Hospital associations are preparing to take on the Centers for Medicare and Medicaid Services overa planned cut of $1.6 billion dollars to the 340B drug payment program.

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Modern Healthcare reports that in less than an hour after CMSreleased the final rule, America’s Essential Hospitals, theAmerican Hospital Association and the Association of AmericanMedical Colleges said they believe the agency has overstepped itsstatutory authority by cutting 340B drug payments by $1.6 billion,or 22.5 percent less than the average salesprice.

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The CMS seeks to cut its budget for drugs through the program,which is intended to reduce operating costs for hospitals that servea disproportionate number of low-income patients. Payment decreaseswill not be imposed on rural, children’s and cancer hospitals,however.

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CMS’s final rule also puts in place two modifiers to determinewhether a drug was purchased under the 340B program—one forhospitals that are subject to the payment reduction and another forexempted hospitals that purchase drugs under the 340B program—withthe intent of tracking which drugs are being purchased under 340B.If that weren’t changed, hospitals could have seen a cut inreimbursement for drugs not purchased under the discountprogram.

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“CMS’s decision in today’s rule to cut Medicare payments tohospitals for drugs covered under the 340B program willdramatically threaten access to healthcare for many patients,including uninsured and other vulnerable populations,” Tom Nickels,executive vice president of the American Hospital Association, saysin a statement, adding, “It is not based on sound policy andpunishes hospitals and patients for participation in a programoutside of CMS’s jurisdiction.”

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The current 340B payment calculation of 6 percent over theaverage sales price is the same as Medicare’s long-standing policy.But the proposed changes would mean that the CMS would pay only$65,000 for a drug costing $84,000, instead of $89,000 currently.Vaccine payments would not change. While the CMS initiallyestimated $900 million in savings from the reduction in payments,it now says it would save approximately $1.6 billion in 2018.

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According to the report, the 340B program is controversialbecause it does not control how hospitals can use money receivedthrough the program. Critics say some hospitals exploit thesavings.

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Providers have condemned the proposed rule, saying it putsafety-net hospitals particularly at risk. Although they onlyaccount for 36 percent of U.S. hospitals, 340B hospitals provide 60percent of uncompensated care in the country. And in August, HHS’sAdvisory Panel on Hospital Outpatient Payment also asked the CMS torescind the proposal out of worry that it would hurt safety-nethospitals’ ability to care for patients.

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In another part of the rule that covers payment to outpatientfacilities, total knee arthroplasty will be removed by the CMS fromthe list of procedures that can only be performed in inpatientfacilities—a change that hospitals warned earlier could have anegative effect on patient safety.

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The changes will take effect on January 1.

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