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CMS Finalizes Remedy for Unlawful Cuts to 340B Hospitals

Faridat Animashaun
November 3, 2023

The Centers for Medicare & Medicaid Services (CMS) issued a rule Nov. 2 that finalized a remedy for nearly five years of unlawful Medicare Part B cuts to hospitals in the 340B Drug Pricing Program.

In the final rule, CMS finalized a policy to make one-time, lump-sum payments totaling $9 billion to repay 340B hospitals the amounts withheld from their Part B drug reimbursement from 2018 to 2022. The agency has posted each hospital’s final lump-sum repayment amount as Addendum AAA. The final rule establishes a technical correction period, allowing hospitals to review the posted repayment amount and submit a technical correction to calculated payments by Nov. 30.

CMS finalized its decision to instruct Medicare Administrative Contractors (MACs) to repay hospitals as soon as possible after the final rule is effective, which will be 60 days after the publication of the final rule. This would result in repayments being issued in late 2023 or early 2024, with a potential delay for hospitals that submit technical corrections.

The rule also finalized a proposal to reduce Outpatient Prospective Payment System payment rates for non-drug items and services through a negative 0.5 percent conversion factor update to maintain budget neutrality. After considering comments, CMS finalized the prospective offset to start in CY 2026 rather than in CY2025, as proposed. The agency will continue this adjustment until $7.8 billion is offset, which CMS estimates will take 16 years.

In a statement on the final rule, America’s Essential Hospitals commended CMS for ensuring hospitals are repaid by early 2024 but expressed its disappointment that CMS will recoup money from hospitals in the name of budget neutrality.

Contact Director of Policy Rob Nelb, MPH, at or 202.585.0127 with questions.

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