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MedPAC's proposed cut to hospitals in 340B drug program hits Congress in March

Proposal would reduce Medicare Part B drug payments to hospitals that participate in the 340B drug pricing program by 10 percent.

Susan Morse, Senior Editor

Hospital groups and other stakeholders have spoken out against a proposal that would cut 10 percent in payments from the Medicare Part B drug pricing program.

It's now up to Congress to decide whether to implement the change recommended this month by the Medicare Payment Advisory Commission.

On Jan. 15, the commission voted 14-3 in favor a draft proposal that would reduce Medicare Part B drug payments to hospitals that participate in the 340B drug pricing program by 10 percent of the drug's average sales price.

MedPAC member Dr. David Nerenz, director of the Center for Health Policy and Health Services Research at Henry Ford Health System, was among the minority voting against the proposal. He and others who oppose the measure questioned why the change was being made.

A non-partisan agency, MedPAC provides policy advice on issues that affect the Medicare program. Its formal proposal for Congress to direct the Secretary of Health and Human Services to implement the 10 percent cut, is expected this March.

"The role of MedPAC is to make recommendations to Congress, but what Congress chooses to do with those recommendations is outside our control," Nerenz said last week.

[Also: MedPAC recommends FY16 hospital payment boost]

MedPAC estimates reducing the hospital payment by 10 percent would yield an estimated $300 million in savings, which it recommends be redistributed back to hospitals that provide the most uncompensated care. That amount would be determined through a hospital's Schedule 3 S-10 Medicare cost reports on the amount of charity care it provides.

"The effect of using the S-10 would be to materially increase payments to some large hospitals that provide lots of uncompensated care relative to their Medicaid days and also those hospitals which tend to be large public hospitals, and that it would also increase payments a bit to rural hospitals," MedPAC said.

About 40 percent of U.S. hospitals are eligible to participate in the 340B drug program, which saved providers about $3.8 billion in medication costs in 2013, according to the Health Resources and Services Administration.

The federal 340B program requires drug manufacturers to provide outpatient drugs to eligible health care providers at discounts ranging from 20 to 50 percent. The Affordable Care Act expanded the program and focuses on hospitals with disproportionately low-income patient populations.

The Office of the Inspector General has estimated that hospitals in the 340B program received an average discount of 34 percent on Part B drugs in 2013.  This is equivalent to hospitals saving over $1 billion on drugs provided to Medicare patients, according to MedPAC.

However, the program has come under scrutiny. Last year, Congress asked MedPAC to review it.

The American Hospital Association is among the groups opposed to the payment cut. AHA Executive Vice President Tom Nickels said, "We are disappointed MedPAC has ventured so far afield from their mission, especially in the face of such strong opposition by several commissioners. Making a recommendation that penalizes hospitals for their participation in a non-Medicare, public health program that is designed to increase patient access to care is outside of MedPAC's scope, and is inappropriate."

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340B Health, a nonprofit organization of  public and private hospitals said, "MedPAC's proposal would fundamentally change the 340B program and there has not been enough analysis about how hospitals would be affected. 340B hospitals provide significantly more uncompensated care than non-340B hospitals. The proposal would harm hospitals that provide high levels of care to Medicaid patients even though Congress set the 340B eligibility criteria to explicitly include high-volume Medicaid hospitals."

Bruce Siegel, president and CEO of America's Essential Hospitals, said the changes recommended by MedPAC "would produce negligible savings for beneficiaries, while putting vulnerable patients and the hospitals on which they depend at risk."

Kasey Thompson, vice president of policy, planning and communications for the American Society of Health System Pharmacists said "ASHP is disappointed that MedPAC did not assess the negative impact this recommendation could have on the sickest and most vulnerable patients that are served by our nation's safety net hospitals." 

Twitter: @SusanJMorse

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