The Centers for Medicare and Medicaid Services (CMS) has announced that it “fully expects” to reverse Medicare Part B rate cuts for separately payable drugs acquired through the 340B Drug Pricing Program, resulting in an estimated additional $1.96 billion for 340B hospitals. The announcement was made in conjunction with the recently released proposed calendar year (CY) 2023 Medicare Outpatient Prospective Payment System (OPPS) rule (related fact sheet), and follows from the recent Supreme Court decision invalidating the same rate cuts for CY 2018 and CY 2019. 340B hospitals are public and non-profit hospitals that meet certain statutory conditions related to their commitment to serving low-income patients. Since January 1, 2018, these hospitals have had certain separately payable drugs and biologics – which they are able to buy at a discount pursuant to the 340B program – reimbursed at significantly reduced rates by the Medicare program.

This news is especially significant given the unresolved questions about the resolution of the Supreme Court decision. The litigation before the Supreme Court was limited to CY 2018 and CY 2019, but CMS had continued the same payment cuts for 340B hospitals in CY 2020, CY 2021, and CY 2022 – and had planned to continue them in CY 2023. However, CMS announced it will not continue the cuts into CY 2023, which suggests it views the Supreme Court’s decision as applicable to other years as well. CMS’ announcement signals that, moving forward, it intends to abandon its policy of paying for 340B drugs differently than other drugs reimbursed through the Medicare OPPS. 

Significant issues still remain with regard to reversing the rate cuts for CY 2018 through CY 2022. Medicare OPPS payments are “budget neutral,” meaning rate cuts for 340B drugs increased payments for other services reimbursed through the OPPS. For CY 2023, the estimated impact of these shifts is $1.96 billion. CMS could potentially recoup payments from non-340B hospitals to remedy 340B hospitals for the invalidated rate cuts for CY 2018 through CY 2022, although it is unclear whether they will do so. In the proposed CY 2023 OPPS, CMS requests public comments on the best way to craft remedies for CY 2018 through CY 2022. CMS’ remedies for CY 2018 and CY 2019 will also be subject to the oversight of the U.S. District Court for the District of Columbia.

Also of interest for 340B hospitals is whether Medicare will continue to require the identification of 340B drugs on Medicare claim forms, if there is no longer a reimbursement impact. The identification of 340B drugs at the time of billing has created administrative complexity for 340B hospitals.