Medicare Program; Hospital Outpatient Prospective Payment System: Remedy for the 340B-Acquired Drug Payment Policy for Calendar Years 2018-2022, 44078-44096 [2023-14623]
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SUPPLEMENTARY INFORMATION:
DEPARTMENT OF HEALTH AND
HUMAN SERVICES
Centers for Medicare & Medicaid
Services
42 CFR Part 419
[CMS–1793–P]
RIN 0938–AV18
Medicare Program; Hospital Outpatient
Prospective Payment System: Remedy
for the 340B-Acquired Drug Payment
Policy for Calendar Years 2018–2022
Centers for Medicare &
Medicaid Services (CMS), Department
of Health and Human Services (HHS).
ACTION: Proposed rule.
AGENCY:
This proposed rule describes
the agency’s proposed actions to comply
with the remand from the district court
to craft a remedy in light of the United
States Supreme Court’s decision in
American Hospital Association v.
Becerra, 142 S. Ct. 1896 (2022), relating
to the adjustment of Medicare payment
rates for drugs acquired under the 340B
Program from calendar year (CY) 2018
through September 27th of CY 2022.
DATES: To be assured consideration,
comments must be received at one of
the addresses provided below, by
September 11, 2023.
ADDRESSES: In commenting, please refer
to file code CMS–1793–P.
Comments, including mass comment
submissions, must be submitted in one
of the following three ways (please
choose only one of the ways listed):
1. Electronically. You may submit
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to https://www.regulations.gov. Follow
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2. By regular mail. You may mail
written comments to the following
address ONLY: Centers for Medicare &
Medicaid Services, Department of
Health and Human Services, Attention:
CMS–1793–P, P.O. Box 8010, Baltimore,
MD 21244–8010.
Please allow sufficient time for mailed
comments to be received before the
close of the comment period.
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Stop C4–26–05, 7500 Security
Boulevard, Baltimore, MD 21244–1850.
For information on viewing public
comments, see the beginning of the
SUPPLEMENTARY INFORMATION section.
FOR FURTHER INFORMATION CONTACT:
Elise Barringer, (410) 786–9222.
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I. Background
A. OPPS Payment Policy for Drugs
Acquired Through the 340B Program
1. Overview
Under the Hospital Outpatient
Prospective Payment System (‘‘OPPS’’),
we generally set payment rates for
separately payable drugs and biologicals
(hereinafter referred to collectively as
‘‘drugs’’) under section 1833(t)(14)(A) of
the Social Security Act (the Act).
Section 1833(t)(14)(A)(iii)(II) of the Act
provides that, if hospital acquisition
cost data are not available, the payment
amount is the average price for the drug
in a year established under section
1842(o), section 1847A, or section
1847B of the Act, as the case may be.
Payment rates for drugs are usually
established under section 1847A of the
Act, which generally sets a default rate
of the average sales price (ASP) plus 6
percent. Section 1833(t)(14)(A)(iii)(II) of
the Act also provides that the average
price for the drug in the year as
established under section 1847A of the
Act is calculated and adjusted by the
Secretary of the Department of Health
and Human Services (Secretary) as
necessary for purposes of paragraph
(14).
In the calendar year (CY) 2018 OPPS/
ASC final rule with comment period (82
FR 59353 through 59371), the Centers
for Medicare & Medicaid Services (CMS)
reexamined the appropriateness of
paying the ASP plus 6 percent for drugs
acquired through the 340B Drug Pricing
Program (hereinafter referred to as the
‘‘340B Program’’), a Health Resources
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and Services Administration (HRSA)administered program that allows
covered entities to purchase certain
covered outpatient drugs at discounted
prices from drug manufacturers. Based
on findings of the Government
Accountability Office (GAO),1 the HHS
Office of the Inspector General (OIG),2
and the Medicare Payment Advisory
Commission (MedPAC) 3 that 340B
hospitals were acquiring drugs at a
significant discount under the 340B
Program, CMS adopted a policy
beginning in 2018 generally to pay an
adjusted amount of ASP minus 22.5
percent for certain separately payable
drugs or biologicals acquired through
the 340B Program. This adjustment
amount was based on our concurrence
with an analysis by MedPAC that
concluded that the estimated average
minimum discount of 22.5 percent of
ASP adequately represented the average
minimum discount that a 340B
participating hospital received for
separately payable drugs under the
OPPS (82 FR 59354 through 59371). Our
intent in implementing this payment
reduction was to reflect more accurately
the actual costs incurred by
participating hospitals in acquiring
340B drugs. We stated our belief that
such changes would allow Medicare
beneficiaries and the Medicare program
to pay a more appropriate amount when
hospitals participating in the 340B
Program furnished drugs to Medicare
beneficiaries that were purchased under
the 340B Program (82 FR 59353 through
59371).
2. OPPS Payment for 340B Drugs in CY
2018 Through September 27th of 2022
From January 1, 2018, through
September 27, 2022, under the OPPS we
generally paid for certain separately
payable drugs acquired through the
340B Program at ASP minus 22.5
percent. In the CY 2018 OPPS/ASC final
rule with comment period (82 FR 59369
through 59370), we finalized our
proposal and adjusted the payment rate
for separately payable drugs (other than
1 Government Accountability Office. ‘‘Medicare
Part B Drugs: ‘‘Action Needed to Reduce Financial
Incentives to Prescribe 340B Drugs at Participating
Hospitals.’’ June 2015. Available at https://
www.gao.gov/assets/gao-15-442.pdf.
2 Office of Inspector General. ‘‘Part B Payment for
340B Purchased Drugs. OEI–12–14–00030’’.
November 2015. Available at: https://oig.hhs.gov/
oei/reports/oei-12-14-00030.pdf.
3 Medicare Payment Advisory Commission.
March 2016 Report to the Congress: Medicare
Payment Policy. March 2016. Available at Medicare
Payment Advisory Commission. March 2016 Report
to the Congress: Medicare Payment Policy. March
2016. Available at https://www.medpac.gov/
document/http-www-medpac-gov-docs-defaultsource-reports-may-2015-report-to-the-congressoverview-of-the-340b-drug-pricing-program-pdf/.
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drugs with pass-through payment status
and vaccines) acquired under the 340B
Program from ASP plus 6 percent to
ASP minus 22.5 percent. We also noted
that critical access hospitals are not paid
under the OPPS, and therefore were not
subject to the OPPS 340B drug payment
adjustment policy (hereinafter referred
to as the ‘‘340B payment policy’’). We
also exempted rural sole community
hospitals, children’s hospitals, and PPSexempt cancer hospitals from the 340B
payment adjustment primarily due to
these hospitals receiving special
payment adjustments under the OPPS.
In addition, as stated in the CY 2018
OPPS/ASC final rule with comment
period, this policy change did not apply
to drugs with pass-through payment
status, which are required to be paid
based on the ASP methodology, or
vaccines, which are excluded from the
340B Program.
Additionally, as discussed in the CY
2018 OPPS/ASC final rule with
comment period (82 FR 59369 through
59370), to effectuate the payment
adjustment for 340B-acquired drugs, we
implemented modifier ‘‘JG,’’ effective
January 1, 2018. Hospitals paid under
the OPPS, other than types of hospitals
excluded from the OPPS (such as
critical access hospitals), or exempted
from the 340B payment policy for CY
2018, were required to report modifier
‘‘JG’’ on the same claim line as the drug
Healthcare Common Procedure Coding
System (HCPCS) code to identify a
340B-acquired drug. For CY 2018, rural
sole community hospitals, children’s
hospitals, and PPS-exempt cancer
hospitals were exempted from the 340B
payment adjustment. These hospitals
were required to report informational
modifier ‘‘TB’’ for 340B-acquired drugs,
and continued to be paid the full
applicable amount, generally ASP plus
6 percent.
In the CY 2019 OPPS/ASC final rule
with comment period (83 FR 58981), we
continued the Medicare 340B payment
policies that were implemented in CY
2018 and adopted a policy to pay for
non-pass-through 340B-acquired
biosimilars at ASP minus 22.5 percent
of the biosimilar’s ASP, rather than the
reference biological product’s ASP.
Additionally, in the CY 2019 OPPS/ASC
final rule with comment period (83 FR
59015 through 59022), we finalized a
policy to pay ASP minus 22.5 percent
for 340B-acquired drugs furnished in
non-exempted off-campus providerbased departments (PBDs) paid under
the Physician Fee Schedule (PFS). We
adopted this payment policy for CY
2019 and subsequent years. Also, during
the CY 2019 OPPS/ASC rulemaking
cycle, we clarified that the 340B
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payment adjustment applied to drugs
priced using either wholesale
acquisition cost (WAC) or average
wholesale price (AWP), and since the
policy was first adopted, we applied the
340B payment adjustment to 340Bacquired drugs priced using these
pricing methodologies. The 340B
payment adjustment for WAC-priced
drugs was WAC minus 22.5 percent.
340B-acquired drugs that were priced
using AWP were paid an adjusted
amount of 69.46 percent of AWP (83 FR
37125).4
For more detailed descriptions of our
OPPS payment policy for drugs
acquired under the 340B program
during this timeframe, we refer readers
to the CY 2018 OPPS/ASC final rule
with comment period (82 FR 59353
through 59371); the CY 2019 OPPS/ASC
final rule with comment period (83 FR
59015 through 59022); the CY 2020
OPPS/ASC final rule with comment
period (84 FR 61321 through 61327); the
CY 2021 OPPS/ASC final rule with
comment period (85 FR 86042 through
86055); the CY 2022 OPPS/ASC final
rule with comment period (86 FR 63640
through 63649); and the CY 2023 OPPS/
ASC final rule with comment period (87
FR 71972 through 71973).
3. Payment for Non-Drug Items and
Services in CY 2018 Through CY 2022
In the CY 2018 OPPS/ASC final rule
with comment period (82 FR 59216,
59258), to comply with the statutory
budget neutrality requirements under
sections 1833(t)(9)(B) and (t)(14)(H) of
the Act, we finalized our proposal to
redistribute our estimated reduction in
payments for separately payable drugs
as a result of the 340B payment policy
by increasing the conversion factor used
to determine the payment amounts for
non-drug items and services. As further
described in the CY 2018 OPPS/ASC
final rule with comment period, we
used updated CY 2016 claims data and
a list of 340B-eligible providers to
calculate an estimated impact of $1.6
billion based on the final CY 2018
policy to pay for OPPS 340B-acquired
drugs at a payment rate of generally ASP
minus 22.5 percent. In order to
effectuate the budget neutrality
provisions of the OPPS, the estimated
$1.6 billion in reduced drug payments
from adoption of the final 340B
payment methodology was redistributed
4 The 69.46 percent of AWP was calculated by
first reducing the original 95 percent of AWP price
by 6 percent to generate a value that is similar to
ASP or WAC with no percentage markup. Then we
applied the 22.5 percent reduction to ASP/WACsimilar AWP value to obtain the 69.46 percent of
AWP, which was similar to either ASP minus 22.5
percent or WAC minus 22.5 percent.
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in an equal offsetting amount to all
hospitals paid under the OPPS by
increasing the payment rates by 3.19
percent for nondrug items and services
furnished by all hospitals paid under
the OPPS for CY 2018. This same
conversion factor adjustment applied for
CYs 2019 through 2022, increasing
payments for non-drug items and
services in these CYs as a result of the
340B payment policy.
B. Litigation History of the 340B
Payment Policy
The 340B payment policy has been
the subject of extensive litigation. On
December 27, 2018, in the case of
American Hospital Association v. Azar,
348 F. Supp. 3d 62 (D.D.C. 2018), the
United States District Court for the
District of Columbia (the District Court)
concluded that the Secretary exceeded
his statutory authority by adjusting the
Medicare payment rates for drugs
acquired under the 340B Program to
ASP minus 22.5 percent for CY 2018.
The District Court subsequently came to
the same conclusion for CY 2019. See
Am. Hosp. Ass’n v. Azar, 385 F. Supp.
3d 1 (D.D.C. 2019).
On July 10, 2019, the District Court
entered final judgment. See Am. Hosp.
Ass’n v. Azar, No. 18–cv–2084 (RC),
2019 WL 3037306 (D.D.C. July 10,
2019). The agency then appealed to the
United States Court of Appeals for the
District of Columbia Circuit (the D.C.
Circuit), and on July 31, 2020, that court
issued an opinion reversing the District
Court’s judgment. See Am. Hosp. Ass’n
v. Azar, 967 F.3d 818 (D.C. Cir. 2020).
On June 15, 2022, the Supreme Court
reversed the decision of the D.C. Circuit,
holding that if CMS has not conducted
a survey of hospitals’ acquisition costs,
it may not vary the payment rates for
outpatient prescription drugs by
hospital group. See Am. Hosp. Ass’n v.
Becerra, 142 S. Ct. 1896 (2022).
The Supreme Court declined to opine
on the appropriate remedy and
remanded the case to the D.C. Circuit,
which in turn remanded it to the
District Court. Upon remand to the
District Court, the plaintiffs filed
motions seeking orders (1) vacating the
portion of the CY 2022 final OPPS rule
that set the reimbursement rate for 340B
drugs at ASP minus 22.5 percent, which
was still in effect for the remainder of
2022, and (2) requiring CMS to remedy
the reduced payment amounts to 340B
hospitals under the final OPPS rules for
CY 2018 through CY 2022 by
reimbursing them the difference
between what they were paid and ASP
plus 6 percent. On September 28, 2022,
the District Court ruled on the first
motion, vacating the 340B
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reimbursement rate for the remainder of
2022. See Am. Hosp. Ass’n v. Becerra,
18–cv–2084 (RC), 2022 WL 4534617.5
On January 10, 2023, the District
Court ruled on the second motion,
issuing a remand without vacatur to
give the agency the opportunity to
determine the proper remedy for the
reduced payment amounts to 340B
hospitals under the payment rates in the
final OPPS rules for CY 2018 through
CY 2022. See Am. Hospital Ass’n v.
Becerra, 18–cv–2084 (RC), 2023 WL
143337.6
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C. Payment for 340B-Acquired Drug
Claims for September 28, 2022, Through
December 31, 2022, and for CY 2023
The agency complied with the District
Court’s September 28, 2022, decision by
uploading revised OPPS drug files to
pay the default rate (generally ASP plus
6 percent) for all CY 2022 claims for
340B-acquired drugs paid from
September 28, 2022, through the end of
CY 2022.7
In the CY 2023 OPPS/ASC final rule
with comment period, we finalized a
policy that drugs acquired through the
340B program would be paid at the
default rate (generally ASP plus 6
percent) for CY 2023. Correspondingly,
to ensure budget neutrality for CY 2023
OPPS payment rates as required by
statute, we finalized a reduction of 3.09
percent to the 2023 OPPS conversion
factor. This 3.09 percent reduction for
CY 2023 offsets the prior increase of
3.19 percent that was applied to the
conversion factor when we
implemented the 340B payment policy
in CY 2018. This is because a downward
adjustment involves a smaller
percentage reduction from a larger
number to get the same dollar amount
as the original upward adjustment from
a smaller number. More specifically, in
order to achieve the original budget
neutrality adjustment for CY 2018, we
had to multiply the conversion factor by
1.0319. In order to offset this prior
increase for the CY 2023 rule, we had
to make a downward adjustment to the
conversion factor, which involved
dividing 1 by 1.0319, which equals
0.9691. And 1 minus 0.9691 equals
0.0309, which is where we derived the
3.09 percent reduction to the conversion
factor for CY 2023. As we explained in
the CY 2023 OPPS/ASC final rule, we
decreased the OPPS conversion factor to
offset the increase the OPPS conversion
factor in CY 2018, which originally
5 https://ecf.dcd.uscourts.gov/cgi-bin/show_
public_doc?2018cv2084-79.
6 https://ecf.dcd.uscourts.gov/cgi-bin/show_
public_doc?2018cv2084-86.
7 See supra note 4.
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implemented the 340B policy in a
budget neutral manner. We stated: ‘‘This
adjustment to the conversion factor is
appropriate in these circumstances,
including because it removes the effect
of the 340B policy as originally adopted
in CY 2018, which was recently
invalidated by the Supreme Court as
explained above, from the CY 2023
conversion factor and ensures it is
equivalent to the conversion factor that
would be in place if the 340B payment
policy had never been implemented’’
(87 FR 71975). Additionally, we
explained that we agreed with
commenters, including the American
Hospital Association (AHA), that under
these specific circumstances it was
appropriate to decrease payments for
non-drug items and services by a
percentage that would offset the
percentage by which they were
increased when CMS implemented the
340B policy in CY 2018 (87 FR 71975).
For more detail on the payment rate
for drugs acquired under the 340B
program for CY 2023 and the
corresponding adjustment to the
conversion factor to maintain budget
neutrality as a result of reversing the
340B adjustment and paying for all
separately payable drugs at ASP plus 6
percent (or WAC plus 3 or 6 percent or
95 percent of AWP), we refer readers to
the CY 2023 OPPS/ASC final rule with
comment period (87 FR 71973 through
71976).
II. Proposal To Remedy Payment
Adjustment for 340B-Acquired Drugs
From CY 2018 Through September 27th
of CY 2022
A. Remedy Options Considered By CMS
We evaluated several options to
determine which remedy would best
achieve the objective of unwinding the
unlawful 340B payment policy while
making certain OPPS providers
(hereinafter referred to as ‘‘affected 340B
covered entity hospitals’’) 8 as close to
whole as is administratively feasible.
We describe the different remedy
options and aspects of those alternative
options that we considered below.
1. Make Additional Payments to
Affected 340B Covered Entity Hospitals
for 340B-Acquired Drugs From CY 2018
Through September 27th of CY 2022
Without Proposing an Adjustment To
Maintain Budget Neutrality
We considered calculating the
additional amount each affected 340B
8 Throughout the duration of the policy, the 340B
payment adjustment did not apply to critical access
hospitals, rural sole community hospitals,
children’s hospitals, and PPS exempt cancer
hospitals.
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covered entity hospital would have been
paid for 340B-acquired drugs from CY
2018 through September 27th of CY
2022 if not for the 340B payment policy,
and then proposing to pay that amount
to each hospital without applying a
corresponding adjustment to the
conversion factor for the increased
payments for non-drug items and
services that were made from CY 2018
through CY 2022 due to the 340B
payment policy. As described in more
detail below, we believe that we would
have the authority to make remedy
payments under sections 1833(t)(2)(E)
and 1833(t)(14) of the Act, along with
our retroactive rulemaking authority in
section 1871(e)(1)(A) of the Act. We
note that sections 1833(t)(2)(E) and
1833(t)(14) of the Act require budget
neutrality with respect to payment
adjustments to the OPPS made under
those sections and are not specific to
remedy payments. Consequently, we
believe the best reading of both of those
provisions is that these remedy
payments are subject to budget
neutrality requirements, at least when
the budget neutrality adjustment would
not be de minimis. We believe our
reading of these provisions is consistent
with the statute’s general approach of
budget neutralizing OPPS payment
adjustments, see, e.g., Social Security
Act (SSA) section 1833(t)(9)(B), as
further explained in the following
sections.
