS.  Depending on the type of 340B hospital, MA plan penetration in the hospital’s market, and specific contract language, there may be potential avenues to recover substantial MA plan underpayments.

As a result, we recommend that 340B hospitals that were subject to the CMS’s 2018 reimbursement cut closely analyze their MA plan agreements and underlying in-network MA plan claims to identify additional underpayments. 340B hospitals should also analyze out-of-network MA claims as the plans must pay at least the traditional Medicare rate for those claims (now ASP plus 6%). It is critical to act now to formalize disputes in order to comply with timely filing and other dispute resolution requirements in the MA plan agreements. Equally critical is the need to formally dispute MA plan payment rates on a go-forward basis. We are aware of some MA plans that have yet to acknowledge the impact of the SCOTUS opinion, while others intend to adjust rates on a go-forward basis. Our 340B Drug Pricing Program and Managed Care & Payor Disputes groups have teamed up to represent a number of health systems to timely and proactively pursue commercial plan underpayments.

Other Material 340B Reimbursement Considerations

While ensuring that the default ASP plus 6% payment rate is restored where applicable, there are other matters that hospitals continue to watch closely.

Remedies

As of this publication, the lower Court has not addressed the issue of remedies for reimbursement reductions but may in a future order. Meanwhile, CMS indicated that it intends to issue a proposed rule in 2023 to address remedies. CMS continues to reiterate its concern that the remedies must be budget neutral. Many stakeholders disagree with this position, including non-340B hospitals. More notably, CMS argued in a response to AHA’s motions that only named defendants in the case should receive remedies, which signals that CMS could attempt to limit which 340B hospitals receive remedies per the Court rather than all 340B hospitals that experienced the reimbursement reductions.

Modifiers 

The recent Court orders and the follow-up publications from CMS did not discuss discontinuing use of the JG and TB modifiers. However, in CMS’s recently released CY 2023 OPPS Final Rule, CMS finalized its policy to require use of the JG and TB modifiers to identify 340B drugs.  As a reminder, CMS initially required use of the JG modifier to trigger the lower 340B reimbursement rate, and other 340B hospitals not subject to the lower reimbursement were required to use the TB modifier for data gathering purposes. CMS’s position is disappointing as the modifiers presents significant administrative challenge and they serve no payment purpose. More important, CMS’s collection of data via the JG / TB modifiers provides a troubling sign that CMS isn’t giving up on its pursuit to pay 340B hospitals at a lesser rate.

Next Steps

Impacted 340B hospitals should consider the following. We are actively assisting 340B hospitals in these efforts.

• Monitor Part B 340B drug payments for dates of service on or after 9/28/2022 to confirm ASP plus 6%

• Seek MAC adjustments to pre-9/28/2022 claims noting timely filing requirements

• Analyze and demand MA plan rate adjustments and underpayments

• Analyze and consider out-of-network MA underpayments

• Consider the need to report 340B modifiers on traditional Medicare and MA plan claims

• Monitor CMS, MAC and MA plan policy releases