CMS’ proposed outpatient payment rule for 2019: 10 things to know

https://www.beckershospitalreview.com/finance/cms-proposed-outpatient-payment-rule-for-2019-10-things-to-know.html

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CMS released its 2019 Medicare Outpatient Prospective Payment System proposed rule July 25, which calls for site-neutral payments and would make changes to the 340B program.

Here are 10 things to know about the 2019 proposed rule:

Payment update

1. CMS proposed increasing the OPPS rates by 1.25 percent in 2019. The agency arrived at its proposed rate increase through the following updates: a positive 2.8 percent market basket update, a negative 0.8 percentage point update for a productivity adjustment and a negative 0.75 percentage point adjustment for cuts under the ACA.

Site-neutral payment proposal

2. Under the proposed rule, CMS would make payments for clinic visits site-neutral by reducing the payment rate for hospital outpatient clinic visits provided at off-campus provider-based departments to 40 percent of the OPPS rate. The clinic visit is the most common service billed under the OPPS, and CMS estimates the payment proposal would save the Medicare program and Medicare recipients a combined $760 million in 2019.

3. This change is projected to reduce OPPS payments by 1.2 percent, which would largely offset the 1.25 percent payment rate increase under the proposed rule.

Proposed 340B program changes

4. CMS scaled back the 340B drug discount program in 2018, and the agency proposed additional cuts for next year.

5. On Jan. 1, 2018, CMS began paying hospitals 22.5 percent less than the average sales price for drugs purchased through the 340B program. That’s compared to the previous payment rate of average sales price plus 6 percent.

6. Under the proposed rule, CMS would extend the average sales price minus 22.5 percent payment rate to 340B drugs provided at nonexcepted off-campus provider-based departments.

7. CMS also proposed to pay for separately payable biosimilars acquired under the 340B program at the average sales price minus 22.5 percent of the biosimilar’s own ASP, rather than ASP minus 22.5 percent of the reference product’s ASP.

Hospital Outpatient Quality Reporting Program changes

8. For 2019, CMS proposed removing one measure from the Hospital Quality Reporting Program beginning with the 2020 payment determination and removing nine other measures beginning with the 2021 payment determination.

9. “The proposals to remove these measures are consistent with the CMS’ commitment to using a smaller set of more meaningful measures and focusing on patient-centered outcomes measures, while taking into account opportunities to reduce paperwork and reporting burden on providers,” CMS said in the fact sheet for the proposed rule.

Comment period

10. CMS will accept comments on the proposed rule until 5 p.m. EST Sept. 24.

 

HOSPITALS VOW TO REFILE AFTER 340B SUIT REJECTED ON APPEAL

https://www.healthleadersmedia.com/finance/hospitals-vow-refile-after-340b-suit-rejected-appeal?utm_source=silverpop&utm_medium=email&utm_campaign=20180718_HLM_HP_resend%20(1)&spMailingID=13896483&spUserID=MTY3ODg4NTg1MzQ4S0&spJobID=1441533371&spReportId=MTQ0MTUzMzM3MQS2

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An appellate court decision dealt a major setback to hospitals unhappy with planned cuts to the Medicare drug reimbursement program.


KEY TAKEAWAYS

The appellate judges affirmed the district court’s dismissal for lack of subject-matter jurisdiction.

The AHA failed to fulfill the legal prerequisites to judicial review, according to the ruling.

The plaintiff has seven days to file a petition for the appellate court to rehear the matter en banc.

The American Hospital Association’s attempt to block $1.6 billion in cuts to the 340 Drug Pricing Program suffered a major setback Tuesday, when the D.C. Circuit Court sided with Health and Human Services.

The three-judge panel ruled that the lower court had properly dismissed AHA’s case because the association failed to fulfill the legal prerequisites to judicial review.

More specifically, AHA failed to adequately present the matter to HHS Secretary Alex Azar. This “presentment” threshold is the obstacle that tripped up the AHA challenge at the district court level, a decision Tuesday’s appellate ruling affirmed.

