This Medicare change is giving hospitals heartburn

• Reduced Medicare payment would be a double whammy, hitting just as sweeping changes to Medicaid are expected to put new financial pressures on facilities.

"It's piling on," Maureen Testoni, CEO of 340B Health, which advocates on behalf of hospitals that participate in the discount drug program, told Axios. Facilities that rely on these federal programs are "definitely going to reach unsustainability."

Some industry groups are already threatening to sue to halt the plan if it's finalized, saying it punishes hospitals for a mistake that Medicare itself made between 2018 and 2022.

• The new timeline for clawbacks would jeopardize hospitals' ability to care for patients in need, Testoni said in a statement.

Follow the money: The clawback stems from a Supreme Court ruling that overturned a nearly 30% cut the first Trump administration made in payments to safety-net providers in the 340B federal discount drug program, after research showed some could profit inappropriately off the program.

• Medicare repaid $9 billion to make the affected hospitals whole early last year.

The problem was that Medicare budgeting anticipated future savings from the 30% cut boosted pay for hospital outpatient services other than dispensing drugs.

• To avoid adding to total Medicare spending, the Biden administration devised a plan to claw back $7.8 billion in increased reimbursements from hospitals over 16 years.

Now, the administration wants to reduce that timeline by a decade, arguing the quicker process would make the burden on hospitals more closely reflect the benefits they previously received. A more drawn-out process could also be complicated by hospital closures, it said.

• That translates into a bigger annual clawback for hospitals already operating on tight margins.

The Centers for Medicare and Medicaid Services also notified hospitals last week that it plans to conduct a survey early next year on their costs for acquiring drugs, including rebates and discounts that hospitals receive under the federal 340B discount drug program.

• The notice doesn't explicitly say that the survey will be used to justify future cuts to hospitals' reimbursement. But industry executives say that's the subtext, especially in light of the 2022 Supreme Court decision.

Between the lines: Hospital participation in 340B has grown significantly over the past two decades. Nonprofit and public hospitals that qualify for the program say it enables them to provide charity care. But critics say it's gotten too big and charge that some hospitals abuse the program.

• Conservative think tanks that have the Trump administration's ear, like Paragon Health Institute, have recommended overhauling the way Medicare pays for discounted drugs.

What they're saying: The American Hospital Association hinted it could sue the administration if it moves forward with accelerated clawbacks.

• "The proposed recoupment is both illegal and unwise, and it should not be finalized," Ashley Thompson, AHA's senior vice president of public policy analysis and development, said in a statement.
• The Association of American Medical Colleges also said that speeding up the clawbacks "will have catastrophic effects on patients nationwide."

What to watch: "We expect significant pushback in the comments to this proposed rule and that the final rule may be less aggressive," Chris Meekins, managing director at Raymond James and health official in the first Trump administration, wrote in an analyst note.

• Reality check: Hospitals are still in line for an $8.1 billion increase in Medicare payments for outpatient services overall next year.