Section 1833(t)(2)(E) of the Act
straightforwardly requires adjustments
made under that provision be made ‘‘in
a budget neutral manner.’’ (Accord 65
FR 18438 (noting (t)(2)(E)’s budget
neutrality requirement)) Section
1833(t)(14)(H) of the Act, relating to
drug APC payment rates, states that
‘‘Additional expenditures resulting from
this paragraph shall not be taken into
account in establishing the conversion,
weighting, and other adjustment factors
for 2004 and 2005 under paragraph (9),
but shall be taken into account for
subsequent years.’’ In addition, section
1833(t)(9)(B) of the Act, referenced in
section 1833(t)(14)(H), states that ‘‘[i]f
the Secretary makes adjustments under
subparagraph (A),9 then the adjustments
for a year may not cause the estimated
amount of expenditures under this part
for the year to increase or decrease from
the estimated amount of expenditures
under this part that would have been
9 Section 1833(t)(9)(A) Periodic review.—The
Secretary shall review not less often than annually
and revise the groups, the relative payment weights,
and the wage and other adjustments described in
paragraph (2) to take into account changes in
medical practice, changes in technology, the
addition of new services, new cost data, and other
relevant information and factors.
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made if the adjustments had not been
made.’’
We believe these statutory
requirements require that we maintain
budget neutrality when making these
remedy payments. To the extent these
remedy payments are understood as a
payment adjustment under section
1833(t)(2)(E) of the Act, they are subject
to that section’s budget neutrality
constraints. And to the extent these
payments are understood as a payment
under section 1833(t)(14) of the Act,
they are ‘‘[a]dditional expenditures
resulting from’’ paragraph (t)(14) for
years other than 2004 or 2005 and thus
are subject to budget neutrality
constraints under section 1833(t)(14)(H)
of the Act.
This reading of these provisions is
consistent with the statute’s general
approach of budget neutralizing OPPS
payment adjustments, see, e.g., SSA
section 1833(t)(9)(B), except when
expressly exempted, see SSA section
1833(t)(7)(I), (t)(14)(H), (t)(16)(D)(iii),
(t)(18)(C), (t)(19)(A), (t)(20). Budget
neutrality in OPPS serves the important
interest of limiting expenditures under
Part B and thus protecting the public
fisc. Cf. H.R. Rep. No. 106–436, at 34
(1999) (noting the goal of prospective
payment systems, including the OPPS,
is to slow growth rate of Medicare
expenditures). The Supplementary
Medicare Insurance Trust Fund
(hereinafter referred to as the ‘‘Part B
Trust Fund’’) that makes OPPS
payments is mostly financed by
premiums from participants and
contributions from the general fund of
the Treasury. The Trustees of the Part B
Trust Fund warn that unexpected
increases in Medicare Part B or D
expenditures may thus require increases
to beneficiary premiums and
coinsurance, which already represent a
growing share of beneficiaries’ total
income and are projected to reflect
about three-quarters of the average
Social Security retired-worker benefit by
the end of this century. See The 2023
Annual Report of the Boards of Trustees
of the Federal Hospital Insurance and
Federal Supplementary Medicare
Insurance Trust Funds at 40–41.10
Additionally, unexpected increases in
Medicare Part B or D expenditures
could require tax increases or
expenditure reductions elsewhere in the
Federal budget; the Trustees already
project expenditures to consume more
than 30 percent of Federal income tax
revenue in just 50 years. Id. at 43.
Accordingly, when changes to
payment policy are made, we make an
adjustment to the OPPS conversion
10 https://www.cms.gov/oact/tr/2023.
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factor in order to maintain budget
neutrality. (70 FR 68542 (noting
outpatient drugs are included in the
budget neutrality calculation beginning
in 2006)) We do not believe Congress
intended the statute to permit regulated
entities to achieve policy outcomes
through litigation that would be
statutorily unavailable to them through
the regular rulemaking process—
especially policy outcomes that increase
total Medicare expenditures.
We acknowledge that, in the past, not
all OPPS payment policy changes based
on sections 1833(t)(14) and (t)(2)(E) of
the Act have resulted in adjustments to
the budget neutrality factor or actual
expenditures from the Part B Trust Fund
equaling zero in all circumstances. The
method CMS uses to account for
changes to the ‘‘estimated number of
expenditures’’ referenced in section
1833(t)(9)(B) and incorporated by
section 1833(t)(14)(H) is the OPPS
conversion factor (e.g., 71 FR 68193
through 68194). In situations that have
not had any estimated impact on the
OPPS conversion factor or that would
otherwise have a de minimis impact,
such as a 0.0001 change to the
conversion factor, which would have an
inconsequential effect on Medicare
payments, CMS has effectively rounded
the estimated impact on expenditures to
zero.11 Thus, in circumstances when
there would be a de minimis impact on
estimated OPPS payment to meet the
budget neutrality requirements as a
result of a post-rulemaking policy
change, we have not changed OPPS
payments to reflect the minimal impact
of the policy change. When considering
whether the estimated amount of
expenditures is de minimis, we have
taken into account relevant context,
such as the size of the change
comparable to the OPPS payments
overall, the relative number of
interested parties and any reliance
interests, as well as the anticipated
impact on the Part B Trust Fund of the
change in payment due to the postannual rulemaking policy versus the
11 In the CY 2007 OPPS/ASC final rule with
comment period, using our authority under section
1833(t)(2)(E) of the Act, we implemented a quality
improvement program which required hospitals
eligible to participate in the Inpatient Prospective
Payment Systems (IPPS) Reporting Hospital Quality
Data for the Annual Payment Update (RHQDAPU)
to meet the requirements for receiving the full FY
2007 IPPS payment in order to qualify for the CY
2007 OPPS update. Hospitals failing to meet the
requirements would receive a reduced OPPS
conversion factor update in CY 2007, the amount
of which would then, if not deemed ‘‘negligible,’’
be offset by a corresponding increase to the OPPS
conversion factor to maintain budget neutrality. See
71 FR 68193 through 68194.
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anticipated administrative burden and
cost of ratesetting disruption.
In the case of the remedy payments
for the 340B payment policy, by
contrast, we believe a budget neutrality
adjustment is statutorily required and,
even if not statutorily required,
warranted as a matter of sound public
policy. The estimated impact of our onetime lump sum remedy payments is
significant and reflects a very
substantial fraction of total OPPS
spending for any one calendar year, one
that goes well beyond any impact of
which we have previously rounded to
zero. The specifics of the lump sum are
discussed in greater detail in the
following section, II.B.1. Additionally,
we do not believe any reliance interests
or administrative burdens outweigh the
impact of the remedy payments on the
Part B Trust Fund sufficiently to justify
disregarding the principle of budget
neutrality, if that were statutorily
possible. As we explain below, though,
the potential reliance interests
implicated by the need to recover
unwarranted payments made over many
years, combined with the unique
difficulties in calculating and collecting
these payments through retroactive
rulemaking, should properly affect the
way the budget neutrality principle
applies to these unique circumstances.
As noted previously in section I.A.3,
we budget neutralized the 340B
payment policy from CY 2018 to CY
2022 by increasing the rate for non-drug
items and services by 3.19 percent. That
resulted in $7.8 billion in additional
spending on non-drug items and
services during that time period. We
note that some OPPS providers are still
filing, or re-filing, claims for CY 2022;
therefore, our estimate of the total
amount of additional spending on nondrug items and services during that time
period could change as more claims
from CY 2022 are processed, or
reprocessed. CMS has repeatedly stated
in both litigation and OPPS rules in the
Federal Register that any remedy
payments could be subject to budget
neutrality constraints. See, e.g., Am.
Hosp. Ass’n v. Becerra, 142 S. Ct. 1896,
1903 (2022) (acknowledging HHS’s
position that ‘‘a judicial ruling
invalidating the 2018 and 2019
reimbursement rates for certain
hospitals would require offsets
elsewhere in the program’’); 84 FR
61323 (‘‘Recognizing Medicare’s
complexity in formulating an
appropriate remedy, any changes to the
OPPS must be budget neutral, and
reversal of the policy change, which
raised rates for non-drug items and
services by an estimated $1.6 billion for
2018 alone, could have a significant
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economic impact on the approximate
3,900 facilities that are paid for
outpatient items and services covered
under the OPPS.’’). Additionally,
because the 340B payment policy this
rule proposes to remedy was itself
budget neutralized, failing to budget
neutralize the remedy payments would
mean that the additional payments for
non-drug items and services that were
made from CY 2018 through CY 2022 to
achieve budget neutrality for the 340B
payment policy as described under
section I.A.3 of this proposed rule
would be a windfall, especially to non340B hospitals that were not subject to
decreased drug payments from CY 2018
through CY 2022. The Trust Fund has
a strong interest in recovering that
windfall, and those who received it
have no legitimate reliance interest in
permanently retaining that windfall.
As for the administrative burden
specific to maintaining budget
neutrality, CMS was already required by
the remand order to remedy the 340B
policy. The decision to include a budget
neutrality component in this remedy
does not appreciably change this
burden, though of course the burden
could be greater or lesser depending on
how the remedy is crafted. As set forth
more fully below, our proposed budget
neutrality adjustment does not directly
recoup money already paid to providers;
rather, it is a proposed adjustment to
future payment rates, allowing hospitals
to take such rates into account rather
than forcing them to open their bank
accounts and disgorge their windfall
immediately. On balance, the billions of
dollars the proposed payments to
affected 340B covered entity hospitals
would cost the Part B Trust Fund
outweigh the potential administrative
expenses or disruption resulting from a
broad change in OPPS payment to offset
these additional costs.
Finally, even if this remedy rule were
exempt from budget neutrality
requirements as a matter of statutory
interpretation, we would still exercise
our authority under section 1833(t)(2)(E)
of the Act to offset the extra payments
we made for non-drug items and
services from 2018 through 2022. As
discussed, those payments have proven
to be an unwarranted windfall, and the
Trust Fund has a strong interest in
recovering them. This proposal to avoid
a windfall to providers would also be
consistent with the agency’s
longstanding inherent and common-law
(and common-sense) recoupment
authority, through which ‘‘the Secretary
generally has the duty and power to
protect against overpayments to
providers.’’ Chaves Cnty. Home Health
Serv., Inc. v. Sullivan, 931 F.2d 914, 918
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(D.C. Cir. 1991); see also, e.g., United
States v. Lahey Clinic Hosp., Inc., 399
F.3d 1, 16 (1st Cir. 2005) (‘‘Although
provisions of the Medicare Act
expressly authorize the Secretary to
reopen initial payment determinations
and to recoup overpayments
administratively in certain
circumstances, see 42 U.S.C. 1395g(a)
and 1395gg, the statute does not
displace the United States’ long
standing power to collect monies
wrongfully paid through an action
independent of the administrative
scheme, nor is there any
inconsistency.’’); Mount Sinai Hosp. of
Greater Miami, Inc. v. Weinberger, 517
F.2d 329, 345 (5th Cir.), modified, 522
F.2d 179 (5th Cir. 1975) (similar). For
that reason and those discussed above,
we would find that unwinding those
payments would be necessary to ensure
equitable payments, even assuming no
statutory budget neutrality requirement
applies.
Therefore, we believe that it is
required by the statute—but even if not
required, that it would be consistent
with the statute—and consistent with
our past practices, and appropriate, to
propose to offset the additional
payments for non-drug items and
services that were made from CY 2018
through CY 2022 in order to maintain
budget neutrality or equitable payments
when remedying this policy. But the
context of this rule remains unique: We
are adjusting payments prospectively in
order to provide a remedy for a previous
unlawful payment decision. And
precisely because that previous payment
decision itself followed budget
neutrality principles; it provided
unwarranted payments to some at the
same time it improperly took payments
from others. In applying budget
neutrality principles to this remedy, we
seek to rectify this imbalance and
restore matters as closely as possible to
where they would have been absent the
policy the Supreme Court determined to
be unlawful. We solicit comments from
the public on our proposed
interpretation of our statutory budget
neutrality obligations, equitable
payment authorities, and recoupment
authority.
2. Full Claims Reprocessing From CY
2018 Through September 27th of CY
2022
Perhaps the most perfect measure of
achieving budget neutrality in
circumstances like this would be to turn
back the clock to the day the unlawful
payment decision was first made, undo
that decision, and start over. To do so
here, CMS would have to reprocess all
OPPS claims for 340B-acquired drugs
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and non-drug items and services from
CY 2018 through September 27th of CY
2022 using the default payment rate
under section (t)(14) of the Act and our
retroactive rulemaking authority in
section 1871(e)(1)(A) of the Act. This
approach would have the benefit of
putting providers, beneficiaries, and
Medicare back in the same situation
they would have been in if CMS had
never adopted the ASP minus 22.5
percent rate for 340B-acquired drugs in
2018. But we have previously rejected
arguments that remedial rulemaking
must necessarily provide this type of
precise make-whole relief. See Shands
Jacksonville Med. Ctr., Inc. v. Azar, 959
F.3d 1113, 1118 (D.C. Cir. 2020)
(agreeing that the agency need not
restore ‘‘each individual hospital . . . at
least to the position it would have
occupied had the rate reduction never
taken effect’’).
Reprocessing every single claim might
be a potential approach to remedy this
situation, if it were administratively
achievable. But reprocessing such an
unprecedentedly large volume of claims
and issuing payment to affected
providers in a timely fashion would
impose an immense administrative
burden on CMS, its contractors, and
providers. We accordingly believe that
this approach is not feasible in this case.
This approach would require the
reprocessing of virtually all claims
submitted to the OPPS system during
the affected period of time, but that
system processes more than 100 million
claims each year. Reprocessing almost 5
years’ worth of OPPS claims could take
several years, resulting in some affected
340B covered entities having to wait
multiple years to receive payment, and
leading to widespread beneficiary cost
sharing uncertainty, as beneficiaries
could be caught by surprise by a
significant change in cost sharing
responsibility from a claim they thought
had been closed many years ago. The
large quantity of claims and the amount
of time required to reprocess them while
continuing normal claims processing
likewise would not result in timely
payments or adjustments to hospitals.
Additionally, reprocessing these claims
would lead to the need for significant
recoupments of payments for non-drug
items and services that would have
already been paid at the higher rate
based on the budget neutrality
adjustment applied as a result of the
original 340B payment policy. The D.C.
Circuit has held that it is not necessary
‘‘to recalculate each individual claim
paid under the reduced rate’’ that was
the subject of litigation when doing so
would have caused significant
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administrative burden and delayed
payments. See Shands, 959 F.3d at
1120. But the expected results of such
a calculation can certainly inform an
alternative approach to budget
neutrality, as we discuss below.
We note that the vast majority of 340B
drug claims from CY 2022 have been
reprocessed at the higher 340B payment
rate, generally ASP plus 6 percent,
which we believe was allowable under
the District Court’s order prospectively
vacating the CY2022 340B payment rate
and the typical timely filing
requirements described at 42 CFR
424.44. We believe this was appropriate
for CY 2022 claims given that providers
were able to follow the regular claims
processing conventions for these claims,
and we will ensure CMS does not make
duplicate payments for these claims
already remedied by the usual claims
processing methods. As of this proposed
rule, we estimate that for CY 2022, $1.5
billion in remedy payments (including
the Medicare and beneficiary portions)
have already been made to providers
through reprocessed claims, or claims
that had dates of service January 1,
2022, through September 27, 2022, but
were held until, or reprocessed after, the
340B rule was vacated and the standard
drug payment rates were in effect for
340B-acquired drugs. We consider these
reprocessed claims to be partially
remedied as 340B providers no longer
received the lower 340B drug payment
rate for these 340B-acquired drugs. We
note that the non-drug item and service
payment components of these claims
were not remedied, which we discuss in
subsequent sections. This $1.5 billion is
one component of the total remedy
payments accounted for in this
proposed rule. We also note that these
claims only had the 340B drug portion
of the claim adjusted, and that for these
claims to be fully remedied the nondrug item and service components of
these claims would also need to be
adjusted as discussed in subsequent
sections.
3. Aggregate Hospital Payments From
CY 2018 Through September 27th of CY
2022
We also considered calculating onetime aggregate payment adjustments for
each provider for the CY 2018 through
September 27th of CY 2022 time-period,
including both additional payments for
340B-acquired drugs and reduced
payments for non-drug items and
services under sections 1833(t)(2)(E) and
1833(t)(14) of the Act, along with our
retroactive rulemaking authority in
section 1871(e)(1)(A) of the Act. This
option would have involved: (1)
calculating the total additional
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payments for each hospital that would
have been paid for separately payable
non-pass-through 340B-acquired drugs
from CY 2018 through September 27th
of 2022 in the absence of the 340B
payment policy; (2) calculating the
additional amount each hospital was
paid under the OPPS from CY 2018
through CY 2022 for non-drug items and
services as a result of the 340B policy;
(3) subtracting (2) from (1); and (4)
issuing a payment to, or requiring a
recoupment from, each hospital for the
5-year period in which the 340B
payment policy was in effect.
While this approach would also have
satisfied the statutory budget neutrality
concerns discussed above, we do not
believe the statute mandates such an
inflexible approach in these
circumstances. Cf. Shands Jacksonville
Med. Ctr., Inc., 959 F.3d at 1120. (For
further discussion of this point, see
section II.B.1.a.) Such an approach
would require immediate, and in many
cases large, retroactive recoupments
from the majority of OPPS hospitals and
would impose a substantial, immediate
burden on these hospitals as well as an
uncertain impact on beneficiaries. Given
these burdens, the financial strain many
hospitals experienced during the recent
public health emergency, and the
amount of time that has transpired since
the original payments for these drugs,
items, and services were made, we
decided not to propose this option and
overly burden these hospitals in this
way.
B. Proposed Remedy
1. Proposed Methodology for
Calculating and Process for Remitting
Remedy Payments to Affected 340B
Covered Entity Hospitals for 340BAcquired Drugs Furnished and Paid
Adjusted Amounts Under the OPPS in
CY 2018 Through September 27th of CY
2022
a. Statutory Authority
CMS believes that the best way to
remedy our payment policy for 340Bacquired drugs for the period from CY
2018 through September 27th of CY
2022, which the Supreme Court found
unlawful, would be to make one-time
lump sum payments to affected 340B
covered entities calculated as the
difference between what they were paid
for 340B drugs (ASP minus 22.5 percent
or an adjusted WAC or AWP amount)
during the relevant time period (from
CY 2018 through September 27th of CY
2022) and what they would have been
paid had the 340B payment policy not
applied. We believe this approach
comes as close to providing 340B
covered entities with make-whole relief
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44083
as CMS can reasonably accomplish,
without the massive burden that would
be associated with manually
reprocessing all claims. Assuming
hospitals properly assigned the billing
codes discussed below when submitting
their CY 2018 through 2022 claims,
CMS expects the remedy payment to
each 340B covered entity for 340Bacquired drugs to be the same as if CMS
manually reprocessed those claims.
We propose to make the remedy
payments relying principally on: (1) our
rate-setting authority under section
1833(t)(14) of the Act; and (2) our
equitable adjustment authority under
section 1833(t)(2)(E) of the Act. To the
extent this proposed rule is retroactive
(in whole or in part), we would rely on
our retroactive rulemaking authority in
section 1871(e)(1)(A) of the Act.
The Supreme Court has held that if
CMS has not conducted a survey of
hospitals’ acquisition costs, it may not
vary the payment rates for outpatient
prescription drugs by hospital group.