“When the plaintiffs filed this lawsuit, neither the hospital plaintiffs, nor any members of the hospital-association plaintiffs, had challenged the new reimbursement regulation in the context of a specific administrative claim for payment. Nor could they have done so, for the new regulation had not yet even become effective,” the appellate judges wrote. “Therefore, they had neither presented their claim nor obtained any administrative decision at all, much less the ‘final decision’ required under [the relevant law].”

The AHA, along with fellow plaintiffs the Association of American Medical Colleges and America’s Essential Hospitals, had argued that it met the presentment requirement by opposing the policy in writing during the rulemaking process.

Because the decision was based on a lack of subject-matter jurisdiction, it did not address the merits of AHA’s claims.

“We are deeply disappointed that the courts have once again failed to rule on the merits of our case,” the hospital groups said Tuesday in a statement.

The groups emphasized that the decision does not address whether they can obtain judicial review. It simply addresses when and how that review can be obtained.

“We will continue our fight to reverse these unwarranted cuts and protect access for patients, and we expect to refile promptly in district court,” the groups added.

 

 

 

CMS Administrator Seema Verma promotes cuts to 340B drug payments

http://www.healthcarefinancenews.com/news/cms-administrator-seema-verma-promotes-cuts-340b-drug-payments?mkt_tok=eyJpIjoiTURSaU5UWXhOV1EzTlRNeiIsInQiOiJvU3NYQXBoQkwzMXBteUNzVVNpXC9abldIM3RMZXkrc05LNUNXdXd1TzUrUmJwTFZYTDBFZmRYNmFvVnloTEE2K0dtZXhEbWYyRjFWTmpRT29Zb3I0ZFdLRW92bGFrQUJnYyt2N0JyV1dVSE5IR1RJRmczYnZJUlo1d1pYZzR1UkIifQ%3D%3D

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Senate committee is taking a closer look at the drug discount program.

The Centers for Medicare and Medicaid Services’ focus on lowering drug prices now includes the contentious 340B drug pricing program.

On Wednesday, CMS Administrator Seema Verma told the Pharmacy Quality Alliance that the agency’s change in the 340B payment rate to qualifying hospitals would save Medicare beneficiaries $320 million this year.

Under 340B, hospitals that serve a large number of vulnerable patients are able to buy drugs from manufacturers at discounted prices. However, Verma said Wednesday, “these discounts were not being passed on to our beneficiaries. So, CMS reduced the amount that beneficiaries and the federal government will pay hospitals for drugs that they acquire through this program.”

Medicare beneficiaries will save a total of $320 million in drug spending this year from the change, Verma said.

Last November, several hospital groups including the American Hospital Associationsued CMS for the $1.6 billion in cuts, representing a 28 percent decrease.

On Tuesday, a Senate health committee got involved when members questioned why a rule that would set ceiling prices on drugs in the program has been delayed five times.

The final rule would impose monetary penalties for manufacturers that charge more than the ceiling price for an outpatient drug and imposes other restrictions.

340B hospitals want to see the rule enforced.

The Government Accountability Office will be looking into the issue and the work of the Health Resource and Services Administration, the agency which manages the program and is responsible for the latest delay in implementation of the final rule until July 2019.

The problem is that states and providers do not know the ceiling prices. Confidentiality rules prevent the HRSA from sharing ceiling prices with states or 340B providers.

Because of this, 340B hospitals don’t know what they ought to be paying for discounted drugs, according to Ann Maxwell, assistant inspector general for evaluation and inspections for the Office of the Inspector General, speaking before the Senate Committee on Health, Education, Labor and Pensions.

This lack of transparency prevents ensuring that 340B providers are not overpaying pharmaceutical manufacturers and that state Medicaid programs are not overpaying 340B providers, Maxwell said.

The 340B drug pricing program debate pits the hospitals that benefit from the discounted prices of the program against organizations that contend these providers are taking advantage of the financial incentive.

The 340B program, established in 1992, generates savings for certain safety-net providers by allowing them to purchase outpatient drugs at discounted prices.

Opponents of 340B say seniors get none of the benefit and pay full price and that the disproportionate share hospitals that get the discount take advantage of the financial incentive by buying larger quantities of drugs and more expensive drugs.

HRSA reported that total 340B sales in 2016 amounted to approximately $16 billion, or about 3.6 percent of the U.S. drug market.

