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Why Medicare 340B benefits rural hospitals the most

The findings contradict the notion that the new payment system will result in hospitals seeing a drastic cut in reimbursement.

Jeff Lagasse, Associate Editor

he majority of hospitals, 85 percent, will see net payment increases from recent Medicare Part B outpatient payment changes, with rural hospitals seeing much greater-than-average overall payment increases for 2018. The findings are included in new research from Avalere Health commissioned by the Community Oncology Alliance. 

The study investigates the net financial impact of a restructuring of payments for Part B drugs to correct the unintended consequence of some 340B hospitals profiting from the program. The findings contradict the notion that the new payment system will result in hospitals seeing a drastic cut in reimbursement.

[Also: Rural hospitals continue to struggle to pay for lifesaving drugs]

On average, all hospital types will see a 1.5 percent net payment increase in Medicare Part B payments compared to 2017, according to the analysis. Rural hospitals see a much larger 2.7 percent net payment increase due to the redistribution of 340B savings. Most states benefit as well; 42 of them will experience a net increase in Part B payments.

The authors looked at the net impact of recent Medicare Part B payment changes on 3,814 hospitals across the country. They compared 2017 Part B payments to 2018 payments, accounting for recently implemented change to 340B reimbursement as well as other increases announced in the final 2018 Medicare Outpatient Prospective Payment System rules.

[Also: Bipartisan bill would reverse CMS rule slashing 340B drug payments]

Recognizing that the 340B program has grown significantly with allegations that some hospitals profited more than intended under the program, the Centers for Medicare and Medicaid Services adjusted the payment rate for drugs purchased through 340B to be the average sales price minus 22.5 percent, rather than previous rate of ASP plus 6 percent. 

The payment change will save the government $1.6 billion in 2018, which is being reallocated across all hospitals, including 340B hospitals, to increase reimbursements for other non-drug items and services paid under the OPPS. And CMS estimates that the change will reduce drug copayments for seniors by an estimated $320 million in 2018 alone.

Started by Congress in 1992, the 340B program requires drug companies to sell medicines to certain hospitals and clinics at steep discounts. The aim was to allow these hospitals treat uninsured and underinsured patients, without adding to their cost of uncompensated care. 

Opponents have said there's too much potential for profiteering.

Today, about 45 percent of all acute care hospitals participate in the 340B program. 

Other recent studies have highlighted problems with the 340B program. This includes a study released last week in the New England Journal of Medicine which found that the program is driving consolidation of the nation's cancer care system into the much more expensive hospital system; is associated with hospitals administering more cancer drugs; and has not resulted in any clear expansion care or lower mortality for eligible patients. 

Earlier this month, the House Committee on Energy and Commerce released the results of a two-year-long investigation into the 340B program. It details problems with program oversight, reporting requirements and data, and recommends Congress make significant changes to improve it.

And late last year, a Berkeley Research Group study found the average profit margin on 340B oncology drugs was 49 percent in 2015, providing hospitals a clear financial incentive to aggressively expand and market oncology services.

Twitter: @JELagasse
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