Medicare proposed rules include massive cuts to payment for 340B drugs, off-campus hospital sites

July 26, 2017

Proposed rules recently issued by the Center for Medicare and Medicaid Services (CMS) would have significant impacts on hospitals, particularly those that serve significant underserved populations.

The Outpatient Prospective Payment System proposed rule includes a provision that would reduce payments for drugs purchased by 340B eligible hospitals by about 25 percent. The 340B program was enacted to enable hospitals and other entities that qualify based on care for underserved communities to benefit from discounted prices on outpatient drugs. Under the proposed rule, the bulk of the benefit of the discount would revert to the Medicare program. On a more positive note, the proposed rule would reinstate the moratorium on the enforcement of the direct supervision policy for critical access and small rural hospitals for 2018 and 2019.

The Medicare Physician Fee Schedule proposed rule includes an additional cut to services provides by off-campus hospital departments. Currently, off-campus hospital sites and services that were not billed as hospital services as of November 2015 are paid at 50 percent of the regular outpatient hospital payment rate. Under the proposed rule, for 2018 payment for these sites and services would be further reduced to 25 percent of the regular outpatient rate. CMS’s intent is to limit payment for new off-campus hospital departments to an amount comparable to the Medicare physician fee schedule. The proposed policy will hurt hospitals’ ability to provide access to services and locations that are not sustainable under regular fee schedule. As a positive development, the proposed rule includes new codes for behavioral health collaborative care model services provided by federally qualified health centers and rural health clinics.

WSHA will provide member hospitals with further analysis. We plan to comment on both. Comments for both rules are due September 11, 2017. (Andrew Busz,


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