Because we did not use any survey of
hospitals’ acquisition costs, we believe
it is necessary for the remedy to apply
the default rate (generally ASP plus 6
percent) to comply with paragraph
(14)(A)(iii) of section 1833(t) of the Act
for those years, as interpreted by the
Supreme Court. Even if a retroactive
rule were not necessary to comply with
section 1833(t)(14) of the Act, we
believe that failing to apply the default
rate retroactively would be contrary to
the public interest in this specific
situation in part because it would leave
the plaintiff 340B hospitals paid at a
substantially lower rate, due to the
magnitude of payment, than we now
believe to be proper under the statute
and that they have continually pressed
in court since we first announced the
adjustment. We believe the equities
weigh in favor of a partially retroactive
remedy here, because a significant
number of plaintiff hospitals have been
advocating for our current policy in
court since we first announced our 340B
payment policy for CY 2018 despite our
view that there was no administrative or
judicial review for such claims, and
because the impact on the Part B Trust
Fund will be lessened because we are
applying budget neutrality principles.
We note that the position of those
plaintiff hospitals was ultimately
vindicated by the Supreme Court.
Section 1871(e)(1)(A) of the Act
prohibits the application of a
substantive change in regulations to
items and services furnished before the
effective date of the substantive change
unless, ‘‘such retroactive application is
necessary to comply with statutory
requirements’’ or the ‘‘failure to apply
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the change retroactively would be
contrary to the public interest.’’
Assuming this proposal is viewed as a
retroactive remedy (in whole or in part),
we believe it would be necessary to use
this retroactive rulemaking authority to
implement the remedy by revising 340B
payment rates for this prior period to
comply with the Supreme Court’s
interpretation of the requirements of
section 1833(t)(14) of the Act.
Section 1833(t)(2)(E) of the Act
requires the Secretary to, ‘‘establish, in
a budget neutral manner, outlier
adjustments . . . transitional passthrough payments . . . and other
adjustments as determined to be
necessary to ensure equitable payments,
such as adjustments for certain classes
of hospitals.’’ In this case, we propose
that the lump sum payment, calculated
as the difference between what an
affected 340B covered entity hospital
received for 340B-acquired drugs during
the time period at issue and what they
would have received for 340B-acquired
drugs if the 340B adjustment had not
been in place, would be an equitable
retroactive adjustment. Such an
adjustment is necessary to ensure
equitable payments to affected 340B
covered entity hospitals by making them
whole for the decreased payments for
340B-acquired drugs they received from
CY 2018 through September 27th of CY
2022 that are no longer proper in light
of the Supreme Court’s decision. To the
extent necessary, we are applying the
adjustment retroactively in accordance
with the Court’s ruling and for the
reasons discussed in the above
paragraph.
We are proposing to use our authority
under 1833(t)(14) of the Act in
conjunction with our equitable
adjustment authority under 1833(t)(2)(E)
of the Act, to accomplish an equitable
outcome as we remedy past payments
made under the 340B payment policy.
To the extent necessary, we also
propose to use our retroactive
rulemaking authority under section
1871(e)(1)(A) of the Act.
We solicit comment from the public
on our proposed use of these authorities
in the remedy policies discussed in the
rule. We also solicit comment on other
possible authorities (including implied
authority or common law authority) that
might also be applicable to the remedy
policies discussed in this rule or on
which we could rely to make remedy
payments.
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b. Estimated Reduction in Drug
Payments to Affected 340B Covered
Entity Hospitals in CY 2018 Through
September 27, 2022
An estimated 1,649 340B covered
entity hospitals were paid at the 340B
payment rate, which was generally ASP
minus 22.5 percent for 340B-acquired
drugs for CY 2018 through September
27th of 2022, rather than the default
rate, which is generally ASP plus 6
percent, due to the 340B payment
policy. CMS estimates that these
hospitals received approximately $10.5
billion less in 340B drug payments
(including money that would have been
paid by Medicare and money that would
have come from beneficiaries as
copayments) than they would have for
drugs provided in CY 2018 through
September 27th of 2022 had the 340B
policy not been implemented. We will
update these estimated figures in the
final rule as we continue to receive
updated CY 2022 claims data. We
expect to have sufficient CY 2022 340B
drug claims at issue submitted by
September 27, 2023; therefore, by the
publication date for the final rule that
corresponds to this proposed rule, we
should have sufficient claims data to
state with more specificity the reduction
in drug payments to affected 340B
covered entity hospitals in CY 2018
through September 27, 2022. As
previously discussed, we estimate that
340B providers have already received
$1.5 billion in remedy payments
through reprocessed claims for 340B
drugs provided from January 1, 2022,
through September 27, 2022. Since $1.5
billion of the total $10.5 billion that we
calculated affected 340B covered entity
hospitals did not receive as a result of
this payment policy has already been
remedied through reprocessed claims,
we estimate the remaining remedy
amount that affected 340B covered
entity hospitals have not yet received as
a result of this policy is $9.0 billion.12
We have calculated the estimated
aggregate payments by isolating 340B
12 We note that the additional amount CMS pays
affected 340B covered entity hospitals through this
remedy could decrease if additional CY 2022 claims
are processed at the higher payment rate, as
discussed under section I.C. As previously
explained, the agency complied with the District
Court’s September 28, 2022, decision by paying the
default rate (generally ASP plus 6 percent) for all
CY 2022 claims for 340B-acquired drugs paid from
September 28, 2022, onward. However, as some
affected 340B providers are still filing, or re-filing,
claims for CY 2022, we are paying those claims at
the higher default payment rate for drugs, which is
generally ASP plus 6 percent. Therefore, our
estimate of the total amount of additional drug
payments that would be made through this remedy
could change as more claims from CY 2022 are
processed, or reprocessed, at the default payment
rate of ASP plus 6 percent.
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drugs assigned status indicator
‘‘K’’(non-pass-through drugs and nonimplantable biologicals, including
therapeutic radiopharmaceuticals) and
billed with modifier ‘‘JG’’ (drug or
biological acquired with 340B Program
discount, reported for informational
purposes). We then calculated the
difference between these drugs’ CY 2018
through 2022 340B payment rate and
the 340B rate proposed in this rule,
which was generally the difference
between ASP minus 22.5 percent and
ASP plus 6 percent. We used a similar
process to estimate aggregate payments
owed for drugs with payment amounts
based on WAC or AWP. In particular,
for drugs priced using WAC, we
calculated the difference between WAC
minus 22.5 percent and WAC plus 3 or
6 percent, as applicable, and for drugs
priced using AWP, we calculated the
difference between 69.46 percent of
AWP and 95 percent of AWP. We note
that the WAC and AWP based payment
rates outlined in this paragraph are the
common longstanding default OPPS
drug payment rates if ASP data are not
available.
We welcome comment on this
proposed methodology of estimating the
reduction in drug payments to affected
340B covered entity hospitals in CY
2018 through September 27, 2022.
c. Proposed Methodology for
Calculating Remedy Payments Owed to
Each Affected 340B Covered Entity
Hospital
We propose the following process for
calculating the amount of payment
owed to each affected 340B covered
entity hospital and issuing that
payment. For each affected 340B
covered entity hospital, we propose to
calculate the amount the hospital would
have been paid under the OPPS from CY
2018 through September 27th of CY
2022 for drugs the hospital acquired
through the 340B Program had that
340B policy not been in effect. We
would then subtract from this amount
the amount each affected 340B covered
entity hospital was paid under the OPPS
for 340B-acquired drugs during the
period of CY 2018 to September 27th of
CY 2022.
When added to the adjusted amount
paid under the OPPS from CY 2018
through September 27th of CY 2022 for
separately payable drugs acquired under
the 340B Program, this proposed
additional lump sum payment amount
would result in the affected 340B
covered entity hospital receiving the
default ASP plus 6 percent rate (or WAC
plus 3 or 6 percent or 95 percent of
AWP, as applicable) for drugs acquired
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under the 340B Program for CY 2018
through September 27th of CY 2022.
We illustrate the proposed process for
calculating and paying an affected 340B
covered entity hospital’s additional
lump sum OPPS payments for 340B
drugs furnished from CY 2018 through
September 27th of CY 2022 in the
following example. Based on claims
data from CY 2018 through September
27th of CY 2022 for which those claims
have been processed and OPPS
payments already made, we would
calculate that a particular 340B-covered
entity hospital would have been paid an
estimated $10 million for 340B drugs
had that 340B payment policy not been
in effect during that time period. Then,
based on claims data for the same
hospital from the same time period, we
would calculate that the hospital was
actually paid $7.31 million for 340B
drugs from CY 2018 through September
27th of CY 2022. The difference
between these two amounts—$2.69
million—would be the amount of the
additional lump sum payment the 340B
covered entity hospital would receive.
Another method to estimate the total
amount an affected 340B covered entity
hospital would have been paid had the
340B payment policy not been in effect
(X) is to use the following formula:
X = (Y/0.775) * 1.06
Where Y is the total amount received
under the 340B policy from CY 2018 to
September 27th of CY 2022.
In this example, the Y is $7.31
million. Therefore, ($7.31 million/0.775)
* 1.06 = $10 million. The lump sum
payment would be $10 million minus
$7.31 million, which equals $2.69
million. We solicit comment from the
public on our proposed calculation
methodology for calculating remedy
payments owed to each affected 340B
covered entity hospital.
d. Instruction to MACs To Remit
Remedy Payments
Consistent with our past practice of
remitting payments owed due to
litigation, we propose to make
additional payments to each 340B
covered entity hospital by issuing
instructions (such as a Change Request
(CR) or a Technical Direction Letter
(TDL)) to the 340B covered entity
hospital’s Medicare Administrative
Contractor (MAC), instructing the MAC
to issue a one-time lump sum payment
to the hospital in the amount calculated
using the above described methodology
within a specified timeframe, which we
propose would be within 60 calendar
days of the MAC’s receipt of the
instruction. For instance, in the example
above CMS would issue instructions to
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the relevant MAC instructing it to issue
a payment to the 340B covered entity
hospital in the amount of $2.7 million
within 60 calendar days of the MAC’s
receipt of the instructions. (Note: MACs
will continue to follow normal
accounting processes for collecting
repayment amounts stemming from
provider-specific overpayment
obligations, as well as other unique
situations such as provider bankruptcy
or payment suspension, any of which
may impact the provider’s net payment
amount.) We solicit comment from the
public on our proposed approach to
remitting remedy payments. We
specifically seek comment on the
timeframe of 60 calendar days in which
we are proposing to have the MACs
make the proposed lump sum payments.
Given the number of one-time lumpsum payments to hospitals, the size of
the payments, and the overall
complexity of this remedy, we believe
60 calendar days is necessary for the
MACs to accurately and precisely make
these payments to individual hospitals.
With that being said, we seek comment
on this timeframe and if another such
timeframe, such as 30 calendar days, is
supported by rationale from
commenters.
e. Accounting for Beneficiary CostSharing
In most circumstances, beneficiaries
would pay in the form of coinsurance
approximately 20 percent of any
additional 340B drug payments that
affected 340B covered entity hospitals
would have received, absent the CY
2018 through 2022 340B policy. But as
described above, we are proposing to
make each remedy payment as a onetime lump sum payment through MAC
instructions using a combination of
statutory authorities, including, if
necessary, our retroactive rulemaking
authority under section 1871(e)(1)(A) of
the Act and our equitable adjustment
authority under section 1833(t)(2)(E) of
the Act. Because these payments are
remedy payments issued through MAC
instructions relying in part on our
equitable adjustment authority under
section 1833(t)(2)(E) of the Act, we do
not believe these payments would be
340B drug payments subject to
beneficiary copayments. Rather, we
believe that these remedy payments are
analogous to the type of cost report
adjustments under section 1833(t)(2)(E)
of the Act that we have previously
found do not authorize providers to seek
additional beneficiary copayments.13
13 For example, section 3138 of the Affordable
Care Act added a new section 1833(t)(18) to the
Social Security Act, providing for an adjustment
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We acknowledge that we have
previously suggested that any remedy
might affect beneficiary cost-sharing.
See, e.g., 84 FR 61323. But we made that
statement in 2019, before the litigation
was concluded, and well before we
proposed here how to structure any
remedy and determine how it should
impact beneficiary cost sharing many
years later. With the benefit of a
concrete proposed remedy, we can
clarify that our proposed lump sum
payments for the difference in 340Bacquired drug payments due to the 340B
payment policy would not affect
beneficiary cost-sharing.
We believe that in these unique
circumstances, it is appropriate to
exercise our authority under section
1833(t)(2)(E) of the Act to make
adjustments ‘‘as necessary to ensure
equitable payments’’ and for Medicare
to pay the full $9.0 billion difference
between what 340B hospitals were paid
for 340B-acquired drugs from CY 2018
through September 27, 2022, and what
they would have been paid for 340Bacquired drugs absent the 340B payment
policy during this time period, so that
affected 340B covered entity hospitals
are paid the amount they would have
been paid in full without application of
the 340B payment policy. While we do
not believe it would necessarily be
appropriate to make this kind of
adjustment under section 1833(t)(2)(E)
of the Act to ensure hospitals receive
what they would have been paid from
Medicare and beneficiaries absent the
340B payment policy every time we
make a policy change or lose a lawsuit,
we propose finding that such an
adjustment is necessary for equitable
payments in these unique circumstances
in part because of the unprecedented
under section 1833(t)(2)(E) of the Social Security
Act to address higher costs incurred by cancer
hospitals. Section 1833(t)(2)(E) of the Act, in turn,
directs the Secretary to establish, ‘‘in a budget
neutral manner,’’ payment ‘‘adjustments as
determined to be necessary to ensure equitable
payments, such as adjustments for certain classes of
hospitals.’’ In response to CMS’s proposal to
implement this adjustment on a per claim basis
through increased APC payments, commenters
expressed concern that doing so would increase
beneficiary copayments since beneficiary
copayment is a percentage of the APC payment.
These commenters encouraged CMS to implement
the adjustment in a way that did not increase
beneficiary copayments. Consequently, CMS
determined it was appropriate to make the cancer
hospital payment adjustment through the form of an
aggregate payment to each cancer hospital
determined at cost report settlement, as opposed to
an adjustment at the APC level, thereby eliminating
the higher copayments for beneficiaries associated
with providing the adjustment on a claims basis
through increased APC payments. See CY 2012
OPPS/ASC final rule, 76 FR 74121, 74204 (2011),
for our prior use of our equitable adjustment
authority under section 1833(t)(2)(E) of the Act to
adjust cancer hospital payments.
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scope of the remedy in terms of the
amount of money at issue; the number
of services, beneficiaries, and claims
affected; and the number of years that
have passed between the claims and the
remedy.
Accordingly, we believe that here,
where we are remedying prior
payments, it would be appropriate to set
the remedy payment amount under
section 1833(t)(2)(E) of the Act so that
affected 340B covered entity hospitals
would be paid amounts that
approximate what they would have
been paid for these drugs absent the
340B payment policy, which includes
what affected 340B covered entity
hospitals would otherwise have been
paid by the beneficiary. Therefore, the
$9.0 billion payment amount includes
$1.8 billion, an amount that is
equivalent to what affected 340B
covered entity hospitals would have
collected from beneficiaries for these
340B-acquired drugs if the 340B
payment policy had not been in effect.
We emphasize that, if our proposal is
finalized, affected 340B covered entity
hospitals may not bill beneficiaries for
coinsurance on remedy payments—
regardless of this adjustment—because
we would issue this remedy payment
through MAC instructions relying in
part on our equitable adjustment
authority under section 1833(t)(2)(E).
CMS would consider appropriate
administrative action for providers who
nevertheless bill beneficiaries for
coinsurance. We solicit comments from
the public on our proposed approach to
accounting for beneficiary cost sharing.
ddrumheller on DSK120RN23PROD with PROPOSALS1
f. Proposed Remedy Payment Amounts
The following data file contains our
calculations of the amounts owed under
the above-described methodology to
each affected 340B covered entity
hospital: https://www.cms.gov/
medicare/medicare-fee-for-servicepayment/hospitaloutpatientpps. We
solicit comment from the public on the
accuracy of the data in Addendum AAA
of this proposed rule, particularly with
respect to the estimated amount of
remedy payment due to each hospital.
This addendum can be found online
through the CMS OPPS website.14
g. Anticipated Timing of Proposed
Remedy Payments
If we finalize the proposal to pay
affected 340B covered entity hospitals
in the manner described above, we
would propose to make these additional
payments at the end of CY 2023 or
beginning of CY 2024, after this rule has
14 https://www.cms.gov/medicare/medicare-fee-
for-service-payment/hospitaloutpatientpps.
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been finalized and the MAC instructions
for each affected 340B covered entity
hospital have been issued.
h. Eligibility of Proposed Remedy
Payments for Interest
CMS also considered its authority to
pay interest on the remedy payments
but does not believe it has the authority
to do so.
2. OPPS Non-Drug Item and Service
Payments From CY 2018 Through CY
2022
a. Background
As mentioned earlier in section I.A.3,
the 340B payment policy was
implemented in a budget neutral
manner under sections 1833(t)(9)(B) and
1833(t)(14)(H) of the Act by increasing
non-drug item and service payments to
all OPPS providers for CY 2018 through
CY 2022. To comply with the statutory
budget neutrality requirements in
sections 1833(t)(9)(B) of the Act and
1833(t)(14)(H) of the Act, as well as
section 1833(t)(2)(E), CMS must account
for these additional payments, which
were made solely due to the 340B
payment policy that was in effect from
CY 2018 through CY 2022, in
determining a remedy for the 340B
policy. After the Supreme Court’s
decision in American Hospital
Association, those additional payments
became a windfall—payments the
hospitals should not have received but
did anyway. To comply with budget
neutrality and restore the situation as
closely as reasonably possible to the
state that would exist if we simply reran all the claims from 2018 to 2022
under the correct payment rules, we
must find a means of recovering this
windfall.
The reduction in 340B drug payments
made to affected 340B covered entity
hospitals from CY 2018 through CY
2022 was offset by an increase in nondrug item and service payments made to
all hospitals paid under the OPPS
during the same time period to comply
with statutory budget neutrality
requirements. In other words, all
hospitals were paid more under the
OPPS for non-drug items and services
for CY 2018 through CY 2022 than they
would have been paid in the absence of
the 340B payment policy. Starting in CY
2018, CMS applied an approximate 3.19
percent increase to the OPPS conversion
factor to offset the decreased OPPS 340B
drug payments in order to maintain
budget neutrality in those years.
Because we are now making additional
payments to affected 340B covered
entity hospitals to pay them what they
would have been paid had the 340B
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policy never been implemented, we
must correspondingly make an offset to
maintain budget neutrality as if the
340B payment policy had not been in
effect during CY 2018 through CY 2022.
This is consistent with the policy
finalized in the CY 2023 OPPS/ASC
final rule with comment period (87 FR
71976) where CMS finalized a minus
3.09 percent adjustment to the
conversion factor as this adjustment
removes the effect of the 340B policy as
originally adopted in CY 2018, again, as
described in more detail above in
section I.C. The CY 2023 adjustment to
the conversion factor ensures it is
equivalent to the conversion factor that
would be in place if the 340B payment
policy had never been implemented.
