Medicare Proposes 33.4% Cut to Hospital Reimbursement for 340B Drugs, Sparking Safety-Net Hospital Backlash
Key Insights
Medicare (search) proposes cutting hospital outpatient payments for 340B-acquired drugs from average sales price plus 6% to average sales price minus 33.4%, effective next year.
The proposal follows agency surveys finding some patients paid more for 340B drugs than hospitals' acquisition costs.
Nonprofit and academic hospital groups swiftly condemned the rule, arguing it disproportionately harms safety-net providers.
Medicare (search) has proposed slashing payments to hospitals for drugs acquired through the 340B drug discount program (search) by more than a third beginning next year, after the agency said its surveys found some patients paid more for the drugs than the hospitals did.
Under a proposal released Thursday, Medicare (search) would pay hospitals for 340B drugs at their average sales price minus 33.4%, dramatically less than the current rate of average sales price plus 6%. The provision, part of a proposed rule on hospital outpatient payments, represents the latest swing at what has become a hotly debated drug discount program, viewed by some as a lifeline for safety-net hospitals and by others as a profit center for wealthy health systems.
The proposal drew swift condemnation from groups representing nonprofit and academic hospitals, who said it would disproportionately harm safety-net providers. That is because only nonprofit facilities are eligible for 340B, while for-profit hospitals are not. Medicare (search)'s proposed rule shows a 7.4% pay increase to for-profit hospitals under the 340B adjustment.
The 340B program has been lucrative for nonprofit hospitals, but faces increasing scrutiny from lawmakers. Sen. Bill Cassidy (search) (R-La.), chair of the Senate health committee, recently introduced a bill to restrict the program. Hospitals are already confronting attacks on their bottom lines, especially in Medicaid, following the tax bill passed last summer that significantly decreased the federal government's share of Medicaid costs and is expected to reduce the number of people on Medicaid. Hospitals also face the prospect of site-neutral payment legislation that would lower hospital payments to levels charged by doctor offices.