by Lisa Scholz, PharmD, MBA, FACHE, Senior Vice President Industry Relations
September 29, 2022
An entire season has now come and gone since the U.S. Supreme Court ruled that the federal government unlawfully shorted 340B hospitals on Medicare Part B payments. Those hospitals are understandably anxious to know when they’ll be compensated.
As fall begins, the big news centers on the court’s decision in June knocking down CMS’ nearly 30% Medicare Part B reimbursement cuts to 340B hospitals for the years 2018 and ’19 (it sent the case back to the lower court to determine a remedy; there, the judge ruled that the government must restore full reimbursement for the remainder of 2022). CMS recently closed the window on accepting public comments related to its proposed 2023 Medicare hospital outpatient prospective payment system (OPPS) and the five years of underpayments, which netted nearly 1,600 comments — including from us here at The Craneware Group. Importantly, lawyers for the government in a court filing this month said they agreed with the 340B groups’ contention that SCOTUS’ decision “effectively resolves Plaintiffs’ claims relating to the 2020, 2021, and 2022 calendar years.”
That jibes with the comments submitted by hospital groups and The Craneware Group. “The reduced reimbursements to hospitals through this reduction were harmful to the communities our customers serve at a time when a public health emergency demanded more resources to care for underserved communities — and that need continues,” I wrote in our letter to CMS, adding that contract pharmacy exclusions by manufacturers are also causing significant, ongoing hardship.
What’s more, CMS said it expects to resume paying average sales price plus 6% starting in 2023. So, time to pop the Champagne? Well, not quite.
Health and Human Services has again asked the judge to let it determine the contours of a financial remedy for 340B hospitals for the five-year period. The plaintiffs, led by the American Hospital Association, have asked the judge to order HHS to correct its underpayments plus interest, all without taking from hospitals in other areas because of budget-neutrality requirements. The AHA also wrote in a court brief that “despite having now had years to devise a remedy in the event of an adverse final decision — and more than three months since the Supreme Court’s ruling — HHS displays absolutely no urgency about implementing a remedy.”
The budget neutrality requirement undoubtedly complicates matters. In September, Avalere Health released a study that said 80% of all Medicare OPPS hospitals, including 52% of 340B hospitals, would see their net OPPS payments decline in 2023 if CMS ends the ASP minus 22.5% payments it began in 2018. Avalere’s study was funded by the Community Oncology Alliance, which counts dozens of drug makers among its corporate members and is antagonistic toward 340B. The big national hospital groups, including the AHA, argue CMS shouldn’t claw back any non-drug funds from hospitals to stay revenue-neutral, but they haven’t specified how to do it. (In 2019 we offered CMS our own suggestions for how to remedy the cuts, which you can read here.)
The final Medicare OPPS rule for 2023 is expected in November. A resolution to the thornier question over resolving five years’ worth of underpayments is likely to take much longer.
Public comment odds and ends
In their submitted comments, many hospitals told CMS they don’t want to have to continue to use JG or TB modifiers on 340B-eligible Medicare Part B claims, a capability we built into our Sentinel solution in 2018. I noted in the letter that some hospitals hard-coded their claims-scrubber solutions to apply modifiers regardless of whether a claim is 340B-eligible, and thus lose out on all potential savings.
Conspicuously missing from most hospitals’ responses was any mention of JZ modifiers, which go into effect Jan. 1, 2023, to alert CMS that you used the entirety of a single-dose drug and did not have any waste, and thus don’t need to use the JW modifier. Our team plans to have JZ modifiers in place in our software once the calendar flips to 2023, pending the final OPPS rule.
340B news
Otherwise, things have been relatively quiet on the 340B front.
- Oral arguments in the Eli Lilly case are scheduled for Oct. 31.
- A federal district judge put Merck’s contract pharmacy lawsuit against HHS on hold until a federal appeals court rules on the consolidated Novartisand United Therapeutics case, where arguments are scheduled next month in Washington D.C.
- We got some bad news on the legal front as a judge in New York ruled against two health centers in their antitrust lawsuit against four manufacturers of insulin and diabetes drugs. New York-based Mosaic Health and Central Virginia Health Services alleged that AstraZeneca, Lilly, Novo Nordisk and Sanofi violated state and federal laws by colluding to deny 340B pricing on the diabetes drugs at contract pharmacies. But Chief Judge Elizabeth Wolford disagreed, writing that the drug manufacturers did not conspire to withhold 340B pricing, in part because they announced their contract pharmacy restrictions at different times from one another. She has asked them to review their filing to provide them an opportunity to submit additional information on their claim.
- In more healthcare industry consolidation news, pharmacy and healthcare behemoth CVS Healthhas agreed to purchase Signify Health, a home health company, for a cool $8 billion. I mention this because Signify earlier this year acquired Caravan Health, an accountable care organization that also helps with 340B referrals. And a judge recently cleared the pathway for United Healthcare-owned Optum’s acquisition of Change Healthcare, providing data visibility to healthcare providers and stakeholders, including 340B entities. We created our own chart to show the vertical integration of healthcare; you can see it at our ninth annual Performance Summit. What or who is next?
As we look to the close of 2022, we place our focus on the midterm elections, the funding of the federal government, and our virtual Performance Summit Oct. 12-14. We encourage hospitals and their partners to register and join in our conversations on the future of the value cycle.