To calculate the additional amount
CMS paid for non-drug items and
services, we propose to include those
assigned the following status indicators,
SI = J1, J2, P, Q1, Q2, Q3, R, S, T, U,
V. These status indicators generally
capture the non-drug items and services
impacted by a change in the OPPS
conversion factor. For additional details
on these status indicators, we refer
readers to Addenda D1 of the CY 2023
OPPS/ASC final rule with comment
period for the most recent OPPS status
indicators and their definitions. This
file is available on the CMS website.15
We calculated the adjusted payment
(the payment that would have been
made for the non-drug item or service
absent the budget neutrality adjustment
to the conversion factor due to the 340B
payment policy) by taking the amount
paid for the non-drug item or service
and dividing it by 1.0319 (the amount
by which the conversion factor was
increased during CYs 2018 through
2022 to budget neutralize the effect of
the 340B payment policy). We propose
that the amount that would need to be
offset to maintain budget neutrality in
crafting this remedy would be based on
the payments to providers that would
have been made for non-drug items and
services absent the 340B payment policy
during CY 2018 through CY 2022, and
the Medicare payment to 340B
providers for the amount equivalent to
the additional drug payments that
would have otherwise been paid as
beneficiary cost-sharing. Based on these
factors, we are proposing prospectively
to offset $7.8 billion in order to
maintain budget neutrality. This figure
was calculated based on past claims
data with 80 percent of this amount
based on the Medicare share and 20
percent based on the beneficiary share.
15 https://www.cms.gov/medicaremedicare-feeservice-paymenthospitaloutpatientppshospitaloutpatient-regulations-and-notices/cms-1772-fc.
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As we explain below, our budgetneutrality adjustment in the 2018
through 2022 OPPS rules reflected a
prediction regarding how much we
would spend on 340B drugs—a
prediction that turned out to be too low.
As it turns out, 340B hospitals spent
more on drugs than we expected, so our
policy ended up saving the Trust Fund
(and beneficiaries) more money from
cutting the rates paid for 340B drugs
than the Trust Fund (and beneficiaries)
paid for non-drug services in our
budget-neutrality adjustment to offset
the savings. Our proposed remedy
achieves budget neutrality by reversing
that imbalance. In aggregate, the total
additional payment that providers will
receive as a result of this remedy, $10.5
billion, will be larger than the amount
of payment that will be prospectively
offset, $7.8 billion. As we explain
below, we believe that our proposed
remedy, which effectively reverses the
imbalance that arose under the policy
the Supreme Court deemed unlawful,
and reasonably approximates the results
that would occur if we simply re-ran the
claims after eliminating the 340B
adjustment, reflects the best approach to
budget neutrality in these unique
circumstances. We solicit comments
from the public on our proposed
approach to implementing budget
neutrality.
b. Proposed Prospective Adjustment to
Payments for Non-Drug Items and
Services To Offset the Increased
Payments for Non-Drug Items and
Services Made in CY 2018 Through CY
2022
As discussed previously in section
II.A.1, we believe that sections
1833(t)(2)(E) and 1833(t)(14) of the Act,
under which we propose to make this
proposed remedy payment, are properly
read to require budget neutrality.
Section 1833(t)(2)(E) of the Act provides
that adjustments under that provision
must be made in a budget neutral
manner. Section 1833(t)(14)(H) of the
Act states that additional expenditures
resulting from this paragraph shall not
be taken into account in establishing the
conversion, weighting, and other
adjustment factors for 2004 and 2005
under paragraph (9), but shall be taken
into account for subsequent years, while
section 1833(t)(9)(B) of the Act states
that the adjustments for a year may not
cause the estimated amount of
expenditures under this part for the year
to increase or decrease from the
estimated amount of expenditures under
this part that would have been made if
the adjustments had not been made. To
implement these requirements, we
propose to unwind the additional
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payments that were made for non-drug
items and services to all providers from
CY 2018 through CY 2022. In other
words, along with reversing the rate
change discussed earlier in this rule, we
propose to reverse the accompanying
increase in the conversion factor for CYs
2018 through 2022 that was solely
attributable to the adoption of the 340B
payment policy.
In order to reduce the burden on
providers of offsetting this amount
required to maintain budget neutrality,
estimated to be $7.8 billion, we are
proposing to implement this adjustment
prospectively. We propose to, beginning
in CY 2025, reduce all payments for
non-drug items and services to all OPPS
providers, except new providers as
defined later in this section, by 0.5
percent each year until the total offset
is reached (approximately 16 years). We
believe starting this reduction in CY
2025 would allow CMS time to finalize
the appropriate methodology, and then
calculate and publish the payment rates
derived from this policy in the CY 2025
OPPS/ASC proposed rule, allowing
adequate time for impacted parties to
assess and prepare for the new payment
rates that would be calculated using a
reduced conversion factor. Additionally,
we believe a 0.5 percent annual
reduction in the conversion factor
would be appropriate because it would
balance the need to address the past
payments for non-drug items and
services to ensure budget neutrality
while also ensuring the offset is not
overly financially burdensome on
impacted entities, especially those in
rural communities, which we believe
would be the case if we were to apply
an adjustment for the full offset amount
in a single year.
We acknowledge that, in litigation, we
at one point questioned the American
Hospital Association’s suggestion that
we could achieve budget neutrality by
decreasing Medicare payments in future
years, noting that section 1833(t)(9) of
the Act requires budget neutrality for a
particular ‘‘year.’’ See Am. Hosp. Ass’n
v. Becerra, Br. for the Respondents, at 30
(U.S. No. 20–1114).16 At the same time,
however, the government pointed to the
district court’s conclusion that if the
Secretary was to retroactively increase
the 2018 and 2019 payments for 340B
hospitals, ‘‘budget neutrality would
require him to retroactively lower the
2018 and 2019 rates for other Medicare
Part B products and services.’’ Ibid. We
have now further considered section
1833(t)(9) in light of the Supreme
16 https://www.supremecourt.gov/DocketPDF/20/
20-1114/197027/20211020212647625_201114bsUnitedStates.pdf.
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Court’s decision holding that judicial
review is available and also recognizing
the statutory requirement of budget
neutrality, and distinct possible ways of
approaching the remedy issue have
come into focus.
As explained below, we believe that
the proposal here is consistent with
paragraph (t)(9) of the Act: It would
offset the amounts of money that
constitute excess payments in past
years—which are effectively
overpayments for each past year in
question (that is, 2018 to 2022) in light
of the Supreme Court’s decision. In
other words, while we propose reducing
the conversion factor in future years, we
would be doing so not by seeking to
budget neutralize payments across a
period of years rather than in a
particular ‘‘year’’, but instead by
adjusting payment rates for each year
from 2018 to 2022 to account for the
Supreme Court’s decision. We would
then make the requisite additional
payments to 340B hospitals for those
years, and collect the excess payments
from other hospitals in future years.
Because the estimated amount of
expenditures for each of 2018 to 2022
would still be budget neutralized—
indeed, it is our best effort to implement
the policy that would have been in
effect had the 340B policy never been
implemented in the first place—we
believe it is consistent with the
provision that adjustments may not
‘‘cause the estimated amount of
expenditures under this part for the year
to increase or decrease.’’ See SSA
section 1833(t)(9)(B). We believe that
this interpretation would balance any
reliance interests hospitals may have in
payments already made while staying
consistent with the budget neutrality
requirements repeated throughout the
OPPS statute in sections 1833(t)(2)(E),
1833(t)(9), and 1833(t)(14)(H). And, as
discussed above in section II.A.1,
avoiding a windfall to providers is
consistent with the agency’s
recoupment authority. We welcome
comments on these aspects of our
proposal.
We also acknowledge that under our
proposal the Part B Trust Fund would
pay out more for remedial payments
than it would recover over time based
on the reduction in payments for nondrug items and services. That is a
consequence of many factors, including
our estimate in the CY 2018 OPPS/ASC
final rule of the amount that
expenditures for 340B-acquired drugs
would decrease under the 340B
payment policy, which we budget
neutralized by applying a corresponding
adjustment to the conversion factor to
increase expenditures for non-drug
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items and services by 3.19 percent. We
acknowledged this limitation in
Medicare’s ability to calculate a precise
estimate for purposes of the CY 2018
final rule with comment period in
which this original budget neutrality
adjustment was made. In the CY 2018
final rule with comment period we
discussed that because data on drugs
that are purchased with a 340B discount
are not publicly available, we did not
believe it was possible to more
accurately estimate the amount of the
aggregate payment reduction and the
offsetting amount of the adjustment that
was necessary to ensure budget
neutrality through higher payment rates
for other services. Further we discussed
that there were potential offsetting
factors, including possible changes in
provider behavior and overall market
changes that would likely have lowered
the impact of the payment reduction (82
FR 52623).
As previously discussed, we now
know our estimate of the reduction in
expenditures for 340B drugs was lower
than the actual amount by which
expenditures for 340B drugs were
reduced in CYs 2018 through 2022.
Therefore, our budget neutrality
calculations for those years ended up
increasing payments for non-drug
services by less than we decreased
payments for 340B drugs. In an effort to
come as close as is reasonably possible
to turning back the clock to restore the
position in which we would have been
absent the policy the Supreme Court
invalidated, we believe the budget
neutrality calculation should reverse
that result. The total amount of our
proposed remedy payments to 340B
hospitals for 340B drugs would thus be
greater than the prospective reduction to
the conversion factor. Given the unique
posture of this remedy rule, we do not
propose at this time to revise
retroactively our estimated expenditures
for CY 2018 through 2022, as
readjusting our past estimated
expenditures in order to prospectively
adjust the conversion factor is not our
standard practice for budget neutrality,
nor is it required by the statute.
While our CY 2018 through 2022
predictions are the primary reasons that
our proposed method of budget
neutralization would not fully align
with the money we predict the Part B
Trust Fund would pay out in lump sum
payments for 340B-acquired drugs as a
result of this remedy, there are
additional reasons. Some of these
reasons increase the gap between our
lump sum payment and our reduction
in prospective non-drug spending;
others do the opposite. First, as
previously discussed, a large portion of
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the CY 2022 340B drug claims for dates
of service between January 1, 2022, and
September 27, 2022, have already been
remedied as a result of being processed
or reprocessed at the default drug
payment rate. However, none of the
non-drug item and service claims from
CY 2022 have been offset yet to account
for our proposed method of budget
neutralization. Second, as previously
noted, during CY 2022 CMS began
making payment for 340B drugs at the
default drug payment rate, generally
ASP plus 6 percent, for claims
processed after September 28, 2022;
however, no adjustment was made for
the increased payment of the non-drug
item and service claims that were
processed during this time. Therefore,
there is over an entire quarter of claims
for non-drug items and services that
were paid a higher rate due to the 340B
payment policy that still need to be
offset, while the 340B drug claims for
this quarter have already been paid
correctly. We note that in aggregate, the
total additional payment that providers
will receive as a result of this remedy,
$10.5 billion ($9 billion in lump sum
payments and $1.5 billion for claims in
2022 that were processed or reprocessed
at the default drug payment rate), will
be larger than the amount of payment
that will be prospectively offset, $7.8
billion. All of these figures include the
beneficiary co-insurance portion in
order to ensure providers receive what
they would have absent the unlawful
340B payment policy.
As discussed above at section II.B.1.e,
our proposal includes in the remedy
payments the amount that affected 340B
covered entity hospitals would
otherwise have been paid by the
beneficiary, so that the payments
approximate what the hospitals would
have been paid for these drugs absent
the previous policy. Because the statute
requires that this adjustment be budget
neutral, we are proposing to include in
the prospective offset calculation an
amount to offset this increase in
Medicare payments. As also discussed,
we are proposing a total prospective
offset of $7.8 billion to maintain budget
neutrality as if the 340B payment policy
had never been in effect and therefore
had never adjusted the OPPS conversion
factor. That offset encompasses both the
money hospitals unwarrantedly
received from the Medicare Trust Fund
for non-drug services between 2018 and
2022, as well as the additional
copayments they received from
beneficiaries on those services. And we
are using it to offset both the payments
we are making to compensate 340B
hospitals for the lower amounts
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Medicare paid them and the equitable
adjustment we are making to
compensate for the additional
beneficiary copayments they would
have received.
To avoid potentially overburdening
providers with an immediate downward
adjustment to the OPPS conversion
factor, we believe applying a delayed
offset to every non-drug item and
service for every hospital is appropriate
over a period of time. This is similar to
the original 340B payment policy
budget neutrality adjustment that
increased the payment for every nondrug item and service for CY 2018
through CY 2022 to offset the downward
adjustment in the payment rate for
drugs acquired under the 340B program.
We are aware that, depending on how
a hospital’s future mix of drug and nondrug services compares to its past mix
of drug and non-drug services, as well
as any absolute growth in a hospital’s
non-drug services, some hospitals may
ultimately receive slightly more (or less)
of a payment reduction than the
payment increase they received in CY
2018 through CY 2022. But there is
often some imprecision inherent in
budget neutrality calculations, and the
alternative would require that we
recalculate the additional amount that
each hospital received under the prior
policy and then apply a specific
reduction to that hospital’s future nondrug service payment rates to offset that
amount. That is very similar to the
claims reprocessing alternative that we
discussed previously in section II.A.2,
which would impose significant
burdens and payment delays for 340B
providers and it is faster and more
certain than prospectively offsetting for
all OPPS providers. In addition, it
would be administratively unworkable
to tailor individual payment reductions
for each of the thousands of impacted
hospitals for over a decade and a half,
meaning we would likely need to collect
a lump sum budget neutrality
recoupment. That would impose all the
burdens of an up-front budget neutrality
recoupment we decided against
proposing, as explained previously in
section II.A.3. Except in the case of truly
new hospitals, which we propose to
exclude from the prospective offset as
described under section II.B.2.c below,
we generally do not believe our
proposed approach would so
significantly undercompensate hospitals
to require that outcome, despite these
potential distributional consequences.
See Shands Jacksonville Med. Ctr., Inc.
v. Azar, 959 F.3d 1113, 1120 (D.C. Cir.
2020) (rejecting challenge to remedy
rule even when it left some hospitals
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‘‘slightly better off and others slightly
worse off than they would have been
had the rate reduction never taken
effect’’). Rather, we believe that our
remedy would come as close as
reasonably possible to turning back the
clock to restore us to the place in which
we would have been absent the policy
the Supreme Court held unlawful. This
remedy applies in truly unique
circumstances: we must apply budget
neutrality not purely prospectively but
in a partially retroactive rulemaking to
rectify an adjudicated past violation of
law. As previously discussed, rerunning all the relevant claims as if the
340B payment policy didn’t occur
would be close to impossible
administratively. In these unique
circumstances, we believe our proposed
approach properly applies the budget
neutrality principle, even if it results in
some effectively unavoidable
imprecision.
Accordingly, beginning in CY 2025,
we propose annually to reduce OPPS
payments for non-drug items and
services, by decreasing the OPPS
conversion factor by 0.5 percent each
year until the total offset, estimated to
be $7.8 billion, is reached. We recognize
this rule is unique and therefore
requires a unique prospective offset
period. We believe an annual reduction
of 0.5 percent would offset this amount
in a reasonable amount of time while
not imposing too significant of a
reduction on hospitals in any particular
year. At this time, we estimate that this
process would take approximately 16
years (Table 1). This estimate is based
on current OPPS payments that are
made through the OPPS conversion
factor and typical year-over-year
increases in OPPS payments over the
past ten years. We note that, similar to
the original 340B budget neutrality
adjustment to the conversion factor,
both Medicare payments under the
OPPS and beneficiary cost-sharing will
be impacted by the change in the
conversion factor. In this instance,
beneficiaries will generally have lower
co-insurance payments for non-drug
items and services as a result of this
proposed 0.5 percent annual reduction
to the OPPS conversion factor for the
duration of the required budget
neutrality offset. We invite comment on
our estimated budget neutrality offset
calculations, including the discussion of
our method of budget neutralization not
fully aligning with the money we
predict the Part B Trust Fund would pay
out in lump sum payments for 340Bacquired drugs as a result of this
remedy, in advance of our application of
the 0.5 percent reduction to the
conversion factor starting in CY 2025.
We would adjust this estimate in future
CY annual OPPS rules after CY 2025,
based on updated data, such as claims
and aggregate OPPS spending estimates,
to account for how much of the total
additional non-drug item and service
payment amount has been offset by the
time of each annual rule. In the final CY
rulemaking for this process, we propose
that when we estimate the remaining
amount of Medicare payment that
would be needed to be fully offset
within the prospective year, we propose
that the 0.5 percent reduction amount
would be reduced in the final year in
which the adjustment applies, if
needed, to the percentage estimated to
be sufficient to offset the remaining
amount by the end of that calendar year.
After this final prospective adjustment
is made, we propose that we would not
make any additional adjustments to the
OPPS conversion factor for purposes of
offsetting the additional Medicare
payments made to remedy the OPPS
340B payment policy, nor would we
make any additional future adjustments
if the amount of the offset in the final
year of this adjustment is more or less
than we had estimated in rulemaking for
that CY. We propose to codify the 0.5
percent reduction in the OPPS
conversion factor effective for CY 2025
in the regulations by adding new
paragraph (b)(1)(iv)(B)(12) to § 419.32.
TABLE 1—ILLUSTRATION OF THE PROPOSED 0.5 PERCENT CONVERSION FACTOR ADJUSTMENT TO THE OPPS NON-DRUG
ITEMS AND SERVICES BEGINNING CY 2025 TO MAINTAIN BUDGET NEUTRALITY
Total Applicable OPPS Non-Drug Item and Service Spending (millions)
0.5-Percent Payment Reduction Amount (millions) .................................
Estimated Total Cumulative Offset (millions) ..........................................
Total Applicable OPPS Non-Drug Item and Service Spending (millions)
0.5-Percent Payment Reduction Amount (millions) .................................
Estimated Total Cumulative Offset (millions) ..........................................
CY 2024
CY 2025
CY 2026
CY 2027
CY 2028
CY 2029
$63,724
................
................
$66,910
335
335
$70,256
351
686
$73,769
369
1,055
$77,457
387
1,442
$81,330
407
1,849
CY 2030
CY 2031
CY 2032
CY 2033
CY 2034
CY 2035
$85,369
427
2,276
$89,667
448
2,724
$94,150
471
3,195
$98,858
494
3,689
$103,801
519
4,208
$108,991
545
4,753
CY 2036
CY 2037
CY 2038
CY 2039
CY 2040
$114,440
572
5,325
$120,162
601
5,926
$126,170
631
6,557
$132,479
662
7,219
$139,102
* 581
7,800
Total Applicable OPPS Non-Drug Item and Service Spending (millions) ...................
0.5-Percent Payment Reduction Amount (millions) .....................................................
Estimated Total Cumulative Offset (millions) ..............................................................
ddrumheller on DSK120RN23PROD with PROPOSALS1
* Note, the final year’s offset is estimated to be less than 0.5 percent in order to meet the total estimated offset of $7.8 billion.
We also note the Total Applicable OPPS Non-Drug Item and Service Spending are estimates based on an assumption of 5 percent annual
growth. The 5 percent annual growth is determined from a 10-year baseline percentage increase.
We seek comments on the annual
percent reduction method described
above and whether an alternative
option—including those discussed
previously in section II.A—would be
appropriate. Additional possible
alternative timelines for maintaining
budget neutrality could be to offset a
fixed dollar amount each year over a
fixed period of time, such as 5, 10, or
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15 years. For example, we could divide
the $7.8 billion number by ten in order
to offset $780 million per year from CY
2025 through CY 2034 by making an
adjustment to the conversion factor to
reflect an estimated $780 million
reduction in non-drug item and service
spending for each year.