The Alliance for Integrity and Reform of 340B, or AIR340B released a new report with analytics by the Berkeley Research Group on Medicare Part B hospital outpatient reimbursements that found in 2016, 340B hospitals accounted for nearly two-thirds of Medicare Part B reimbursements – while only representing slightly more than half of all Medicare hospital outpatient revenue.

“Medicare patients treated in 340B hospitals have disproportionately high outpatient drug spend as compared to patients treated at non-340B hospitals,” AIR340B said

PhRMA said it was encouraged to see the Senate HELP Committee continuing to take a closer look at issues within the 340B program.

The New England Journal of Medicine concluded that financial gains for 340B hospitals have not been associated with clear evidence of expanded care or lower mortality among low-income patients, PhRMA said.

340B also drives a shift of treatment to more expensive hospital settings for physician-administered medicines, PhRMA said.

Hospitals and proponents say the 340B drug pricing program is one of the few federal programs to curb drug costs that is working.

“Sadly, the administration’s policy proposals would erode that progress and just put more money into the pockets of pharmaceutical companies,” 340B Heath said. “The administration’s proposals are based on a faulty understanding of the 340B program and the pharmaceutical market. The notion that 340B discounts are raising drug prices is simply false. Drug companies set the prices for their products and they, alone, decide how high those prices go.”

Hospitals participating in the 340B program account for 60 percent of all uncompensated care in the U.S. and serve a high proportion of low-income patients on Medicaid, 340B Health said.

“There is a clear history of manufacturers overcharging 340B providers. Delaying enforcement of this rule will have a tremendous adverse impact on hospitals, clinics and health systems caring for low-income and rural patients,” said Maureen Testoni, interim president and CEO of 340B Health.

America’s Essential Hospitals said federal scrutiny of manufacturer pricing practices has found overcharges in the 340B drug pricing program.

“These overcharges undermine the program’s ability to make drugs affordable for vulnerable patients and increase costs for their hospitals, which already operate with thin margins,” the group said.

 

Court sets speedy 340B lawsuit schedule, siding with AHA

https://www.healthcaredive.com/news/court-sets-speedy-340b-lawsuit-schedule-siding-with-aha/515988/

Dive Brief:

  • The American Hospital Association and other parties’ request for an expedited brief schedule for the group’s lawsuit over CMS cuts to the 340B program was agreed to by the U.S. Court of Appeals for the District of Columbia Circuit Tuesday, despite the government’s request for more time to respond to the lawsuit.
  • U.S. District Judge Rudolph Contreras dismissed the initial lawsuit in December, saying the groups did not have standing to sue because the cuts hadn’t yet taken effect. On January 11, AHA and the other groups appealed the decision, and then asked the court to expedite the case citing the immediate impact the cuts have on 340B hospitals’ ability to provide services to underserved communities.
  • Attorneys for the Department of Justice argued the compressed briefing schedule would not give adequate time for the government to prepare its brief and coordinate with affected agencies.

Dive Insight:

The lawsuit concerns a HHS final rule that took effect at the start of the year changing the amount 340B hospitals are paid for drugs to 22.5% less than the average sales price. Last year, hospitals paid the average price plus 6%.

“America’s hospitals and health systems are pleased that the U.S. Court of Appeals has accepted our expedited brief schedule in our appeal to reverse the significant cuts to the 340B Drug Savings Program, which for over 25 years has played a vital role in helping hospitals stretch scarce federal resources to expand and enhance patient services and access to care for vulnerable communities without any cost to the government,” Melinda Hatton, general counsel for the American Hospital Association, told Healthcare Dive.

AHA is joined in the lawsuit by America’s Essential Hospitals, the Association of American Medical Colleges, Eastern Maine Healthcare Systems (Brewer, Maine), Henry Ford Health System (Detroit) and Adventist Health System’s Park Ridge Health (Henderson, North Carolina).

The groups argue the cuts will hurt 340B hospitals’ budgeted operations, bond covenants and other items necessary to provide community care, and say the reimbursement change exceeds HHS’ authority.

