The 340B reductions

Maria Todd discusses the financial impact of the changes to the 340B program for Medicare reimbursement for Medications

So... 340B changes making you nervous? Pull up a chair and pour a cup of tea or coffee. Let's talk about it.

As you may have heard, new 340B guidelines announced in November 1, 2017 and became effective January 1, 2018.  Since the announcement I've been working with hospitals on strategies to implement, extend, and optimize participation in the 340B program. 

The back story

On November 1, Centers for Medicare and Medicaid Services (CMS) issued its 2018 Outpatient Prospective Payment System (OPPS) Final Rule, which finalized the Medicare Part B payment reduction for certain drugs acquired through the 340B Program for Disproportionate Share Hospitals and Rural Referral Centers.  This had significant impact and since most hospitals project budgets and finalize them in October, having had this final rule in place prior to September 30th would have been far more helpful in modeling revenues, expenses and budgets for the upcoming year.

The economic impact of the change

Prior to 1/1/2018, the rate for Medicare Part B payment was set at Average Sales Price (ASP) plus 6% for medications.  Effective January 1, 2018, the new payment rate for these affected 340B participants was reduced to ASP minus 22.5%, which is nearly a 27% reduction in Medicare Part B reimbursement.  While I counsel my clients to perhaps accept a percentage of Medicare rates in commercial contracts, I always caution them never to tie to rates in the contract language. For those who don't follow my advice and allow this contractual reference, payment from commercial payers will be reduced as well.

The final rule also established two modifiers to identify whether a drug was purchased under the 340B program:

  1. one for hospitals that are subject to the payment reduction and
  2. another for exempted hospitals that purchase drugs under the 340B program.

The reason for this was the intention to better track what drugs are being purchased under the program. Without that change, hospitals might have received a cut in reimbursement for drugs not purchased under the discount program.

To understand how this new payment rule may affect your organization, as well as to discuss strategies to lessen this negative impact to your outpatient revenue, please contact me and lets discuss the possibilities. There isn't a one-size fits-all solution because there are many nuances to your patient and service mix that require little tweaks in the strategy to customize them to your requirements. That being said, this is not a high dollar consulting assignment and I can usually complete the work quickly and remotely unless your preference is to have me travel to your location for an initial meeting and assessment.

image of maria todd with contact information
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