We are also considering whether
hospitals need additional time to
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prepare following any finalized policy,
and, as such, seek comment on whether
delaying the proposed reduction in the
conversation factor from CY 2025 to CY
2026 would provide hospitals with
additional time to make necessary
arrangements.
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c. Exclusion of New Providers
CMS recognizes that any hospital that
enrolled in Medicare after January 1,
2018, received less than the full amount
of the increased non-drug item and
service payments made during that time
than they otherwise would have
received if enrolled prior to that date.
This is because the increased non-drug
item and service payments were being
paid during all of CY 2018 through CY
2022, so any hospital that was not
enrolled in Medicare for the full
duration of this time period did not
receive the full amount of increased
non-drug items and service payments.
We note that while the 340B drug
payments increased to the default rate
effective September 28, 2022 following
the Supreme Court’s decision, the
increased conversion factor and
associated increased non-drug item and
service payments were in effect until
December 31, 2022. We are therefore
proposing that these providers would
not be subject to the prospective rate
reduction, which is predominantly
designed to offset those non-drug item
and service payments made during CY
2018 through CY 2022.
Consequently, we propose to
designate any hospital that enrolled in
Medicare after January 1, 2018, as a
‘‘new provider’’ for purposes of the
conversion factor adjustment to offset
those additional expenditures by
Medicare to remedy the 340B payment
policy and to pay these hospitals the
rate for non-drug items and services that
would apply in the absence of the
conversion factor adjustment
implemented due to the 340B payment
policy remedy. This means that we
would calculate payment rates for new
providers using the conversion factor
before applying the proposed 0.5
percent annual adjustment that would
apply for hospitals that are not ‘‘new
providers’’ for purposes of this policy.
For the purpose of designating a new
provider, we are proposing the date of
enrollment in Medicare as the
provider’s CMS certification number
(CCN) effective date. Providers that
would meet this definition, and that we
propose would be excluded from the
prospective payment adjustment, are
listed in the Addendum BBB to this
proposed rule. This addendum can be
found online through the CMS OPPS
website.17 As reflected in this file, we
have determined that approximately 300
providers of the approximately 3,900
OPPS providers meet this definition. We
propose to codify the exclusion of new
17 https://www.cms.gov/medicare/medicare-feefor-service-payment/hospitaloutpatientpps.
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providers from the prospective payment
adjustment to the conversion factor for
the duration of its application in the
regulations by adding new paragraph
(b)(1)(iv)(B)(12) to § 419.32.
This proposed ‘‘new provider’’
designation is intended to apply only to
truly new providers, meaning those that
were not enrolled in Medicare as of
January 1, 2018. Our proposal to
exclude ‘‘new providers’’ from the
prospective rate reduction would not
apply to providers that were enrolled in
Medicare before January 1, 2018, and
subsequently had a change in
ownership that resulted in a new CCN,
in part due to the fact that these
providers would have received
increased non-drug item and service
payments for the duration of the 340B
payment policy from CY 2018 through
CY 2022. We recognize that this
approach will exempt some hospitals
receiving the 340B lump sum payment
from the prospective offset. We
considered creating various levels of
exclusion from the proposed
prospective offset depending on how
long the specific hospital received
increased non-drug item and service
payments as a result of the 340B
payment policy. However, we do not
think it is feasible for CMS, or likely
preferred by providers, to create many
different sets of payment rates for
different groups of hospitals for the
duration of the proposed 16-year offset
period depending on how much of the
period of CY 2018 through CY 2022 the
provider was enrolled in Medicare for.
This is why we are proposing that any
hospital that enrolled in Medicare after
January 1, 2018, which would have
received less than the full amount of the
increased non-drug item and service
payments made during CY 2018 through
CY 2022 due to the 340B payment
policy than they otherwise would have
received if enrolled prior to that date,
would be exempt from the annual
adjustment to the conversion factor to
offset lump sum payments to affected
340B covered entity hospitals.
We solicit comments on our proposed
definition of a ‘‘new provider’’ and our
proposal to exempt new providers from
the annual adjustment to the conversion
factor to offset lump sum payments to
affected 340B covered entity hospitals.
We also solicit comments on whether
there are any other easily-identifiable
categories of providers who should be
similarly exempted from the annual
adjustment to the conversion factor.
III. Collection of Information
Requirements
This document does not impose
information collection requirements;
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that is, reporting, recordkeeping or
third-party disclosure requirements.
Consequently, there is no need for
review by the Office of Management and
Budget under the authority of the
Paperwork Reduction Act of 1995 (44
U.S.C. 3501 et seq.).
IV. Response to Comments
Because of the large number of public
comments we normally receive on
Federal Register documents, we are not
able to acknowledge or respond to them
individually. We will consider all
comments we receive by the date and
time specified in the DATES section of
this preamble, and, when we proceed
with a subsequent document, we will
respond to the comments in the
preamble to that document.
V. Regulatory Impact Analysis
A. Statement of Need
From CY 2018 through September
27th of CY 2022, CMS paid a lower rate
(generally ASP minus 22.5 percent) to
certain hospitals for drugs acquired
through the 340B discount program. The
purpose of this policy was to pay these
hospitals for 340B drugs at a rate that
more accurately reflected the actual
costs they incurred to acquire them.
This 340B policy was the subject of
several years of litigation, which
culminated in a decision of the Supreme
Court of the United States in American
Hospital Association v. Becerra, 142 S.
Ct. 1896 (2022), which held that if CMS
has not conducted a survey of hospitals’
acquisition costs, it may not vary the
payment rates for outpatient
prescription drugs by hospital group.
The Supreme Court subsequently
remanded the case, and the district
court ultimately ordered CMS to
implement a remedy to address the
reduced payment amounts to the
plaintiff hospitals from CY 2018 through
September 27th of CY 2022.
This proposed rule describes the
remedy CMS is proposing to comply
with the district court’s remand. It
would remedy the reduced payment
amounts to the affected 340B covered
entity hospitals by (1) calculating the
amount each hospital would have
received for 340B drugs from CY 2018
through September 27th of 2022 had the
340B policy not been in place; (2)
subtracting from that total the amount
each hospital received for 340B drugs
from CY 2018 through September 27th
of CY 2022; and (3) paying each affected
340B covered entity hospital the
difference between these amounts by
issuing instructions to the relevant MAC
instructing it to issue a one-time lump
sum payment to the hospital. The
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ddrumheller on DSK120RN23PROD with PROPOSALS1
amount of the lump sum payment
would include the portion of the
payment amount that would have been
paid from the Part B Trust Fund and the
portion of the payment amount that
would have been paid in the form of
beneficiary coinsurance if not for the
340B payment policy.
To comply with statutory budget
neutrality requirements, we are
proposing to annually reduce OPPS
payments for non-drug items and
services beginning in CY 2025 by
decreasing the OPPS conversion factor
by 0.5 percent each year, until a total
offset of an estimated $7.8 billion is
reached.
B. Overall Impact
We have examined the impacts of this
proposed rule as required by Executive
Order 12866 on Regulatory Planning
and Review (September 30, 1993),
Executive Order 13563 on Improving
Regulation and Regulatory Review
(January 18, 2011), Executive Order
14094 on Modernizing Regulatory
Review (April 6, 2023), the Regulatory
Flexibility Act (RFA) (September 19,
1980, Pub. L. 96–354), section 1102(b) of
the Act, section 202 of the Unfunded
Mandates Reform Act of 1995 (March
22, 1995; Pub. L. 104–4), and Executive
Order 13132 on Federalism (August 4,
1999), and the Congressional Review
Act (5 U.S.C. 804(2)).
Executive Orders 12866 and 13563
direct agencies to assess all costs and
benefits of available regulatory
alternatives and, if regulation is
necessary, to select regulatory
approaches that maximize net benefits
(including potential economic,
environmental, public health and safety
effects, distributive impacts, and
equity). Executive Order 14094 amends
section 3(f) of the Executive Order
12866 to define a ‘‘significant regulatory
action’’ as an action that is likely to
result in a rule: (1) having an annual
effect on the economy of $200 million
or more in any 1 year, or adversely
affect in a material way the economy, a
sector of the economy, productivity,
competition, jobs, the environment,
public health or safety, or State, local,
territorial, or tribal governments or
communities; (2) creating a serious
inconsistency or otherwise interfering
with an action taken or planned by
another agency; (3) materially altering
the budgetary impacts of entitlements,
grants, user fees, or loan programs or the
rights and obligations of recipients
thereof; or (4) raising legal or policy
issues for which centralized review
would meaningfully further the
President’s priorities or the principles
set forth in this Executive order.
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A regulatory impact analysis (RIA)
must be prepared for rules with
significant regulatory action(s) and/or
with significant effects as per section
3(f)(1) as measured by the $200 million
or more in any 1 year. Based on our
estimates, the Office of Management and
Budget’s (OMB’s) Office of Information
and Regulatory Affairs has determined
this rulemaking is significant per
section 3(f)(1) as measured by the $200
million or more in any 1 year.
Accordingly, we have prepared a
Regulatory Impact Analysis that to the
best of our ability presents the costs and
benefits of the rulemaking. Therefore,
OMB has reviewed these proposed
regulations, and the Department has
provided the following assessment of
their impact. We solicit comments on
the regulatory impact analysis provided.
As required by statute, we are
implementing this court-ordered
remedy in a budget neutral manner, and
we estimate that the total increase in
Federal Government expenditures, due
only to the proposed changes in this
proposed rule, would be $2.8 billion.
We took into consideration the
additional Medicare drug payments of
$9.0 billion to the estimated 1,649 340B
covered entity hospitals to which the
drug payment remedy would apply, and
the $6.2 billion in reduced Medicare
prospective payments for non-drug
items and services beginning in CY 2025
to offset the additional payments that
were made for non-drug items and
services from CY 2018 through CY 2022
as part of the 340B payment policy and
the amount of the 340B drug remedy
payments that would otherwise have
been paid by the beneficiary. We note
that this $6.2 billion figure is the
portion of reduced Medicare
prospective payments specifically, and
this represents approximately 80
percent of the total $7.8 billion offset
that we are proposing. Beneficiaries will
experience reduced prospective coinsurance payments representing
approximately the remaining 20 percent
of the total $7.8 billion offset. The $9.0
billion amount is an estimate of the total
aggregate additional payments that still
need to be made to 340B hospitals for
drugs that were paid less due to the
340B policy from CY 2018 through
September 27, 2022.
While we consider the amount of
additional payment made to affected
340B covered entity hospitals for 340Bacquired drug claims with dates of
service from January 1, 2022, through
September 27, 2022, that were
processed or reprocessed at the default
drug payment rate after the 340B
payment policy was vacated, estimated
at $1.5 billion, for purposes of the total
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Fmt 4702
Sfmt 4702
44091
aggregate remedy payment to affected
340B covered entity hospitals, we are
not including that $1.5 billion in our
calculation here, which estimates the
total increase in Federal Government
expenditures due only to the proposed
changes in this proposed rule. This $1.5
billion in remedy payments has already
been made after the District Court’s
order.
The two amounts described above,
$9.0 billion and $6.2 billion, are not
equal because the separate amounts
associated with restoring 340B-acquired
drug payments to ASP plus 6 and
offsetting the impact of additional
Medicare spending to remedy this 340B
payment policy are not equal to each
other. This is due to many factors,
including but not limited to, (1)
Medicare’s payment policy adjustment
for 340B acquired drugs ended on
September 27, 2022, while the original
conversion factor adjustment of minus
3.19 percent remained in effect until
December 31, 2022, (2) most of the 340B
drug claims with dates of service
between January 1, 2022, and September
27, 2022, have already been reprocessed
at the higher default drug payment rate,
while none of the increased non-drug
item and service payment during this
time period have been remedied, (3)
Medicare’s payment of an amount
equivalent to the increased beneficiary
cost-sharing 340B providers would have
received for 340B-acquired drugs if the
340B payment policy had not been in
effect as part of the lump sum payments
to providers, and (4) the original budget
neutrality adjustment to increase the
conversion factor in CY 2018 did not
keep pace with the reduction in 340B
drug payments for the remainder of the
years for which the 340B payment
policy previously applied. We note that,
in aggregate, the total additional
payment that providers will receive as
a result of this remedy, $10.5 billion,
will be larger than the amount of
payment that will be prospectively
offset, $7.8 billion.
Most notable of the aforementioned
factors is factor (4). From CY 2018
through CY 2022, the actual spending
associated with 340B-acquired drugs
changed from what was prospectively
projected. The actual total reduction in
340B-acquired drug payments during
this time period outpaced the
corresponding increase in non-drug
item and service payments. The
proposed changes in this proposed rule
are to maintain budget neutrality by
undoing the original 340B payment
policy. Additionally, this is consistent
with our past practice described in the
CY 2023 OPPS/ASC final rule with
comment period (87 FR 71975), which
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had the support of commenters, where
we maintained budget neutrality by
removing the effect of the 340B policy
as originally implemented in CY 2018
from the CY 2023 conversion factor and
ensured it was equivalent to the
conversion factor that would be in place
if the 340B payment policy had never
existed, rather than budget neutralizing
the increase in 340B drug spending by
making a corresponding conversion
factor decrease to account for the actual
increase in the payment rates for these
drugs. This proposed remedy complies
with the budget neutrality requirement
that Medicare should pay a total amount
for the additional 340B-acquired drug
payments that is generally offset by the
estimated amount that would have paid
absent the 340B payment policy. In
Table 2 of this proposed rule, we
display the impact of these proposed
policy changes on drug payments,
including aggregate payment by hospital
type. Specific proposed additional
340B-acquired drug lump sum payment
amounts by individual hospital can be
found in Addendum AAA. If we adopt
our proposal as proposed, the impact for
specific hospital types of the reduced
prospective payment for non-drug items
and services beginning in CY 2025
would be included in each proposed
and final rule for calendar years in
which the prospective reduction would
apply, beginning in CY 2025.
C. Detailed Economic Analysis
Column 1: Total Number of Hospitals
The first line in Column 1 in Table 2
shows the total number of facilities
(1,661), including designated cancer and
children’s hospitals and Community
Mental Health Centers (CMHCs), for
which we expect that the remedy
payments included in this proposed
rule, if finalized, would be made. We
excluded all hospitals and CMHCs for
which we would not expect any direct
effect from the remedy payments in this
proposed rule. We show the total
number of OPPS hospitals (1,649) for
which we expect remedy payments
would be made, excluding the PPSexempt cancer and children’s hospitals
and CMHCs, on the second line of the
table. We excluded cancer and
children’s hospitals because section
1833(t)(7)(D)(ii) of the Act provides
transitional outpatient payments (TOPs)
which permanently holds harmless
cancer hospitals and children’s
hospitals to their ‘‘pre-Balanced Budget
Act of 1997 (BBA) amount’’ as specified
under the terms of the statute.
Column 2: Remedy for the 340B
Payment Policy (in Millions)
Column 2 shows the estimated
remedy payments that would be made
under this proposed rule to various
categories of affected providers. We note
that certain categories of providers may
experience limited effects due to either
having no providers in the category or
limited billing associated with 340Bacquired drugs. We also note that a
provider’s placement within the
categories may vary due to their
characteristic information potentially
changing across the years in question
(CY 2018 through CY 2022).
Column 3 displays the estimated
payment impact of any CY 2022 claims
that have been reprocessed by the
MACs. We note that if these claims,
which include dates of service for
services furnished prior to September
28, 2022, were not reprocessed their
payments would otherwise have been
included as remedy payments in
Column 2. Column 4 includes the total
remedy payments, which is the sum of
column 2 and column 3.
TABLE 2—ESTIMATED FINANCIAL IMPACT OF THE PROPOSED REMEDY PAYMENTS ON OPPS PROVIDERS
(1)
Number of
hospitals
ddrumheller on DSK120RN23PROD with PROPOSALS1
Row
1
2
3
4
5
6
7
8
9
............
............
............
............
............
............
............
............
............
10
11
12
13
14
..........
..........
..........
..........
..........
15
16
17
18
19
..........
..........
..........
..........
..........
20
21
22
23
24
25
26
27
28
29
..........
..........
..........
..........
..........
..........
..........
..........
..........
..........
30
31
32
33
..........
..........
..........
..........
ALL PROVIDERS * ................................................................................................
ALL HOSPITALS (excludes hospitals held harmless and CMHCs) .....................
URBAN HOSPITALS .............................................................................................
LARGE URBAN .............................................................................................
(GT 1 MILL.).
OTHER URBAN (LE 1 MILL.) ........................................................................
RURAL HOSPITALS .............................................................................................
SOLE COMMUNITY ......................................................................................
OTHER RURAL .............................................................................................
BEDS (URBAN).
0–99 BEDS ....................................................................................................
100–199 BEDS ..............................................................................................
200–299 BEDS ..............................................................................................
300–499 BEDS ..............................................................................................
500 + BEDS ...................................................................................................
BEDS (RURAL).
0–49 BEDS ....................................................................................................
50–100 BEDS ................................................................................................
101–149 BEDS ..............................................................................................
150–199 BEDS ..............................................................................................
200 + BEDS ...................................................................................................
REGION (URBAN).
NEW ENGLAND ............................................................................................
MIDDLE ATLANTIC .......................................................................................
SOUTH ATLANTIC ........................................................................................
EAST NORTH CENT .....................................................................................
EAST SOUTH CENT .....................................................................................
WEST NORTH CENT ....................................................................................
WEST SOUTH CENT ....................................................................................
MOUNTAIN ....................................................................................................
PACIFIC .........................................................................................................
PUERTO RICO ..............................................................................................
REGION (RURAL).
NEW ENGLAND ............................................................................................
MIDDLE ATLANTIC .......................................................................................
SOUTH ATLANTIC ........................................................................................
EAST NORTH CENT .....................................................................................
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(2)
Lump sum
drug remedy
payment
(in millions)
(3)
CY 2022
reprocessed
drug payment
remedy
(in millions)
(4)
Total 340B
drug remedy
payments
(sum of
Columns 2 and 3)
1,661
1,649
1,297
611
9,003.4
9,003.4
8,538.2
4,326.8
1,540.5
1,540.5
1,491.5
815
10,543.9
10,543.9
10,029.7
5,141.8
686
324
147
177
4,211.4
457.3
95.1
362.2
676.5
47.2
5.9
41.4
4,887.9
504.5
101.0
403.6
213
374
252
267
191
258.3
827.1
1,208.8
1,982.7
4,261.3
44.4
124.7
192.6
338.9
790.9
302.7
951.8
1,401.4
2,321.6
5,052.2
124
116
40
21
23
80.6
104.3
89.4
89.9
93.2
7.7
13.3
8.7
8.1
9.3
88.3
117.6
98.1
98.0
102.5
73
163
218
232
75
79
145
86
223
3
613.4
1,173.0
1,593.3
1,318.6
644.2
749.3
610.5
566.2
1,269.7
0.0
114.8
2,36.3
280.2
240
106
129.4
99.6
90.2
195.1
0
728.2
1,409.3
1,873.5
1,558.6
750.2
878.7
710.1
656.4
1,464.8
0.0
11
22
52
48
25.0
32.1
97.1
66.9
1.4
3.5
5.5
8
26.4
35.6
102.6
74.9
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44093
TABLE 2—ESTIMATED FINANCIAL IMPACT OF THE PROPOSED REMEDY PAYMENTS ON OPPS PROVIDERS—Continued
(1)
Number of
hospitals
Row
34
35
36
37
38
..........
..........
..........
..........
..........
39 ..........