“For 340B hospitals, the ability to provide care to their communities is tied to receipt of third-party reimbursements; constriction in the flow of Medicare revenues to 340B hospitals will increasingly constrict funds for medical care for all their patients, most particularly those who are poor and underserved and most reliant on these services,” the groups wrote in their request to expiate the appeal brief schedule.

AHA noted that it is actively exploring other options to address the cuts.

“We will continue to pursue our legislative and legal strategies to reverse these cuts, and expect to prevail in holding the agency accountable for overstepping its authority,” Hatton said.

The Court of Appeals set the the brief schedule to conclude by April 2, appearing to allow AHA’s request that oral arguments to occur by May, prior to the summer recess. “Otherwise the next opportunity for argument would be in September, which would likely significantly delay the resolution of this action,” the plaintiff attorneys had argued.

 

 

Catholic Health Initiatives CFO Dean Swindle’s advice to other systems: ‘Don’t get too comfortable with your past success’

https://www.beckershospitalreview.com/finance/catholic-health-initiatives-cfo-dean-swindle-s-advice-to-other-systems-don-t-get-too-comfortable-with-your-past-success.html

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Englewood, Colo.-based Catholic Health Initiatives embarked on a turnaround plan several years ago with the goal of improving its financial picture while providing high-quality care at its hospitals and other facilities across the nation. The system has made great strides toward its goal, yet there is still a lot of work to be done.

CHI has been laser-focused on performance improvement over the past three years, but rolling out a comprehensive turnaround plan across an organization with 100 hospitals is challenging, and progress is slow. The health system’s efforts just began to take hold in the second half of fiscal year 2017. Although CHI has encountered obstacles on its path to financial stability, the system is pleased with the headway it has made and expects more improvement in the coming months.

CHI’s cost-cutting initiative

To improve its finances, CHI set out to cut costs across the system. It put a great deal of energy into lowering labor and supply costs, which combined can make up two-thirds or more of the system’s operating expenses. CHI developed plans and playbooks focused on reducing these costs several years ago, knowing it would not immediately see results.

In the labor area, CHI President of Enterprise Business Lines and CFO Dean Swindle says the system had to incur costs to cut costs. “In the second half of the year [fiscal 2017] we began to see the benefits of our labor activities in the markets, but we also had cost,” he says. For example, CHI incurred the one-time expense of hiring advisers to help the system develop new labor management techniques. The system also cut jobs, which resulted in severance costs.

“When we got to the second half of 2017, we were very confident and felt very pleased that we were seeing benefit … but it was difficult for others to see it because it was for half of the year, and we had the one-time costs that were burdening that,” Mr. Swindle says.

After factoring in expenses and one-time charges, CHI ended fiscal year 2017 with an operating loss of $585.2 million, compared to an operating loss of $371.4 million in fiscal year 2016.

However, CHI saw its financial situation improve in the first quarter of fiscal year 2018. The system’s operating loss narrowed to $77.9 million from $180.7 million in the same period of the year prior. “What you were able to see in the first quarter [of fiscal 2018] … was the one-time costs had gone away for the most part; those weren’t burdening our results,” says Mr. Swindle.

He says although the system employed more physicians, its absolute labor costs were lower year over year. CHI’s supply costs, including drug costs, were also lower in the first quarter of fiscal year 2018 than in the first quarter of last year.

Mr. Swindle says CHI saw its finances improve in a difficult operating environment. Patient volume was lower in the first quarter of fiscal year 2018 than a year prior, and the system also experienced a nearly $26 million loss from business operations as a result of Hurricane Harvey.

“[This has] given us a level of confidence that we can move forward and address the difficulty that our industry is going to be facing over the next several years,” he says.

In early January, Fitch Ratings affirmed CHI’s “BBB+” rating and upgraded its credit outlook to stable from negative. The credit rating agency cited the health system’s strong start to the 2018 fiscal year and financial improvements in several markets as key reasons for the upgrade.

Preparing for new challenges

Although healthcare organizations are currently facing many challenges, including regulatory uncertainty and dwindling reimbursement rates, Mr. Swindle anticipates hospitals and health systems will face new obstacles over the next few years.

