The billion-dollar rule that has hospitals on edge
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Safety net hospitals will soon learn how the government plans to reimburse them for nearly $10 billion resulting from underpayments from the federal drug discount program. The question is whether it will come at the expense of other hospitals.
Where it stands: The Centers for Medicare and Medicaid Services is poised to reveal a repayment plan to facilities in the 340B program, after the Supreme Court found the agency made illegal program cuts from 2018 to September 2022.
- A repayment rule is being reviewed by the White House Office of Management and Budget and is expected to be published in the next month, which would kick off a a 60-day public comment period.
The intrigue: Since savings from the program cuts have already been applied for other purposes, hospital interests are concerned that CMS might try to claw back Medicare payments made to non-340B facilities to compensate hospitals in the drug discount program — a move that could weigh on certain rural facilities and children's hospitals that were exempt from cuts.
- Such a plan would likely prompt a lawsuit, Chad Golder, the American Hospital Association's deputy general counsel, told Axios, and continue a a series of legal battles between the industry and government over the program.
- CMS declined to comment on specifics of the rule. "We look forward to sharing an update soon once one is available," a spokesperson said.
Catch up quick: CMS in 2018 began cutting payments to safety-net providers by nearly 30% after research indicated some hospitals were profiting excessively from 340B.
- The agency applied $1.96 billion in savings from the payment cuts by raising Medicare payments to all hospitals for non-drug items and services.
- The AHA and other hospitals sued, and a unanimous Supreme Court ruled last June that the rate adjustment ran afoul of the law because officials didn't conduct a survey of hospitals' acquisition costs.
Hospitals hoped the justices would order immediate repayments, but the high court did little to prescribe how that process will work.
- CMS did increase new discounted drug payments to eligible safety-net hospitals.
- The AHA is pressing for remedies as quickly as possible, likely from Medicare trust fund.
- "We've been open to a somewhat extended payment period so long as interest is paid," Golder said, noting that this would ideally be over two to three years.
What we're watching: Repaying hospitals by exclusively repurposing existing funds could lower Medicare payments to 80% of all hospitals next year, according to a September Avalere study.
- Some analysts believe that CMS will have to cut funding to for-profit hospitals in order to make nonprofits whole.
- "We see a 70% likelihood that Medicare will present a rule as early as the end of June to reconcile 340B payments to nonprofit hospitals over a five-year period," Duane Wright, senior government analyst at Bloomberg Intelligence, wrote.
- Congress could be pressed to authorize billions in new spending if regulators take this route.
- And as we've learned from the debt limit deal, Congress is not looking to spend more money anytime soon.