40 ..........
41 ..........
42
43
44
45
46
47
48
..........
..........
..........
..........
..........
..........
..........
49
50
51
52
..........
..........
..........
..........
53 ..........
54 ..........
55 ..........
EAST SOUTH CENT .....................................................................................
WEST NORTH CENT ....................................................................................
WEST SOUTH CENT ....................................................................................
MOUNTAIN ....................................................................................................
PACIFIC .........................................................................................................
TEACHING STATUS.
NON-TEACHING ............................................................................................
MINOR ...........................................................................................................
MAJOR ...........................................................................................................
DSH PATIENT PERCENT.
0 .....................................................................................................................
GT 0–0.10 ......................................................................................................
0.10–0.16 .......................................................................................................
0.16–0.23 .......................................................................................................
0.23–0.35 .......................................................................................................
GE 0.35 ..........................................................................................................
DSH NOT AVAILABLE ** ...............................................................................
URBAN TEACHING/DSH.
TEACHING & DSH ........................................................................................
NO TEACHING/DSH ......................................................................................
NO TEACHING/NO DSH ...............................................................................
DSH NOT AVAILABLE2 ................................................................................
TYPE OF OWNERSHIP.
VOLUNTARY .................................................................................................
PROPRIETARY ..............................................................................................
GOVERNMENT ..............................................................................................
(2)
Lump sum
drug remedy
payment
(in millions)
(3)
CY 2022
reprocessed
drug payment
remedy
(in millions)
(4)
Total 340B
drug remedy
payments
(sum of
Columns 2 and 3)
75
29
54
20
13
145.5
6.8
19.6
28.9
35.4
19.5
0.6
1.4
2.7
4.6
165.0
7.4
21.0
31.6
40.0
795
514
312
1,682.2
2,792.9
4,520.3
273.2
435.5
830
1,955.4
3,228.4
5,350.3
0
31
62
167
715
635
11
0.0
16.5
6.9
53.7
3,819.4
5,098.9
0.1
0
0.4
0.1
15.5
6,71.4
8,51.4
0
0.0
16.9
7.0
69.2
4,490.8
5,950.3
0.1
766
521
0
10
7,157.8
1,380.3
0.0
0.1
1,252
239.5
0
0
8,409.8
1,619.8
0.0
0.1
1,215
150
256
7,202.2
32.2
1,761.1
1,241.7
6.6
290.5
8,443.9
38.8
2,051.6
ddrumheller on DSK120RN23PROD with PROPOSALS1
Column (1) shows total hospitals that are expected to receive payments related to the 340B policy under this proposed rule.
Column (2) includes the estimated drug remedy payment made to account for the policies described in this proposed rule during the time period of CY 2018
through CY 2022.
Column (3) displays the estimated payment impact of any CY 2022 claims that have been reprocessed by the MACs. We note that if these claims, which include
dates of service for services furnished prior to September 28, 2022, were not reprocessed their payments would otherwise have been included as remedy payments
in Column 2.
Column (4) includes the total remedy payments, which is the sum of column 2 and column 3.
These 1,661 providers include children and cancer hospitals, which are held harmless to pre-BBA amounts, and CMHCs.
** Complete disproportionate share hospital (DSH) numbers are not available for providers that are not paid under IPPS, including rehabilitation, psychiatric, and
long-term care hospitals.
We estimate that the total proposed
monetary transfer in this proposed rule
would be approximately $9.0 billion.
The $9.0 billion includes the proposed
additional lump sum drug payments to
the 1,649 affected 340B covered entity
hospitals. The $9.0 billion amount is an
estimate of the total aggregate additional
payments that would need to be made
to the affected 340B covered entity
hospitals for drugs that were paid less
due to the 340B policy from CY 2018
through September 27th of CY 2022. As
noted previously, the estimated total
amount required to remedy providers is
$10.5 billion, which includes the $1.5
billion that has already been paid
through 340B drug claims processing
and reprocessing that occurred for CY
2022 claims.
We note that in this proposed rule we
also describe our proposal to annually
reduce OPPS payments for non-drug
items and services beginning in the CY
2025 OPPS, by decreasing the OPPS
conversion factor by 0.5 percent each
year until we have offset the full amount
of the additional payments made for
non-drug items and services from CY
2018 through CY 2022 due to the
increase in the conversion factor in
those years in response to the 340B
payment policy. This proposed
prospective offset will apply to all OPPS
providers, including 340B providers,
aside from those OPPS providers
explicitly excluded as previously
discussed. The overall impact of these
prospective reductions is estimated to
be minus $6.2 billion in Medicare
payments alone over the full span of
this proposed offset. The estimated
impact of this offset for each calendar
year for which the offset is estimated to
apply is detailed in Table 1 of this
proposed rule.18 The impact of this
offset on payments to each provider
type for each calendar year in which the
offset is in effect would be included in
the regulatory impact analysis for the
applicable annual OPPS rulemaking,
beginning for CY 2025. However, we
note that generally the impact of that
annual 0.5 percent reduction to the
OPPS conversion factor on individual
providers as well as categories of
providers will depend on the percentage
of their OPPS payments that are
conversion factor based, and in most
cases will be a decrease of slightly less
than 0.5 percent relative to overall OPPS
payment. Please see Table 3 below for
our estimated total impact to the OPPS
payments based on the information
provided in Table 1.
18 We note that Table 1 illustrates the prospective
reductions of $7.8 billion that represent the reduced
Medicare payments as well as reduced cost-sharing
paid by the beneficiary. The $6.2 billion of the
financial impacts discussed here represents only
the Medicare payments over the full span of this
proposed offset.
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TABLE 3—ESTIMATED ANNUAL IMPACT TO OPPS SPENDING BASED ON 0.5 PERCENT ADJUSTMENT TO THE CONVERSION
FACTOR
0.5-Percent Payment Reduction Amount (millions) .................................
0.5-Percent Payment Reduction Amount (millions) .................................
0.5-Percent Payment Reduction Amount (millions) .................................
CY 2025
CY 2026
CY 2027
CY 2028
CY 2029
CY 2030
$335
$351
$369
$387
$407
$427
CY 2031
CY 2032
CY 2033
CY 2034
CY 2035
CY 2036
$448
$471
$494
$519
$545
$572
CY 2037
CY 2038
CY 2039
CY 2040
$601
$631
$662
$581
Total Offset ...............................................................................................................................
ddrumheller on DSK120RN23PROD with PROPOSALS1
4. Regulatory Review Cost Estimation
If regulations impose administrative
costs on private entities, such as the
time needed to read and interpret this
proposed rule, we should estimate the
cost associated with regulatory review.
Due to the uncertainty involved with
accurately quantifying the number of
entities that will review the rule, we
assume that the total number of unique
commenters on last year’s CY 2023
OPPS/ASC proposed rule will be the
number of reviewers of this proposed
rule. We acknowledge that this
assumption may understate or overstate
the costs of reviewing this rule. It is
possible that not all commenters
reviewed last year’s rule in detail, and
it is also possible that some reviewers
chose not to comment on the proposed
rule. For these reasons we thought that
the number of past commenters would
be a fair estimate of the number of
reviewers of this rule. We welcome any
comments on the approach in
estimating the number of entities which
will review this proposed rule.
For the purposes of our estimate we
assume that each reviewer reads 100
percent of the proposed rule. We seek
comments on this assumption.
Using the mean hourly wage
information from the Bureau of Labor
Statistics (BLS) for medical and health
service managers (Code 11–9111), we
estimate that the cost of reviewing this
rule is $123.06 per hour, which is
double the BLS hourly rate in order to
account for fringe benefits and other
indirect costs in addition to the hourly
wage itself.19 Assuming an average
reading speed, we estimate that it would
take approximately 3 hours for the staff
to review this proposed rule. For each
entity that reviews the rule, the
estimated cost is $369.18 (3 hours ×
$123.06). Therefore, we estimate that
19 https://ww.bls.gov/oes/current/oes_nat.htm.
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the total cost of reviewing this
regulation is $608,778 ($369.18 × 1,649).
D. Alternatives Considered
We evaluated several options to
determine which remedy would best
achieve the objectives of unwinding the
unlawful 340B payment policy while
making certain OPPS providers as close
to whole as is administratively feasible.
For example, we considered making
additional payments to affected 340B
covered entity hospitals for 340Bacquired drugs from CY 2018 through
September 27th of CY 2022 without
implementing a budget neutral
adjustment. Additionally, we
considered retrospectively reprocessing
all claims from CY 2018 through
September 27th of CY 2022, which as
for the reasons stated in section II.A.2
we determined not to be operationally
feasible. We further considered making
additional payments to affected 340B
covered entity hospitals for 340Bacquired drugs from CY 2018 through
September 27th of CY 2022 without
proposing an adjustment to maintain
budget neutrality, which as for the
reasons stated in section II.A.1 we
determined not to be operationally
feasible.
We also considered calculating onetime aggregate payment adjustments for
each provider for the CY 2018 through
September 27th of CY 2022 time-period,
including both additional payments for
340B-acquired drugs and reduced
payments for non-drug items and
services under sections 1833(t)(2)(E) and
1833(t)(14) of the Act, along with our
retroactive rulemaking authority in
section 1871(e)(1)(A) of the Act. This
option would have involved: (1)
calculating the total additional
payments for each hospital that would
have been paid for separately payable
non-pass-through 340B-acquired drugs
from CY 2018 through September 27th
of 2022 in the absence of the 340B
payment policy; (2) calculating the
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$7.8 billion
additional amount each hospital was
paid under the OPPS from CY 2018
through CY 2022 for non-drug items and
services as a result of the 340B policy;
(3) subtracting (2) from (1); and (4)
issuing a payment to, or requiring a
recoupment from, each hospital for the
5-year period in which the 340B
payment policy was in effect, which as
for the reasons stated in section II.A.3
we determined not to be feasible or
appropriate. Such an approach would
require immediate, and in many cases
large, recoupments from the majority of
OPPS hospitals and would impose a
substantial, immediate burden on these
hospitals as well as an uncertain impact
on beneficiaries. Given this burden, the
financial strain many hospitals
experienced during the recent public
health emergency, and the amount of
time that has transpired since the
original payments for these drugs, items,
and services were made, we decided not
to propose this option and overly
burden these hospitals in this way,
making our proposed option much more
generous to OPPS providers.
We refer readers to section II.A of this
proposed rule for additional discussion
of all the alternatives we considered,
including our reasons for not proposing
them.
As previously discussed, we are
proposing the prospective offset to begin
in CY 2025, which we believe is
appropriate rather than other years, as
we believe starting this reduction in CY
2025 would allow CMS time to finalize
the appropriate methodology, and then
calculate and publish the payment rates
derived from this policy in the CY 2025
OPPS/ASC proposed rule, allowing
adequate time for impacted parties to
assess and prepare for the new payment
rates that would be calculated using a
reduced conversion factor.
E. Accounting Statement and Table
As required by OMB Circular A–4
(available at https://
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www.whitehouse.gov/wp-content/
uploads/legacy_drupal_files/omb/
circulars/A4/a-4.pdf), we have prepared
an accounting statement in Table 4
showing the classification of the impact
on these payment estimates because, if
finalized without further comment by
affected providers, these payment
amounts will be made by MACs 60
calendar days after receiving relevant
instructions from CMS.
associated with the provisions of this
proposed rule.
We note readers can find providerlevel estimates of proposed Medicare
payments in Addendum AAA to this
proposed rule. We welcome comment
TABLE 4—ACCOUNTING STATEMENT
Category
Estimate
Source citation
Year dollar
Impact table and impact file, based on the respective
2018 through 2022 claims.
CY 2018 through CY
2022.
340 drug claims with dates of service from January 1,
2022, through September 27, 2022, that have already been processed or reprocessed at the default
drug payment rate, generally ASP plus 6 percent.
CY 2022.
Future reductions to the OPPS conversion factor
based on the parameters in this proposed rule (estimated 2025 through 2040).
Estimated to be CY
2025 through CY
2040.
Transfers
One-time monetized transfers.
From whom to whom? .........
Previously monetized transfers (occurring before the
finalization of this rule).
From whom to whom? .........
Total .....................................
Monetized transfers .............
From whom to whom? .........
Total .....................................
$9.0 billion .....................................................................
Federal Government to affected 340B covered entity
hospitals.
$1.5 billion .....................................................................
Federal Government and beneficiaries to affected
340B covered entity hospitals.
$10.5 billion.
$7.8 billion .....................................................................
Hospitals and other providers who receive payment
under the hospital OPPS (other than new providers)
to the Federal Government and beneficiaries.
$7.8 billion.
We note that the approximately $9.0
billion of expected transfers in this
proposed rule is the $9.0 billion in
expected additional lump sum drug
remedy payments associated with this
proposed rule. $1.5 billion of the total
$10.5 billion in transfers to providers
has already been remedied through
processed or reprocessed 340B drug
claims for claims with dates of service
from January 1, 2022, through
September 27, 2022. We also outline the
anticipated $7.8 billion offset to
Medicare spending and beneficiary costsharing to be implemented through a 0.5
percent reduction to the OPPS
conversion factor for certain providers.
ddrumheller on DSK120RN23PROD with PROPOSALS1
F. Regulatory Flexibility Act (RFA)
The RFA requires agencies to analyze
options for regulatory relief of small
entities, if a rule has a significant impact
on a substantial number of small
entities. For purposes of the RFA, many
hospitals are considered small
businesses either by the Small Business
Administration’s size standards with
total revenues of $41.5 million or less in
any single year or by the hospital’s notfor-profit status. For details, we refer
readers to the Small Business
Administration’s ‘‘Table of Size
Standards’’ at https://www.sba.gov/
content/table-small-business-size
standards. As its measure of significant
economic impact on a substantial
number of small entities, HHS uses a
change in revenue of more than 3 to 5
percent. We believe that this threshold
will be reached by the requirements in
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this proposed rule with comment
period. As a result, the Secretary has
determined that this rule will have a
significant impact on a substantial
number of small entities.
In addition, section 1102(b) of the Act
requires us to prepare a regulatory
impact analysis if a rule may have a
significant impact on the operations of
a substantial number of small rural
hospitals. This analysis must conform to
the provisions of section 603 of the
RFA. For purposes of section 1102(b) of
the Act, we define a small rural hospital
as a hospital that is located outside of
a metropolitan statistical area and has
100 or fewer beds. We estimate that this
proposed rule with comment period
would result in approximately $190
million in remedy payments to 240
small rural hospitals. We note that the
estimated payment impact for any
category of small entity would depend
on the degree to which these entities
furnished 340B-acquired drugs.
The analysis, together with the
remainder of this proposed rule,
provides a regulatory flexibility analysis
and a regulatory impact analysis. We
note that the policies contained in this
proposed rule would apply more
broadly to OPPS providers and would
not specifically focus on small rural
hospitals. As a result, the impact on
those providers may depend more
significantly on their case mix of
services provided as well as the extent
to which they furnished 340B-acquired
drugs.
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G. Unfunded Mandates Reform Act
(UMRA)
Section 202 of the Unfunded
Mandates Reform Act of 1995 (UMRA)
also requires that agencies assess
anticipated costs and benefits before
issuing any rule whose mandates
require spending in any 1 year of $100
million in 1995 dollars, updated
annually for inflation. In 2023, that
threshold is approximately $177
million. This proposed rule does not
mandate any requirements for State,
local, or tribal governments, or for the
private sector.
H. Federalism
Executive Order 13132 establishes
certain requirements that an agency
must meet when it promulgates a
proposed rule (and subsequent final
rule) that imposes substantial direct
requirement costs on State and local
governments, preempts State law, or
otherwise has federalism implications.
We have examined the OPPS and ASC
provisions included in this proposed
rule in accordance with Executive Order
13132, Federalism, and have
determined that they will not have a
substantial direct effect on State, local,
or tribal governments, preempt State
law, or otherwise have a federalism
implication. As reflected in Table 2 of
this proposed rule, we estimate that
payments to impacted governmental
hospitals (including State and local
governmental hospitals) would increase
by approximately $1,800,000,000 if the
policies included in this proposed rule
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are finalized. Future adjustments to the
OPPS conversion factor to offset the
additional non-drug item and service
payments made from CY 2018 through
CY 2022 due to the 340B payment
policy would be discussed in the annual
rulemaking to which the adjustment
would apply. The analyses we have
provided in this section of this proposed
rule, in conjunction with the remainder
of this document, demonstrate that this
proposed rule is consistent with the
regulatory philosophy and principles
identified in Executive Order 12866 as
amended by Executive Order 14094, the
RFA, and section 1102(b) of the Act.
This proposed rule would affect
payments to a small number of small
rural hospitals, as well as other classes
of hospitals, and some effects may be
significant.
In accordance with the provisions of
Executive Order 12866, this regulation
was reviewed by the Office of
Management and Budget.
Chiquita Brooks-LaSure,
Administrator of the Centers for
Medicare & Medicaid Services,
approved this document on June 15,
2023.
List of Subjects in 42 CFR Part 419
Hospitals, Medicare, Reporting and
recordkeeping requirements.
For the reasons set forth in the
preamble, the Centers for Medicare &
Medicaid Services proposes to amend
42 CFR chapter IV as set forth below:
PART 419—PROSPECTIVE PAYMENT
SYSTEMS FOR HOSPITAL
OUTPATIENT DEPARTMENT
SERVICES
1. The authority citation for part 419
continues to read as follows:
■
Authority: 42 U.S.C. 1302, 1395l(t), and
1395hh.
2. Section 419.32 is amended by
revising paragraph (b)(1)(iv)(B)(11) and
adding paragraph (b)(1)(iv)(B)(12) to
read as follows:
■
§ 419.32 Calculation of prospective
payment rates for hospital outpatient
services.
ddrumheller on DSK120RN23PROD with PROPOSALS1
*
*
*
*
*
(b) * * *
(1) * * *
(iv) * * *
(B) * * *
(11) For calendar year 2020 through
calendar year 2024, a multifactor
productivity adjustment (as determined
by CMS).
(12) Beginning in calendar year 2025,
a multifactor productivity adjustment
(as determined by CMS) and 0.5
percentage point, except that the 0.5
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percentage point reduction shall not
apply to hospital outpatient items and
services, not including separately
payable drugs, furnished by a hospital
with a CMS certification number (CCN)
effective date of January 2, 2018, or
later. This reduction and associated
exception to the reduction will be in
effect until such time that estimated
payment reductions equal $7.8 billion.
*
*
*
*
*
Dated: July 6, 2023.
Xavier Becerra,
Secretary, Department of Health and Human
Services.
[FR Doc. 2023–14623 Filed 7–7–23; 4:15 pm]
BILLING CODE 4120–01–P
DEPARTMENT OF COMMERCE
National Oceanic and Atmospheric
Administration
50 CFR Part 679
RTID 0648–XD130
Notice of Intent To Prepare an
Environmental Impact Statement for
Minimizing Non-Chinook Salmon
Bycatch in the Bering Sea Pollock
Fishery in the Bering Sea/Aleutian
Islands Fishery Management Plan Area
National Marine Fisheries
Service (NMFS), Alaska Regional Office
(AKR), National Oceanic and
Atmospheric Administration (NOAA),
Commerce.
ACTION: Notification; intent to prepare
an environmental impact statement;
request for written comments.