For example, hospitals will be challenged by changes to the 340B Drug Pricing Program. CMS’ 2018 Medicare Outpatient Prospective Payment System rule finalized a proposal to pay hospitals 22.5 percent less than the average sales price for drugs purchased through the 340B program. Medicare previously paid the average sales price plus 6 percent.

“I don’t think 340B was by chance and in isolation,” says Mr. Swindle. “I think we’re entering one of those cycles that the whole economic environment of our industry is going to be working against us.”

The pressures in the industry are driving hospitals and health systems to join forces. After more than a year of talks, CHI and San Francisco-based Dignity Health signed a definitive merger agreement in December 2017. The proposed transaction will create a massive nonprofit Catholic health system, comprising 139 hospitals across 28 states.

In the short term, the combination of the two systems is expected to drive synergies in the $500 million range, according to Mr. Swindle. In the coming months, the two systems will dive deeper into the synergies they expect to achieve over a multiyear period. “We do believe beyond the synergies there are some strategic initiatives we can put into place as a combined organization that we couldn’t do individually,” Mr. Swindle says. “You won’t see the benefit of those as much in the short term.”

“Take a deep breath”

Mr. Swindle knows firsthand that developing and executing an operational turnaround plan is no easy task. However, today’s healthcare landscape requires health systems to re-engineer their business models.

“Regardless of how good your results … have been over the last five to 10 years, we’re all going to have to transform ourselves in our own way to meet the characteristics of our organizations,” says Mr. Swindle.

When embarking on a performance improvement plan, the first thing health system CFOs should do is “take a deep breath,” he says. Then, they should focus on the things they have more control over. Mr. Swindle says it is critical for health systems to continue to drive improvement in patient experience and quality. They also need to be strategic cost managers.

“It’s not going to be as easy as just saying we’re going to take these [full-time employees] out or reduce this service. You’re really going to have to be very smart and very thoughtful about how you become a good cost manager that adds value to your communities,” says Mr. Swindle. “Don’t get too comfortable with your past success and your past models.”

 

340B Drug Program Sees Massive Changes on the Horizon

http://www.healthleadersmedia.com/health-plans/340b-drug-program-sees-massive-changes-horizon?spMailingID=12791316&spUserID=MTY3ODg4NTg1MzQ4S0&spJobID=1321984466&spReportId=MTMyMTk4NDQ2NgS2#

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A proposal in the Senate aims to create savings for health providers while a new report details how to maximize the program’s pharmacy benefits.  

The 340B Drug Pricing Program represents ample healthcare and business opportunities to some, while others see it as a federal program in need of significant reforms to address outstanding cost concerns.

The program, which provides Medicare payments for outpatient drugs to hospitals serving high volumes of low-income patients, has garnered both praise and controversy in recent months. The program is viewed as crucial for rural hospitals attending to high Medicare populations, but also as a lightning rod for perceived governmental mismanagement.

Sage Growth Partners, a healthcare business consultant agency based in Baltimore, released a report Thursday titled, “Realizing the Full Power of 340B Pharmacy Benefits.” The report includes three distinct 340B models health systems can implement: do-it-yourself, contract pharmacy, or global managed services.

Dan D’Orazio, CEO of Sage Growth Partners, said while contract pharmacy models have been the most popular approach, businesses have to assess their own expectations and needs when getting involved with the 340B program.

“This report takes a look at how you decide to manage or operate one of these entities and whether you go it alone, find a commercial partner like a pharmacy or find a managed partner to help you do that,” D’Orazio told HealthLeaders Media. “There are different models to do that and I think they have different ramifications for profitability, patient care, coordination of care, and medication adherence.”

D’Orazio said recent reports have indicated the 340B program is “a little out of control” but said the public should not be scared, adding the program represents a “real opportunity” for health systems dealing with financial pressures. He also said the program’s rules are clear, though hospitals may need to engage with managed partners for experience and assistance with any lingering complexities.

Ire, attention center on 340B

Despite the enthusiasm to maximize 340B benefits, the program has sustained pointed criticism in recent months.

A recent Pacific Research Institute study found numerous cases of abuse and profiteering, ultimately urging Congress to reform the program. A report from the Department of Health and Human Services’ Office of Inspector General last month highlighted $4.4 billion in federal funds misspent on health care programs last year, including 340B.

