Overview

The Centers for Medicare & Medicaid Services (“CMS”) has finalized and proposed several significant changes affecting both site neutrality in Medicare payments and the 340B Drug Pricing Program. These changes are particularly relevant for hospitals and oncology service providers, as they directly impact reimbursement structures, drug acquisition costs, and the financial landscape for outpatient cancer care. 

Key Changes: Site Neutrality

• Expansion of Site-Neutral Payment Policies:
  CMS is advancing policies to align Medicare payments for outpatient services across different care settings. Historically, hospital outpatient departments (“HOPDs”) received higher reimbursement than independent physician offices or ambulatory surgery centers (“ASCs”) for the same services. The new rule proposes to further reduce or equalize payments for certain services—such as drug administration—provided at off-campus, provider-based departments (“PBDs”), reimbursing them at physician office rates rather than higher hospital outpatient rates.
• Phasing Out the Inpatient-Only List:
  CMS is proposing to phase out the list of procedures that must be performed in the inpatient setting, allowing more procedures (including some relevant to oncology) to be performed and reimbursed in outpatient settings, potentially at lower rates.
• Financial Impact:
  These site-neutral policies are intended to reduce Medicare spending and beneficiary cost-sharing, but they also reduce hospital revenue for outpatient services, including those related to oncology. 

Key Changes: 340B Drug Pricing Program

• Remedy for Unlawful 340B Payment Cuts (2018–2022):
  Following the Supreme Court’s decision in American Hospital Association v. Becerra, CMS is issuing one-time, lump-sum payments to 340B hospitals to compensate for underpayments from 2018 through 2022. Approximately $9 billion will be distributed to affected hospitals.
• Budget Neutrality "Clawback":
  To offset these remedy payments, CMS will reduce future payments for non-drug items and services by adjusting the Outpatient Prospective Payment System (“OPPS”) conversion factor. The original plan was a 0.5 percent annual reduction over 16 years; however, the latest proposal accelerates this to a 2 percent annual reduction, recouping the offset by 2031. This will reduce overall hospital reimbursement for all OPPS hospitals, not just 340B participants.
• Ongoing 340B Payment Policy:
  For 2024 and 2025, CMS will continue to reimburse 340B-acquired drugs at the full rate of Average Sales Price (“ASP”) plus 6 percent, restoring parity with non-340B drugs.
• Reporting Requirements:
  Starting January 1, 2025, all 340B hospitals must use the “TB” modifier for 340B-acquired drugs, even if they previously used the “JG” modifier, to ensure compliance and prevent duplicate discounts. 

Implications for Oncology Services

• Reduced Reimbursement for Outpatient Oncology Services:
  Oncology services are often provided in hospital outpatient settings, which have historically benefited from higher reimbursement rates. The expansion of site-neutral payments means that drug administration and other outpatient oncology services provided at off-campus PBDs will be reimbursed at lower, physician office-equivalent rates. This may reduce revenue for hospital-based oncology programs, particularly those that have expanded into off-campus locations.
• 340B Program Revenue and Drug Acquisition:
  The restoration of higher 340B drug reimbursement rates (ASP plus 6 percent) is a positive development for oncology programs at 340B hospitals, as it increases margins on high-cost oncology drugs. However, the accelerated clawback of non-drug payments will offset some of these gains, potentially straining overall hospital finances.
• Potential Impact on Access and Service Consolidation:
  The financial pressures from reduced site-based reimbursement and the clawback of non-drug payments may lead hospitals to reconsider the viability of certain outpatient oncology services, especially in off-campus or lower-volume settings. There is a risk of further consolidation of oncology care into main hospital campuses or larger urban centers, which could impact patient access, particularly in rural or underserved areas.
• Patient Cost Sharing:
  While site-neutral payments may lower patient co-pays for some services, the use of higher-cost drugs in oncology (and the associated cost-sharing) may continue. The 340B program’s financial incentives may continue to influence drug selection and site of care decisions. 

Action Steps for Oncology Providers and Hospitals

1. Review Financial Projections:
   Assess the impact of site-neutral payment reductions and the accelerated 340B clawback on your oncology service lines, especially for off-campus outpatient departments.
2. Evaluate Service Delivery Models:
   Consider whether consolidation or reconfiguration of outpatient oncology services is warranted in light of changing reimbursement.
3. Monitor Compliance:
   Ensure accurate use of required 340B modifiers and maintain robust documentation to comply with new reporting requirements.
4. Communicate with Stakeholders:
   Inform clinical, administrative, and financial teams about these changes and their potential impact on oncology care delivery and hospital finances.
5. Advocacy and Policy Engagement:
   Engage with professional associations and policymakers to communicate the real-world impact of these changes on cancer care access and quality. 

Conclusion

The CMS rule represents a significant shift in Medicare reimbursement policy, with direct effects on both site neutrality and the 340B program. Oncology services—given their reliance on high-cost drugs and outpatient care—are particularly affected. Hospitals and oncology providers should proactively assess and respond to these changes to ensure continued access to high-quality cancer care for their patients.