Analysis Shows Majority of Hospitals Will See Payment Increases Despite 340B Payment Cuts

As a result of the Medicare Outpatient Prospective Payment System (OPPS) rule that took effect on January 1, 85% of 340B hospitals will see net payment increases in 2018 and rural hospitals will reap the largest benefits, according to an analysis conducted by Avalere that was commissioned by Community Oncology Alliance (COA).

Avalere analyzed 2016 Part B drug spending using the Medicare Standard Analytical File, which includes 100% of fee-for-service drug billing by hospital outpatient departments. To determine the total OPPS payment impact, the analysis compared 2017 Part B payments to 2018 payments and included 3814 hospitals under OPPS, not including 53 children's and 11 free-standing cancer hospitals that are excluded from the rule.

“The Avalere study ‘2018 OPPS Medicare Part B Payment Impact Analysis’ is the first to investigate the net financial impact of a restructuring of payments for Part B drugs to correct the unintended consequence of some 340B hospitals profiting from the program,” said COA in a press release.

The analysis showed that overall, rural hospitals will benefit most from the payment adjustments. Because 80% of rural hospitals are exempt from the cuts, they will see greater than average overall net payment increases due to the reallocated savings, according to the analysis. For the hospitals not affected by the payment adjustments, they will, on average, see a 4.4% net payment increase.

While, on average, all hospitals will see a 1.5% net payment increase, rural hospitals will see greater benefit than urban hospitals, with a 2.7% net payment increase. The analysis also found that 42 states will see a net increase in total OPPS payments. The states that do not see an increase will see a decrease of, on average, 0.4%.

The final rule, announced in November, adjusted the payment for drugs purchased through the 340B program from the average sales price (ASP) plus 6% to the ASP minus 22.5%. The savings from the payment adjustments will be reallocated across all hospitals under OPPS.

While organizations like COA commended CMS on the reform, saying it is good for both patients and taxpayers and represents an important first step in stopping the abuse of the program by certain hospitals, other organizations denounced the rule. Ted Slafsky, president and CEO of 340B Health, said the rule will benefit for-profit cancer clinics who turn away the poor, uninsured, and underinsured, and will not lower costs or expand access to care.

The American Hospital Association, America’s Essential Hospitals, and the Association of American Medical Colleges sued HHS shortly after the rule was finalized last year, but a federal judge dismissed the attempt to block the cuts, saying the suit was premature since the changes has not gone into effect yet.