Those interested in implementing the strategies detailed in the Sage Growth Partners’ report will have to account for legislative corrections, which could be on the way.

Sen. Bill Cassidy, R-La., introduced the HELP Act on Tuesday, which would create a moratorium on registering “new non-rural section 340B hospitals and associated sites.” In a press release, Cassidy stated his support for 340B while highlighting the need for improvement after documented instances of wasteful spending.

“But too often the program’s discounts are used to pad hospitals’ bottom lines instead of helping disadvantaged patients afford their treatments,” Cassidy said. “This bill will increase transparency and accountability and help ensure these discounts reach patients.”

The group 340B Health, which represents hospitals and health systems, issued a statement responding to Cassidy’s legislative proposal.

“We agree the 340B program is an important resource for hospitals and their patients, and support having a thoughtful conversation about transparency in the 340B program,” the statement read. “However, we are concerned by the proposals included in the HELP Act.

“If enacted, these changes would limit the ability of 340B hospitals to fulfill their mission to care for all Americans regardless of their ability to pay. The legislation would make changes to the rules on which hospitals can participate in 340B, which could reduce the number of hospitals that could qualify for the drug discounts. It would also impose significant new reporting requirements that would not shed any light on what hospitals do with their 340B savings to help patients.”

So far, the bill has not even advanced to a committee vote.

California, North Carolina and New York hit hardest by 340B cuts

http://www.modernhealthcare.com/article/20171213/NEWS/171219953

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The CMS’ planned $1.6 billion in Medicare cuts to 340B hospitals across the nation will disproportionately impact providers in California, North Carolina and New York, according to a new study.

Slashing the 340B drug discount program, which is intended to lower operating costs for hospitals to give its low-income patients access to drugs, would result in large funding cuts across California, North Carolina and New York hospitals, ranging from $62 million to $126 million, researchers for consultancy Avalere found. Overall, six states will see drug payment cuts of more than $50 million next year.

About 62% of Medicaid disproportionate-share hospitals will experience less than a 5% reduction in Medicare Part B revenue due to the drug cuts, while 6% of impacted hospitals will experience cuts greater than 10%.

But the concurrent increase in non-drug payments will mean that most hospitals will have very minimal changes to their revenues, according to the study. Because the drug-related cuts will disproportionately impact 340B hospitals while the non-drug payment increases will be distributed evenly across facilities, some hospitals would see increased payments while hospitals with high 340B volumes will likely see decreases.

Still, any reduction to the already thin margins of hospitals could spell trouble for providers.

Consumers stand to benefit from the cuts, researchers said. Since Medicare beneficiaries are responsible for a portion of the total drug reimbursement, consumers in California, North Carolina and New York would save a range of $15 million to $32 million. Ten states will have aggregated Medicare beneficiary savings greater than $10 million in 2018.

“The 340B program has become a big business for hospitals,” Avalere President Dan Mendelson said. “As a result, all hospitals in the program have to think about this carefully going into next year.”

Beginning in 2018, Medicare intends to reduce 340B payments from average sales price (ASP) plus 6% to ASP minus 22.5%, which the CMS estimates to be closer to the hospitals’ acquisition cost. With the proposed changes, if a drug costs $84,000, the CMS would pay just over $65,000, instead of the current $89,000. Hospital groups have sued to prevent those cuts and litigation is ongoing.

About half of the hospitals across the country participate in the 340B program, which has been criticized because it does not restrict how hospitals spend 340B money. Critics say that some hospitals use the program to pad profits while rural and critical access hospitals maintain that it’s a vital revenue source and helps support preventive services.

In a House Energy and Commerce Committee hearing on the pharmaceutical supply chain on Wednesday, U.S. Rep. Dr. Larry Bucshon (R-Ind.) said that some hospitals manipulate the program. A financially stable hospital could acquire a physician practice in a rural community and get a 340B distinction for it, he said.

Mandating more transparency on how hospitals use 340B money would prevent abuse, Bucshon said.

“The rules allow the hospitals to pursue these mechanisms aggressively,” said Mendelson. “Some members of Congress believe the rules diverge from the original intent of the program as a way for low-income individuals to access drugs.”

