Hospitals, CMS continue court battles over site-neutral, 340B payments

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Crystal Yednak Senior Manager, Health Research Institute, PwC US November 15, 2019

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HHS’ decision to continue on its path of lowering payments for its 340B drug pricing program and for visits to off-campus hospital outpatient departments is putting hospitals in an uncertain position as legal wrangling continues. Both policies have been struck down in the courts; appeals are pending. 

The American Hospital Association, the Association of American Medical Colleges and member hospitals this week asked a federal judge to immediately enforce her September ruling on CMS’ site-neutral payment policy. 

Because the judge had ruled that the site-neutral policy, included in the 2019 Outpatient Prospective Payment System rule, was unlawful, the hospitals argued that CMS acted unlawfully in pursuing a second year of phasing in the equalization of payments for visits to off-campus hospital outpatient departments with those at physician offices. The hospitals have asked for a resolution before the 2020 rules take effect Jan. 1.

Also, attorneys for hospitals and HHS appeared before the US Court of Appeals for the DC Circuit for oral arguments over cuts to reimbursements in the 340B drug pricing program. Both sides argued over the method that HHS used to reduce reimbursement rates, relying on a “proxy” instead of the survey data outlined in the statute. HHS maintained that hospitals were being overpaid, which was driving up enrollees’ coinsurance, while the attorney for hospitals contended that HHS did not have the authority to reduce the payments. 

HRI impact analysis

The Trump administration, mainly through CMS rulemaking, has tried to address the prices of hospital services and drugs over the past three years. CMS has focused on several areas of reform, including the 340B drug pricing program, physician-administered drugs and hospitals’ efforts to buy up physician-owned clinics to access higher reimbursement rates. But the agency’s efforts to bring reform to those areas have been locked up in the courts, throwing hospitals in limbo as they await answers.

As it wrangled in court over the outpatient payment rules, CMS last week announced a nearly 7 percent increase in Medicare Part B monthly premiums and a similar increase for annual deductibles, blaming the cost of drugs administered in physicians’ offices for the increase.

But an executive with the Biotechnology Innovation Organization wrote that CMS’ own data show otherwise, theorizing that putting the blame on drug prices will help the agency move along with a rule now under review to tie the cost of physician-administered drugs to an international pricing index.

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Trine K. Tsouderos

HRI Regulatory Center Leader, PwC US

Tel: +1 (312) 241 3824

Ben Comer

Senior Manager, Health Research Institute, PwC US

Crystal Yednak

Senior Manager, Health Research Institute, PwC US

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