AGENCY:
NMFS, in consultation with
the North Pacific Fishery Management
Council (Council), announces its intent
to prepare an Environmental Impact
Statement (EIS) on management
measures to minimize non-Chinook
salmon bycatch, particularly bycatch of
chum salmon (Oncorhynchus keta) of
western Alaska origin (Western Alaska
chum), in accordance with the National
Environmental Policy Act of 1969
(NEPA). The management measures
analyzed in this EIS would apply
exclusively to participants in the Bering
Sea pollock (Gadus chalcogrammus)
fishery, managed under the Fishery
Management Plan for Groundfish of the
Bering Sea and Aleutian Islands
Management Area (BSAI FMP), and
consistent with the Magnuson-Stevens
Fishery Conservation and Management
Act (Magnuson-Stevens Act), National
Standards, and other applicable law.
The scope of the EIS will be to analyze
the impacts to the human environment
SUMMARY:
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resulting from alternatives for measures
to minimize non-Chinook salmon
bycatch. NMFS will accept written
comments from the public to identify
the issues of concern and assist the
Council and NMFS in determining the
appropriate range of alternatives for the
EIS.
DATES: Written comments will be
accepted through September 15, 2023.
ADDRESSES: You may submit comments
on this document, identified by NOAA–
NMFS–2023–0089, by any of the
following methods:
• Electronic Submission: Submit all
electronic public comments via the
Federal e-Rulemaking Portal. Go to
https://www.regulations.gov and enter
NOAA–NMFS–2023–0089 in the Search
box. Click on the ‘‘Comment’’ icon,
complete the required fields, and enter
or attach your comments.
• Mail: Submit written comments to
Gretchen Harrington, Assistant Regional
Administrator, Sustainable Fisheries
Division, Alaska Region NMFS, Attn:
Susan Meyer. Mail comments to P.O.
Box 21668, Juneau, AK 99802–1668.
Instructions: Comments sent by any
other method, to any other address or
individual, or received after the end of
the comment period, may not be
considered by NMFS. All comments
received are a part of the public record
and will generally be posted for public
viewing on https://www.regulations.gov
without change. All personal identifying
information (e.g., name, address),
confidential business information, or
otherwise sensitive information
submitted voluntarily by the sender will
be publicly accessible. NMFS will
accept anonymous comments (enter ‘‘N/
A’’ in the required fields if you wish to
remain anonymous).
FOR FURTHER INFORMATION CONTACT:
Bridget Mansfield, (907) 586–7228,
Bridget.Mansfield@noaa.gov.
SUPPLEMENTARY INFORMATION:
Authority for Action
Under the Magnuson-Stevens Act, the
United States has exclusive fishery
management authority over all living
marine resources found within the
exclusive economic zone (EEZ) (i.e.,
those waters that are 3 to 200 nautical
miles (approximately 6 to 370
kilometers) from shore). The
management of these marine resources,
with the exception of birds and some
marine mammals, is vested in the
Secretary of Commerce. The Council
shares responsibility for preparing FMPs
for the fisheries that require
conservation and management in the
EEZ off Alaska. Management of the
Federal groundfish fisheries in the BSAI
E:\FR\FM\11JYP1.SGM
11JYP1
Agencies
[Federal Register Volume 88, Number 131 (Tuesday, July 11, 2023)]
[Proposed Rules]
[Pages 44078-44096]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2023-14623]
[[Page 44078]]
=======================================================================
-----------------------------------------------------------------------
DEPARTMENT OF HEALTH AND HUMAN SERVICES
Centers for Medicare & Medicaid Services
42 CFR Part 419
[CMS-1793-P]
RIN 0938-AV18
Medicare Program; Hospital Outpatient Prospective Payment System:
Remedy for the 340B-Acquired Drug Payment Policy for Calendar Years
2018-2022
AGENCY: Centers for Medicare & Medicaid Services (CMS), Department of
Health and Human Services (HHS).
ACTION: Proposed rule.
-----------------------------------------------------------------------
SUMMARY: This proposed rule describes the agency's proposed actions to
comply with the remand from the district court to craft a remedy in
light of the United States Supreme Court's decision in American
Hospital Association v. Becerra, 142 S. Ct. 1896 (2022), relating to
the adjustment of Medicare payment rates for drugs acquired under the
340B Program from calendar year (CY) 2018 through September 27th of CY
2022.
DATES: To be assured consideration, comments must be received at one of
the addresses provided below, by September 11, 2023.
ADDRESSES: In commenting, please refer to file code CMS-1793-P.
Comments, including mass comment submissions, must be submitted in
one of the following three ways (please choose only one of the ways
listed):
1. Electronically. You may submit electronic comments on this
regulation to https://www.regulations.gov. Follow the ``Submit a
comment'' instructions.
2. By regular mail. You may mail written comments to the following
address ONLY: Centers for Medicare & Medicaid Services, Department of
Health and Human Services, Attention: CMS-1793-P, P.O. Box 8010,
Baltimore, MD 21244-8010.
Please allow sufficient time for mailed comments to be received
before the close of the comment period.
3. By express or overnight mail. You may send written comments to
the following address ONLY: Centers for Medicare & Medicaid Services,
Department of Health and Human Services, Attention: CMS-1793-P, Mail
Stop C4-26-05, 7500 Security Boulevard, Baltimore, MD 21244-1850.
For information on viewing public comments, see the beginning of
the SUPPLEMENTARY INFORMATION section.
FOR FURTHER INFORMATION CONTACT: Elise Barringer, (410) 786-9222.
SUPPLEMENTARY INFORMATION:
Inspection of Public Comments: All comments received before the
close of the comment period are available for viewing by the public,
including any personally identifiable or confidential business
information that is included in a comment. We post all comments
received before the close of the comment period on the following
website as soon as possible after they have been received: https://www.regulations.gov. Follow the search instructions on that website to
view public comments. CMS will not post on Regulations.gov public
comments that make threats to individuals or institutions or suggest
that the individual will take actions to harm the individual. CMS
continues to encourage individuals not to submit duplicative comments.
We will post acceptable comments from multiple unique commenters even
if the content is identical or nearly identical to the content of
comments submitted by other commenters.
I. Background
A. OPPS Payment Policy for Drugs Acquired Through the 340B Program
1. Overview
Under the Hospital Outpatient Prospective Payment System
(``OPPS''), we generally set payment rates for separately payable drugs
and biologicals (hereinafter referred to collectively as ``drugs'')
under section 1833(t)(14)(A) of the Social Security Act (the Act).
Section 1833(t)(14)(A)(iii)(II) of the Act provides that, if hospital
acquisition cost data are not available, the payment amount is the
average price for the drug in a year established under section 1842(o),
section 1847A, or section 1847B of the Act, as the case may be. Payment
rates for drugs are usually established under section 1847A of the Act,
which generally sets a default rate of the average sales price (ASP)
plus 6 percent. Section 1833(t)(14)(A)(iii)(II) of the Act also
provides that the average price for the drug in the year as established
under section 1847A of the Act is calculated and adjusted by the
Secretary of the Department of Health and Human Services (Secretary) as
necessary for purposes of paragraph (14).
In the calendar year (CY) 2018 OPPS/ASC final rule with comment
period (82 FR 59353 through 59371), the Centers for Medicare & Medicaid
Services (CMS) reexamined the appropriateness of paying the ASP plus 6
percent for drugs acquired through the 340B Drug Pricing Program
(hereinafter referred to as the ``340B Program''), a Health Resources
and Services Administration (HRSA)-administered program that allows
covered entities to purchase certain covered outpatient drugs at
discounted prices from drug manufacturers. Based on findings of the
Government Accountability Office (GAO),\1\ the HHS Office of the
Inspector General (OIG),\2\ and the Medicare Payment Advisory
Commission (MedPAC) \3\ that 340B hospitals were acquiring drugs at a
significant discount under the 340B Program, CMS adopted a policy
beginning in 2018 generally to pay an adjusted amount of ASP minus 22.5
percent for certain separately payable drugs or biologicals acquired
through the 340B Program. This adjustment amount was based on our
concurrence with an analysis by MedPAC that concluded that the
estimated average minimum discount of 22.5 percent of ASP adequately
represented the average minimum discount that a 340B participating
hospital received for separately payable drugs under the OPPS (82 FR
59354 through 59371). Our intent in implementing this payment reduction
was to reflect more accurately the actual costs incurred by
participating hospitals in acquiring 340B drugs. We stated our belief
that such changes would allow Medicare beneficiaries and the Medicare
program to pay a more appropriate amount when hospitals participating
in the 340B Program furnished drugs to Medicare beneficiaries that were
purchased under the 340B Program (82 FR 59353 through 59371).
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\1\ Government Accountability Office. ``Medicare Part B Drugs:
``Action Needed to Reduce Financial Incentives to Prescribe 340B
Drugs at Participating Hospitals.'' June 2015. Available at https://www.gao.gov/assets/gao-15-442.pdf.
\2\ Office of Inspector General. ``Part B Payment for 340B
Purchased Drugs. OEI-12-14-00030''. November 2015. Available at:
https://oig.hhs.gov/oei/reports/oei-12-14-00030.pdf.
\3\ Medicare Payment Advisory Commission. March 2016 Report to
the Congress: Medicare Payment Policy. March 2016. Available at
Medicare Payment Advisory Commission. March 2016 Report to the
Congress: Medicare Payment Policy. March 2016. Available at https://www.medpac.gov/document/http-www-medpac-gov-docs-default-source-reports-may-2015-report-to-the-congress-overview-of-the-340b-drug-pricing-program-pdf/.
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2. OPPS Payment for 340B Drugs in CY 2018 Through September 27th of
2022
From January 1, 2018, through September 27, 2022, under the OPPS we
generally paid for certain separately payable drugs acquired through
the 340B Program at ASP minus 22.5 percent. In the CY 2018 OPPS/ASC
final rule with comment period (82 FR 59369 through 59370), we
finalized our proposal and adjusted the payment rate for separately
payable drugs (other than
[[Page 44079]]
drugs with pass-through payment status and vaccines) acquired under the
340B Program from ASP plus 6 percent to ASP minus 22.5 percent. We also
noted that critical access hospitals are not paid under the OPPS, and
therefore were not subject to the OPPS 340B drug payment adjustment
policy (hereinafter referred to as the ``340B payment policy''). We
also exempted rural sole community hospitals, children's hospitals, and
PPS-exempt cancer hospitals from the 340B payment adjustment primarily
due to these hospitals receiving special payment adjustments under the
OPPS. In addition, as stated in the CY 2018 OPPS/ASC final rule with
comment period, this policy change did not apply to drugs with pass-
through payment status, which are required to be paid based on the ASP
methodology, or vaccines, which are excluded from the 340B Program.
Additionally, as discussed in the CY 2018 OPPS/ASC final rule with
comment period (82 FR 59369 through 59370), to effectuate the payment
adjustment for 340B-acquired drugs, we implemented modifier ``JG,''
effective January 1, 2018. Hospitals paid under the OPPS, other than
types of hospitals excluded from the OPPS (such as critical access
hospitals), or exempted from the 340B payment policy for CY 2018, were
required to report modifier ``JG'' on the same claim line as the drug
Healthcare Common Procedure Coding System (HCPCS) code to identify a
340B-acquired drug. For CY 2018, rural sole community hospitals,
children's hospitals, and PPS-exempt cancer hospitals were exempted
from the 340B payment adjustment. These hospitals were required to
report informational modifier ``TB'' for 340B-acquired drugs, and
continued to be paid the full applicable amount, generally ASP plus 6
percent.
In the CY 2019 OPPS/ASC final rule with comment period (83 FR
58981), we continued the Medicare 340B payment policies that were
implemented in CY 2018 and adopted a policy to pay for non-pass-through
340B-acquired biosimilars at ASP minus 22.5 percent of the biosimilar's
ASP, rather than the reference biological product's ASP. Additionally,
in the CY 2019 OPPS/ASC final rule with comment period (83 FR 59015
through 59022), we finalized a policy to pay ASP minus 22.5 percent for
340B-acquired drugs furnished in non-exempted off-campus provider-based
departments (PBDs) paid under the Physician Fee Schedule (PFS). We
adopted this payment policy for CY 2019 and subsequent years. Also,
during the CY 2019 OPPS/ASC rulemaking cycle, we clarified that the
340B payment adjustment applied to drugs priced using either wholesale
acquisition cost (WAC) or average wholesale price (AWP), and since the
policy was first adopted, we applied the 340B payment adjustment to
340B-acquired drugs priced using these pricing methodologies. The 340B
payment adjustment for WAC-priced drugs was WAC minus 22.5 percent.
340B-acquired drugs that were priced using AWP were paid an adjusted
amount of 69.46 percent of AWP (83 FR 37125).\4\
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\4\ The 69.46 percent of AWP was calculated by first reducing
the original 95 percent of AWP price by 6 percent to generate a
value that is similar to ASP or WAC with no percentage markup. Then
we applied the 22.5 percent reduction to ASP/WAC-similar AWP value
to obtain the 69.46 percent of AWP, which was similar to either ASP
minus 22.5 percent or WAC minus 22.5 percent.
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For more detailed descriptions of our OPPS payment policy for drugs
acquired under the 340B program during this timeframe, we refer readers
to the CY 2018 OPPS/ASC final rule with comment period (82 FR 59353
through 59371); the CY 2019 OPPS/ASC final rule with comment period (83
FR 59015 through 59022); the CY 2020 OPPS/ASC final rule with comment
period (84 FR 61321 through 61327); the CY 2021 OPPS/ASC final rule
with comment period (85 FR 86042 through 86055); the CY 2022 OPPS/ASC
final rule with comment period (86 FR 63640 through 63649); and the CY
2023 OPPS/ASC final rule with comment period (87 FR 71972 through
71973).
3. Payment for Non-Drug Items and Services in CY 2018 Through CY 2022
In the CY 2018 OPPS/ASC final rule with comment period (82 FR
59216, 59258), to comply with the statutory budget neutrality
requirements under sections 1833(t)(9)(B) and (t)(14)(H) of the Act, we
finalized our proposal to redistribute our estimated reduction in
payments for separately payable drugs as a result of the 340B payment
policy by increasing the conversion factor used to determine the
payment amounts for non-drug items and services. As further described
in the CY 2018 OPPS/ASC final rule with comment period, we used updated
CY 2016 claims data and a list of 340B-eligible providers to calculate
an estimated impact of $1.6 billion based on the final CY 2018 policy
to pay for OPPS 340B-acquired drugs at a payment rate of generally ASP
minus 22.5 percent. In order to effectuate the budget neutrality
provisions of the OPPS, the estimated $1.6 billion in reduced drug
payments from adoption of the final 340B payment methodology was
redistributed in an equal offsetting amount to all hospitals paid under
the OPPS by increasing the payment rates by 3.19 percent for nondrug
items and services furnished by all hospitals paid under the OPPS for
CY 2018. This same conversion factor adjustment applied for CYs 2019
through 2022, increasing payments for non-drug items and services in
these CYs as a result of the 340B payment policy.
B. Litigation History of the 340B Payment Policy
The 340B payment policy has been the subject of extensive
litigation. On December 27, 2018, in the case of American Hospital
Association v. Azar, 348 F. Supp. 3d 62 (D.D.C. 2018), the United
States District Court for the District of Columbia (the District Court)
concluded that the Secretary exceeded his statutory authority by
adjusting the Medicare payment rates for drugs acquired under the 340B
Program to ASP minus 22.5 percent for CY 2018. The District Court
subsequently came to the same conclusion for CY 2019. See Am. Hosp.
Ass'n v. Azar, 385 F. Supp. 3d 1 (D.D.C. 2019).
On July 10, 2019, the District Court entered final judgment. See
Am. Hosp. Ass'n v. Azar, No. 18-cv-2084 (RC), 2019 WL 3037306 (D.D.C.
July 10, 2019). The agency then appealed to the United States Court of
Appeals for the District of Columbia Circuit (the D.C. Circuit), and on
July 31, 2020, that court issued an opinion reversing the District
Court's judgment. See Am. Hosp. Ass'n v. Azar, 967 F.3d 818 (D.C. Cir.
2020).
On June 15, 2022, the Supreme Court reversed the decision of the
D.C. Circuit, holding that if CMS has not conducted a survey of
hospitals' acquisition costs, it may not vary the payment rates for
outpatient prescription drugs by hospital group. See Am. Hosp. Ass'n v.
Becerra, 142 S. Ct. 1896 (2022).
The Supreme Court declined to opine on the appropriate remedy and
remanded the case to the D.C. Circuit, which in turn remanded it to the
District Court. Upon remand to the District Court, the plaintiffs filed
motions seeking orders (1) vacating the portion of the CY 2022 final
OPPS rule that set the reimbursement rate for 340B drugs at ASP minus
22.5 percent, which was still in effect for the remainder of 2022, and
(2) requiring CMS to remedy the reduced payment amounts to 340B
hospitals under the final OPPS rules for CY 2018 through CY 2022 by
reimbursing them the difference between what they were paid and ASP
plus 6 percent. On September 28, 2022, the District Court ruled on the
first motion, vacating the 340B
[[Page 44080]]
reimbursement rate for the remainder of 2022. See Am. Hosp. Ass'n v.
Becerra, 18-cv-2084 (RC), 2022 WL 4534617.\5\
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\5\ https://ecf.dcd.uscourts.gov/cgi-bin/show_public_doc?2018cv2084-79.
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On January 10, 2023, the District Court ruled on the second motion,
issuing a remand without vacatur to give the agency the opportunity to
determine the proper remedy for the reduced payment amounts to 340B
hospitals under the payment rates in the final OPPS rules for CY 2018
through CY 2022. See Am. Hospital Ass'n v. Becerra, 18-cv-2084 (RC),
2023 WL 143337.\6\
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\6\ https://ecf.dcd.uscourts.gov/cgi-bin/show_public_doc?2018cv2084-86.
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C. Payment for 340B-Acquired Drug Claims for September 28, 2022,
Through December 31, 2022, and for CY 2023
The agency complied with the District Court's September 28, 2022,
decision by uploading revised OPPS drug files to pay the default rate
(generally ASP plus 6 percent) for all CY 2022 claims for 340B-acquired
drugs paid from September 28, 2022, through the end of CY 2022.\7\
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\7\ See supra note 4.
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In the CY 2023 OPPS/ASC final rule with comment period, we
finalized a policy that drugs acquired through the 340B program would
be paid at the default rate (generally ASP plus 6 percent) for CY 2023.
Correspondingly, to ensure budget neutrality for CY 2023 OPPS payment
rates as required by statute, we finalized a reduction of 3.09 percent
to the 2023 OPPS conversion factor. This 3.09 percent reduction for CY
2023 offsets the prior increase of 3.19 percent that was applied to the
conversion factor when we implemented the 340B payment policy in CY
2018. This is because a downward adjustment involves a smaller
percentage reduction from a larger number to get the same dollar amount
as the original upward adjustment from a smaller number. More
specifically, in order to achieve the original budget neutrality
adjustment for CY 2018, we had to multiply the conversion factor by
1.0319. In order to offset this prior increase for the CY 2023 rule, we
had to make a downward adjustment to the conversion factor, which
involved dividing 1 by 1.0319, which equals 0.9691. And 1 minus 0.9691
equals 0.0309, which is where we derived the 3.09 percent reduction to
the conversion factor for CY 2023. As we explained in the CY 2023 OPPS/
ASC final rule, we decreased the OPPS conversion factor to offset the
increase the OPPS conversion factor in CY 2018, which originally
implemented the 340B policy in a budget neutral manner. We stated:
``This adjustment to the conversion factor is appropriate in these
circumstances, including because it removes the effect of the 340B
policy as originally adopted in CY 2018, which was recently invalidated
by the Supreme Court as explained above, from the CY 2023 conversion
factor and ensures it is equivalent to the conversion factor that would
be in place if the 340B payment policy had never been implemented'' (87
FR 71975). Additionally, we explained that we agreed with commenters,
including the American Hospital Association (AHA), that under these
specific circumstances it was appropriate to decrease payments for non-
drug items and services by a percentage that would offset the
percentage by which they were increased when CMS implemented the 340B
policy in CY 2018 (87 FR 71975).