 

Moody’s: Proposed changes to 340B program will hurt the finances of nonprofit hospitals

http://www.fiercehealthcare.com/finance/moody-s-proposed-changes-to-340b-program-will-hurt-finances-nonprofit-hospitals?utm_medium=nl&utm_source=internal&mrkid=959610&mkt_tok=eyJpIjoiTURSbU5qazJZbU5sWlRKayIsInQiOiJJTnUxcUsyUm42Y3FjKzBZZXkzQytVR09NYzB0TzNZXC9rXC9YNnBFNXowa0duZGM1SU4yRGJYM2EraXk2TitOa3lwODlWVFNEXC9rc001WUJvcXNjc1U5ZDlYb3FWclNEUjBwbnNlNHc4RVwvc3dGWDVQclJtMDYyZXU4ZmJBNU1lcVkifQ%3D%3D

drugs

Inpatient drug costs will continue to rise for nonprofit and public U.S. hospitals, but the pace of drug price increases will likely slow down amid growing scrutiny of drug manufacturers’ pricing practices.

But even with the slowing rate of price increases, the rising drug costs and potential changes to Medicare 340B payments for outpatient drugs would further reduce hospital margins, according to a new report from Moody’s Investors Service.

Pharmaceutical costs have outpaced hospital revenue growth in recent years, contributing to weaker operating margins, Moody’s finds. “Price increases in recent years were extraordinarily high for certain branded hospital inpatient drugs, but drug manufacturers are pulling back on these increases,” said Diana Lee, a Moody’s vice president. “On the generic drug side, we expect that some of the pressure will ease as the U.S. Food and Drug Administration approves more generic drugs for the first time.”

However, the government’s proposed reduction of Medicare Part B outpatient drug reimbursement to 340B hospitals by roughly 30% would hurt hospital margins.

“Hospitals and health systems of varying size and across the rating spectrum have noted anecdotally that they have benefited from cost savings from this discount drug program,” Lee says. “In some instances, the savings and income gained from this program can be meaningful relative to total operating cash flow. While about half of hospitals in the nation are 340B providers, those that have limited financial flexibility would be most exposed to possible changes to the 340B program.”

Hospitals and industry trade groups have urged the Centers for Medicare & Medicaid Services to withdraw its proposal to cut the drug payments to hospitals in the federal drug discount program. Hospitals use the savings to waive copays and provide drugs and other services for free or reduced costs to low-income patients.

Last week a bipartisan group of more than 220 members of the House of Representatives also told CMS in a letter (PDF) they oppose the proposal.

“This program is a lifeline for the hospitals that serve our most vulnerable patients. These arbitrary cuts will do nothing to improve patient care, or address rising costs in the Medicare program. Instead they simply jeopardize access to the treatments and services that 340B hospitals provide,” said Rep. Mike Thompson (D-Calif.) in an announcement. “There is robust bipartisan agreement that CMS should go back to the drawing board to prevent harm to patients across the country.”

Rep. David P. McKinley (R-W.Va.) said CMS’ proposal was “misguided.” “Our letter shows strong bipartisan opposition to this proposed rule, and hopefully will convince CMS to change course. We must address the high costs of drugs, but this is not the way to do it,” he said.

Meanwhile, the Health Resources and Services Administration has once again delayed (PDF) the effective date of a different 340B final rule that would set drug price ceilings and penalties for drug manufacturers that knowingly overcharge hospitals for drugs purchased under the program. The Department of Health and Human Services said it has delayed the effective date to July 1, 2018, to give more time to make changes to facilitate compliance. “After reviewing the comments received from stakeholders regarding objections on the timing of the effective date and challenges associated with the complying with the final rule, HHS has determined that delaying the effective date to July 1, 2018, is necessary to consider some of the issues raised.”

Screws Tighten on 340B Program

http://healthleadersmedia.com/content.cfm?topic=HEP&content_id=324594##

Medicine and Dollars

A MedPAC recommendation to reduce by 10% Medicare payment rates for 340B hospitals’ separately payable Part B drugs has been greeted with a chorus of boos from hospital trade associations.