- Despite cuts to reimbursement in the 340B drug program, 85% of hospitals will see an increase in overall Medicare Part B payments in 2018 due to increases in payment for non-drugs and services, according to a new analysis from Avalere Health.
- CMS itself estimated that the calendar year 2018 Medicare Outpatient Prospective Payment System rule will result in an overall increase of about $690 million compared to 2017 payments. Total OPPS Part B payments are set to increase by 1.5% in aggregate.
- Avalere found that only 1% of hospitals will have net cuts of more than 10% of Part B revenues. But among 340B Disproportionate Share Hospitals, 45% will see a net decrease in Part B payments.
Hospitals are challenging the 340B payment cut in court. They have fiercely opposed the change, arguing that safety net hospitals use savings from the program to care for low-income patients. Supporters of the cut say hospitals participating in the program can't show how those savings are used and can't point to increased charity care. A number of lawmakers have said the program should at least have more transparency and implement more reporting requirements.
The OPPS rule reduced Medicare’s payment to 340B hospitals from average sales price (ASP) + 4.3% to ASP -23.7% for drugs purchased under the 340B program, a cut of $1.6 billion in 2018. But Avalere notes that the savings from the cut will simply be reallocated to increase reimbursements for other items.
"There's been a lot of focus on the magnitude of the 340B cuts, but in fact they are more than offset in other payment increases. The story is more about the re-distributive effect away from certain hospitals to others, which obviously creates winners and losers," Caroline Pearson, senior vice president for policy and strategy at Avalere, told Healthcare Dive.
One notable finding is that rural hospitals see greater benefit from the OPPS rule, gaining 2.7% of total net payments compared to 1.4% for urban hospitals. The rule effectively redistributes funds from urban hospitals and 340B hospitals to rural hospitals, according to Avalere.
"When you talk about hospital payment cuts, you worry about rural hospitals on the premise that they are more vulnerable to marginal financial changes, but in fact, on the whole the rural hospitals really benefit on most cases,” Pearson said.
The American Hospital Association blasted the study, alleging it focuses on a selective set of measures and ignores the context of rising drug costs.
“In addition, in determining the number of hospitals that will see net payment increases, the study absurdly conflates the hospital inflation adjustment required by law with the 340B payment changes,” Tom Nickels, executive vice president of the trade group, said in a statement to Healthcare Dive.
He said AHA will keep up its battle against the nearly 30 percent payment cut in court.
“The agency cannot concoct its own reimbursement rules that effectively eviscerate the benefits and intent of the 340B program,” Nickels said.
The Avalere findings come days after a New England Journal of Medicine study found 340B hospitals have grown their hematology-oncology programs through hospital-physician consolidation and more hospital-based administration of parenteral drugs in hematology-oncology and ophthalmology.
Although the 340B program is intended to allow hospitals use savings from drug discounts to improve care for underserved patients, the NEJM study found that the discounts “only strengthen the incentives for hospitals to supply drugs to patients who have generous insurance coverage.”
“Thus, the program may not elicit the intended responses from hospitals — such as providing more care to low-income communities, investing in safety-net providers, or reducing health disparities — and may even have unintended consequences. In particular, the program may have induced provider consolidation,” the NEJM authors write.
Editors note: This story has been updated to add comments from the AHA.