340B Covered Entities (CEs) are getting a glimpse into what they can expect to be repaid due the fallout from CMS’ unlawful 340B payment reduction that was struck down by the U.S. Supreme Court in June 2022. CMS discussed a potential budget neutral lump sum payment process in its highly anticipated Hospital Outpatient Prospective Payment (OPPS) Remedy for the 340B-Acquired Drug Payment Policy Proposed Rule (“Proposed Remedy Rule”) published on July 7, 2023. CMS calculated that the overall remedy amount between CY 2018 – September 27, 2022 was $10.5B among 1,649 CEs with $9B paid in one lump sum payment to impacted 340B hospitals.

The Proposed Remedy Rule outlines CMS’ plan to pay CEs a lump sum payment of the difference between what they were paid during those years and what they should have been paid applying the statutory default rate of ASP + 6 percent at 42 U.S.C. 1395w–3a. Although the Proposed Remedy Rule is framed to be for 340B CEs, there is a component of the Proposed Remedy Rule that will impact all OPPS providers for the next several years. CMS outlined a corresponding budget neutrality adjustment that will apply to non-drug items starting in CY 2025. CMS utilized an extended timeline in attempt to balance the interest of all hospital stakeholders, 340B and non-340B. Providers will want to analyze the net impact of this payment reduction and submit comments on the methodology and proposed remedy to CMS prior to it being finalized.

CMS expects to finalize the Proposed Remedy Rule prior to finalizing the CY 2024 OPPS rule this fall, with potential lump sum payments in late 2023 / early 2024. However, due to the budget neutral impact to all OPPS providers, it’s unclear if CMS will finalize the rule according to its intended schedule. We’ve summarized the major points from the Proposed Remedy Rule and areas where providers should consider submitting comments below. Comments are due by September 5, 2023.

Given the budget neutral adjustment presented by CMS, and the large volume of data used by CMS to project lump sum repayments, we anticipate significant feedback from a variety of stakeholders impacted by the Proposed Remedy Rule.

Major Points from the Proposed Remedy Rule

  1. CEs Can Except to Receive a Lump Sum Repayment for 2018 – 2021 Claims. CMS proposed to pay CEs a lump sum payment either at the end of CY 2023 / beginning of CY 2024. CMS published proposed lump sum payments in Addendum AAA. The total repayment amount for the lump sum accounts for $9B of the total $10.5B proposed. CMS took the position that manually reprocessing years of OPPS claims would be too burdensome, and an added benefit of a lump sum payment is avoiding beneficiary coinsurance changes. As proposed, neither CMS nor CEs would need to pursue adjusted coinsurance payments. CMS proposed to have the MACs pay out the lump sums within 60 days of receiving notice from CMS to pay it. CEs should verify the amounts published align with their internal claims data and comment on / dispute any apparent discrepancies. Keep in mind that some or all of the 2022 projection has likely been paid as discussed below. 340B CEs who submit comments to CMS regarding the payment amounts should request that future data regarding repayment amounts or the claims impacted remain confidential to the extent the CEs exchange claim-level detail.
  2. CMS Has Reprocessed and Repaid Many 2022 Claims. CMS states that it already reprocessed most claims with dates of service between January 1, 2022 – September 27, 2022 to be paid at ASP + 6 percent. This accounts for roughly $1.5B of the total $10.5B proposed remedy. CEs should verify whether they received accurate payment amounts at ASP + 6 percent for these claims. CMS indicated that 2022 figures will be updated in the Final Rule.
  3. CMS Continues to Push Budget Neutrality Argument. CMS proposed decreasing reimbursement for non-drug items and services to all OPPS providers, except new providers noted below, by 0.5% each year for the next 16 years until the increased amount paid to CEs between CY 2018 – 2022 is sufficiently budget neutral. CMS spends a significant portion of the Proposed Remedy Rule discussing its obligation to remain budget neutral and how it will prospectively offset the lump sum payment. This budget neutral rate adjustment does not apply to CEs who enrolled in Medicare after January 1, 2018. CMS indicated that the prospective offset will be $7.8B. CMS explained that the offset is less than the total $10.5B remedy since it initially underestimated the amount saved through it’s unlawful 340B payment reduction.
  4. Payments from Medicare Advantage Organizations (MAOs) Not Addressed in the Proposed Remedy Rule. CMS had previously issued a memo to MAOs in December 2022, which explained that the non-interference clause prevents CMS from opining on reimbursement between MAOs and CEs because of the contractual nature of the relationship. Many MAOs have stalled issuing repayments until CMS issued this Proposed Remedy Rule, so CEs should now resume pursuing repayments from MAOs based on the terms of their contracts. Of significance, the Proposed Remedy Rule clearly confirms CMS’s position that the default payment rate for all 340B drugs from 2018-September 27, 2022 is none other than the statutory ASP + 6 percent rate. MAO contracts apply the “then Medicare rate” or similar rate language should be closely analyzed in light of CMS’s recognition that there is no other alternative to the statutory ASP + 6 percent rate.

Comments Providers Should Submit to CMS

CMS requested comments for several portions of the Proposed Remedy Rule, so we listed the below areas that providers should highly consider submitting comments. These areas directly impact the remedies providers will receive and the logistics of the remedies, so it is important that CMS hear providers’ concerns and feedback.

  • CMS’s obligations to ensure the remedies are budget neutral
  • Methodology used to calculate repayment amount and accuracy of repayment totals
  • Timeline and process for repayment
  • Prospective payment reduction for non-drug items and services