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CMS Finalizes 340B Cuts in CY 2018 OPPS Rule

The calendar year (CY) 2018 final rule for Medicare’s Outpatient Prospective Payment System (OPPS) will increase outpatient payment rates by 1.35 percent overall, but sharply reduce Medicare Part B reimbursement for drugs purchased through the 340B Drug Pricing Program.

In the Nov. 1 rule, the Centers for Medicare & Medicaid Services (CMS) finalized its proposal to pay 340B hospitals 77.5 percent of the average sales price (ASP) for most separately payable Part B drugs. CMS currently pays for these drugs at 106 percent of the ASP. This policy does not apply to vaccines and pass-through, or newer, drugs.

CMS will redistribute the estimated $1.6 billion in savings to all hospitals — including non-340B hospitals — in the form of higher, non-drug OPPS payments. CMS exempted children’s hospitals, rural sole community hospitals, and some cancer hospitals from the 340B policy.

In a statement, America’s Essential Hospitals blasted the policy and said the association will pursue legal action to halt it.

Beginning Jan. 1, CMS will require hospitals to use a modifier to identify drugs purchased through the 340B program. Hospitals affected by the reduced reimbursement rate must use a “JG” modifier, while the groups of hospitals exempt from the policy must append a “TB” modifier to claims for drugs purchased with a 340B discount.

In other provisions related to outpatient payment and quality reporting, the final rule:

  • removes six measures from the Outpatient Quality Reporting Program for the CY 2020 payment determination, one year earlier than proposed for four of the measures;
  • removes total knee arthroplasty from the inpatient-only list, along with five other procedures;
  • delays implementation of data collection for the Consumer Assessment of Healthcare Providers and Systems Outpatient and Ambulatory Surgery Survey in CY 2018; and
  • sets the threshold for triggering an outlier payment at 175 percent of the payment amount and at least $4,150.

America’s Essential Hospitals is analyzing the final rule and will send members a detailed Action Update in the coming days.

Contact Director of Policy Erin O’Malley at or 202.585.0127 with questions.


About the Author

Shahid Zaman is a senior policy analyst at America's Essential Hospitals.

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