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.