For more detail on the payment rate for drugs acquired under the
340B program for CY 2023 and the corresponding adjustment to the
conversion factor to maintain budget neutrality as a result of
reversing the 340B adjustment and paying for all separately payable
drugs at ASP plus 6 percent (or WAC plus 3 or 6 percent or 95 percent
of AWP), we refer readers to the CY 2023 OPPS/ASC final rule with
comment period (87 FR 71973 through 71976).
II. Proposal To Remedy Payment Adjustment for 340B-Acquired Drugs From
CY 2018 Through September 27th of CY 2022
A. Remedy Options Considered By CMS
We evaluated several options to determine which remedy would best
achieve the objective of unwinding the unlawful 340B payment policy
while making certain OPPS providers (hereinafter referred to as
``affected 340B covered entity hospitals'') \8\ as close to whole as is
administratively feasible.
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\8\ Throughout the duration of the policy, the 340B payment
adjustment did not apply to critical access hospitals, rural sole
community hospitals, children's hospitals, and PPS exempt cancer
hospitals.
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We describe the different remedy options and aspects of those
alternative options that we considered below.
1. Make Additional Payments to Affected 340B Covered Entity Hospitals
for 340B-Acquired Drugs From CY 2018 Through September 27th of CY 2022
Without Proposing an Adjustment To Maintain Budget Neutrality
We considered calculating the additional amount each affected 340B
covered entity hospital would have been paid for 340B-acquired drugs
from CY 2018 through September 27th of CY 2022 if not for the 340B
payment policy, and then proposing to pay that amount to each hospital
without applying a corresponding adjustment to the conversion factor
for the increased payments for non-drug items and services that were
made from CY 2018 through CY 2022 due to the 340B payment policy. As
described in more detail below, we believe that we would have the
authority to make remedy payments under sections 1833(t)(2)(E) and
1833(t)(14) of the Act, along with our retroactive rulemaking authority
in section 1871(e)(1)(A) of the Act. We note that sections
1833(t)(2)(E) and 1833(t)(14) of the Act require budget neutrality with
respect to payment adjustments to the OPPS made under those sections
and are not specific to remedy payments. Consequently, we believe the
best reading of both of those provisions is that these remedy payments
are subject to budget neutrality requirements, at least when the budget
neutrality adjustment would not be de minimis. We believe our reading
of these provisions is consistent with the statute's general approach
of budget neutralizing OPPS payment adjustments, see, e.g., Social
Security Act (SSA) section 1833(t)(9)(B), as further explained in the
following sections.
Section 1833(t)(2)(E) of the Act straightforwardly requires
adjustments made under that provision be made ``in a budget neutral
manner.'' (Accord 65 FR 18438 (noting (t)(2)(E)'s budget neutrality
requirement)) Section 1833(t)(14)(H) of the Act, relating to drug APC
payment rates, states that ``Additional expenditures resulting from
this paragraph shall not be taken into account in establishing the
conversion, weighting, and other adjustment factors for 2004 and 2005
under paragraph (9), but shall be taken into account for subsequent
years.'' In addition, section 1833(t)(9)(B) of the Act, referenced in
section 1833(t)(14)(H), states that ``[i]f the Secretary makes
adjustments under subparagraph (A),\9\ then the adjustments for a year
may not cause the estimated amount of expenditures under this part for
the year to increase or decrease from the estimated amount of
expenditures under this part that would have been
[[Page 44081]]
made if the adjustments had not been made.''
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\9\ Section 1833(t)(9)(A) Periodic review.--The Secretary shall
review not less often than annually and revise the groups, the
relative payment weights, and the wage and other adjustments
described in paragraph (2) to take into account changes in medical
practice, changes in technology, the addition of new services, new
cost data, and other relevant information and factors.
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We believe these statutory requirements require that we maintain
budget neutrality when making these remedy payments. To the extent
these remedy payments are understood as a payment adjustment under
section 1833(t)(2)(E) of the Act, they are subject to that section's
budget neutrality constraints. And to the extent these payments are
understood as a payment under section 1833(t)(14) of the Act, they are
``[a]dditional expenditures resulting from'' paragraph (t)(14) for
years other than 2004 or 2005 and thus are subject to budget neutrality
constraints under section 1833(t)(14)(H) of the Act.
This reading of these provisions is consistent with the statute's
general approach of budget neutralizing OPPS payment adjustments, see,
e.g., SSA section 1833(t)(9)(B), except when expressly exempted, see
SSA section 1833(t)(7)(I), (t)(14)(H), (t)(16)(D)(iii), (t)(18)(C),
(t)(19)(A), (t)(20). Budget neutrality in OPPS serves the important
interest of limiting expenditures under Part B and thus protecting the
public fisc. Cf. H.R. Rep. No. 106-436, at 34 (1999) (noting the goal
of prospective payment systems, including the OPPS, is to slow growth
rate of Medicare expenditures). The Supplementary Medicare Insurance
Trust Fund (hereinafter referred to as the ``Part B Trust Fund'') that
makes OPPS payments is mostly financed by premiums from participants
and contributions from the general fund of the Treasury. The Trustees
of the Part B Trust Fund warn that unexpected increases in Medicare
Part B or D expenditures may thus require increases to beneficiary
premiums and coinsurance, which already represent a growing share of
beneficiaries' total income and are projected to reflect about three-
quarters of the average Social Security retired-worker benefit by the
end of this century. See The 2023 Annual Report of the Boards of
Trustees of the Federal Hospital Insurance and Federal Supplementary
Medicare Insurance Trust Funds at 40-41.\10\ Additionally, unexpected
increases in Medicare Part B or D expenditures could require tax
increases or expenditure reductions elsewhere in the Federal budget;
the Trustees already project expenditures to consume more than 30
percent of Federal income tax revenue in just 50 years. Id. at 43.
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\10\ https://www.cms.gov/oact/tr/2023.
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Accordingly, when changes to payment policy are made, we make an
adjustment to the OPPS conversion factor in order to maintain budget
neutrality. (70 FR 68542 (noting outpatient drugs are included in the
budget neutrality calculation beginning in 2006)) We do not believe
Congress intended the statute to permit regulated entities to achieve
policy outcomes through litigation that would be statutorily
unavailable to them through the regular rulemaking process--especially
policy outcomes that increase total Medicare expenditures.
We acknowledge that, in the past, not all OPPS payment policy
changes based on sections 1833(t)(14) and (t)(2)(E) of the Act have
resulted in adjustments to the budget neutrality factor or actual
expenditures from the Part B Trust Fund equaling zero in all
circumstances. The method CMS uses to account for changes to the
``estimated number of expenditures'' referenced in section
1833(t)(9)(B) and incorporated by section 1833(t)(14)(H) is the OPPS
conversion factor (e.g., 71 FR 68193 through 68194). In situations that
have not had any estimated impact on the OPPS conversion factor or that
would otherwise have a de minimis impact, such as a 0.0001 change to
the conversion factor, which would have an inconsequential effect on
Medicare payments, CMS has effectively rounded the estimated impact on
expenditures to zero.\11\ Thus, in circumstances when there would be a
de minimis impact on estimated OPPS payment to meet the budget
neutrality requirements as a result of a post-rulemaking policy change,
we have not changed OPPS payments to reflect the minimal impact of the
policy change. When considering whether the estimated amount of
expenditures is de minimis, we have taken into account relevant
context, such as the size of the change comparable to the OPPS payments
overall, the relative number of interested parties and any reliance
interests, as well as the anticipated impact on the Part B Trust Fund
of the change in payment due to the post-annual rulemaking policy
versus the anticipated administrative burden and cost of ratesetting
disruption.
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\11\ In the CY 2007 OPPS/ASC final rule with comment period,
using our authority under section 1833(t)(2)(E) of the Act, we
implemented a quality improvement program which required hospitals
eligible to participate in the Inpatient Prospective Payment Systems
(IPPS) Reporting Hospital Quality Data for the Annual Payment Update
(RHQDAPU) to meet the requirements for receiving the full FY 2007
IPPS payment in order to qualify for the CY 2007 OPPS update.
Hospitals failing to meet the requirements would receive a reduced
OPPS conversion factor update in CY 2007, the amount of which would
then, if not deemed ``negligible,'' be offset by a corresponding
increase to the OPPS conversion factor to maintain budget
neutrality. See 71 FR 68193 through 68194.
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In the case of the remedy payments for the 340B payment policy, by
contrast, we believe a budget neutrality adjustment is statutorily
required and, even if not statutorily required, warranted as a matter
of sound public policy. The estimated impact of our one-time lump sum
remedy payments is significant and reflects a very substantial fraction
of total OPPS spending for any one calendar year, one that goes well
beyond any impact of which we have previously rounded to zero. The
specifics of the lump sum are discussed in greater detail in the
following section, II.B.1. Additionally, we do not believe any reliance
interests or administrative burdens outweigh the impact of the remedy
payments on the Part B Trust Fund sufficiently to justify disregarding
the principle of budget neutrality, if that were statutorily possible.
As we explain below, though, the potential reliance interests
implicated by the need to recover unwarranted payments made over many
years, combined with the unique difficulties in calculating and
collecting these payments through retroactive rulemaking, should
properly affect the way the budget neutrality principle applies to
these unique circumstances.
As noted previously in section I.A.3, we budget neutralized the
340B payment policy from CY 2018 to CY 2022 by increasing the rate for
non-drug items and services by 3.19 percent. That resulted in $7.8
billion in additional spending on non-drug items and services during
that time period. We note that some OPPS providers are still filing, or
re-filing, claims for CY 2022; therefore, our estimate of the total
amount of additional spending on non-drug items and services during
that time period could change as more claims from CY 2022 are
processed, or reprocessed. CMS has repeatedly stated in both litigation
and OPPS rules in the Federal Register that any remedy payments could
be subject to budget neutrality constraints. See, e.g., Am. Hosp. Ass'n
v. Becerra, 142 S. Ct. 1896, 1903 (2022) (acknowledging HHS's position
that ``a judicial ruling invalidating the 2018 and 2019 reimbursement
rates for certain hospitals would require offsets elsewhere in the
program''); 84 FR 61323 (``Recognizing Medicare's complexity in
formulating an appropriate remedy, any changes to the OPPS must be
budget neutral, and reversal of the policy change, which raised rates
for non-drug items and services by an estimated $1.6 billion for 2018
alone, could have a significant
[[Page 44082]]
economic impact on the approximate 3,900 facilities that are paid for
outpatient items and services covered under the OPPS.''). Additionally,
because the 340B payment policy this rule proposes to remedy was itself
budget neutralized, failing to budget neutralize the remedy payments
would mean that the additional payments for non-drug items and services
that were made from CY 2018 through CY 2022 to achieve budget
neutrality for the 340B payment policy as described under section I.A.3
of this proposed rule would be a windfall, especially to non-340B
hospitals that were not subject to decreased drug payments from CY 2018
through CY 2022. The Trust Fund has a strong interest in recovering
that windfall, and those who received it have no legitimate reliance
interest in permanently retaining that windfall.
As for the administrative burden specific to maintaining budget
neutrality, CMS was already required by the remand order to remedy the
340B policy. The decision to include a budget neutrality component in
this remedy does not appreciably change this burden, though of course
the burden could be greater or lesser depending on how the remedy is
crafted. As set forth more fully below, our proposed budget neutrality
adjustment does not directly recoup money already paid to providers;
rather, it is a proposed adjustment to future payment rates, allowing
hospitals to take such rates into account rather than forcing them to
open their bank accounts and disgorge their windfall immediately. On
balance, the billions of dollars the proposed payments to affected 340B
covered entity hospitals would cost the Part B Trust Fund outweigh the
potential administrative expenses or disruption resulting from a broad
change in OPPS payment to offset these additional costs.
Finally, even if this remedy rule were exempt from budget
neutrality requirements as a matter of statutory interpretation, we
would still exercise our authority under section 1833(t)(2)(E) of the
Act to offset the extra payments we made for non-drug items and
services from 2018 through 2022. As discussed, those payments have
proven to be an unwarranted windfall, and the Trust Fund has a strong
interest in recovering them. This proposal to avoid a windfall to
providers would also be consistent with the agency's longstanding
inherent and common-law (and common-sense) recoupment authority,
through which ``the Secretary generally has the duty and power to
protect against overpayments to providers.'' Chaves Cnty. Home Health
Serv., Inc. v. Sullivan, 931 F.2d 914, 918 (D.C. Cir. 1991); see also,
e.g., United States v. Lahey Clinic Hosp., Inc., 399 F.3d 1, 16 (1st
Cir. 2005) (``Although provisions of the Medicare Act expressly
authorize the Secretary to reopen initial payment determinations and to
recoup overpayments administratively in certain circumstances, see 42
U.S.C. 1395g(a) and 1395gg, the statute does not displace the United
States' long standing power to collect monies wrongfully paid through
an action independent of the administrative scheme, nor is there any
inconsistency.''); Mount Sinai Hosp. of Greater Miami, Inc. v.
Weinberger, 517 F.2d 329, 345 (5th Cir.), modified, 522 F.2d 179 (5th
Cir. 1975) (similar). For that reason and those discussed above, we
would find that unwinding those payments would be necessary to ensure
equitable payments, even assuming no statutory budget neutrality
requirement applies.
Therefore, we believe that it is required by the statute--but even
if not required, that it would be consistent with the statute--and
consistent with our past practices, and appropriate, to propose to
offset the additional payments for non-drug items and services that
were made from CY 2018 through CY 2022 in order to maintain budget
neutrality or equitable payments when remedying this policy. But the
context of this rule remains unique: We are adjusting payments
prospectively in order to provide a remedy for a previous unlawful
payment decision. And precisely because that previous payment decision
itself followed budget neutrality principles; it provided unwarranted
payments to some at the same time it improperly took payments from
others. In applying budget neutrality principles to this remedy, we
seek to rectify this imbalance and restore matters as closely as
possible to where they would have been absent the policy the Supreme
Court determined to be unlawful. We solicit comments from the public on
our proposed interpretation of our statutory budget neutrality
obligations, equitable payment authorities, and recoupment authority.
2. Full Claims Reprocessing From CY 2018 Through September 27th of CY
2022
Perhaps the most perfect measure of achieving budget neutrality in
circumstances like this would be to turn back the clock to the day the
unlawful payment decision was first made, undo that decision, and start
over. To do so here, CMS would have to reprocess all OPPS claims for
340B-acquired drugs and non-drug items and services from CY 2018
through September 27th of CY 2022 using the default payment rate under
section (t)(14) of the Act and our retroactive rulemaking authority in
section 1871(e)(1)(A) of the Act. This approach would have the benefit
of putting providers, beneficiaries, and Medicare back in the same
situation they would have been in if CMS had never adopted the ASP
minus 22.5 percent rate for 340B-acquired drugs in 2018. But we have
previously rejected arguments that remedial rulemaking must necessarily
provide this type of precise make-whole relief. See Shands Jacksonville
Med. Ctr., Inc. v. Azar, 959 F.3d 1113, 1118 (D.C. Cir. 2020) (agreeing
that the agency need not restore ``each individual hospital . . . at
least to the position it would have occupied had the rate reduction
never taken effect'').
Reprocessing every single claim might be a potential approach to
remedy this situation, if it were administratively achievable. But
reprocessing such an unprecedentedly large volume of claims and issuing
payment to affected providers in a timely fashion would impose an
immense administrative burden on CMS, its contractors, and providers.
We accordingly believe that this approach is not feasible in this case.
This approach would require the reprocessing of virtually all claims
submitted to the OPPS system during the affected period of time, but
that system processes more than 100 million claims each year.
Reprocessing almost 5 years' worth of OPPS claims could take several
years, resulting in some affected 340B covered entities having to wait
multiple years to receive payment, and leading to widespread
beneficiary cost sharing uncertainty, as beneficiaries could be caught
by surprise by a significant change in cost sharing responsibility from
a claim they thought had been closed many years ago. The large quantity
of claims and the amount of time required to reprocess them while
continuing normal claims processing likewise would not result in timely
payments or adjustments to hospitals. Additionally, reprocessing these
claims would lead to the need for significant recoupments of payments
for non-drug items and services that would have already been paid at
the higher rate based on the budget neutrality adjustment applied as a
result of the original 340B payment policy. The D.C. Circuit has held
that it is not necessary ``to recalculate each individual claim paid
under the reduced rate'' that was the subject of litigation when doing
so would have caused significant
[[Page 44083]]
administrative burden and delayed payments. See Shands, 959 F.3d at
1120. But the expected results of such a calculation can certainly
inform an alternative approach to budget neutrality, as we discuss
below.
We note that the vast majority of 340B drug claims from CY 2022
have been reprocessed at the higher 340B payment rate, generally ASP
plus 6 percent, which we believe was allowable under the District
Court's order prospectively vacating the CY2022 340B payment rate and
the typical timely filing requirements described at 42 CFR 424.44. We
believe this was appropriate for CY 2022 claims given that providers
were able to follow the regular claims processing conventions for these
claims, and we will ensure CMS does not make duplicate payments for
these claims already remedied by the usual claims processing methods.
As of this proposed rule, we estimate that for CY 2022, $1.5 billion in
remedy payments (including the Medicare and beneficiary portions) have
already been made to providers through reprocessed claims, or claims
that had dates of service January 1, 2022, through September 27, 2022,
but were held until, or reprocessed after, the 340B rule was vacated
and the standard drug payment rates were in effect for 340B-acquired
drugs. We consider these reprocessed claims to be partially remedied as
340B providers no longer received the lower 340B drug payment rate for
these 340B-acquired drugs. We note that the non-drug item and service
payment components of these claims were not remedied, which we discuss
in subsequent sections. This $1.5 billion is one component of the total
remedy payments accounted for in this proposed rule. We also note that
these claims only had the 340B drug portion of the claim adjusted, and
that for these claims to be fully remedied the non-drug item and
service components of these claims would also need to be adjusted as
discussed in subsequent sections.
3. Aggregate Hospital Payments From CY 2018 Through September 27th of
CY 2022
We also considered calculating one-time aggregate payment
adjustments for each provider for the CY 2018 through September 27th of
CY 2022 time-period, including both additional payments for 340B-
acquired drugs and reduced payments for non-drug items and services
under sections 1833(t)(2)(E) and 1833(t)(14) of the Act, along with our
retroactive rulemaking authority in section 1871(e)(1)(A) of the Act.
This option would have involved: (1) calculating the total additional
payments for each hospital that would have been paid for separately
payable non-pass-through 340B-acquired drugs from CY 2018 through
September 27th of 2022 in the absence of the 340B payment policy; (2)
calculating the additional amount each hospital was paid under the OPPS
from CY 2018 through CY 2022 for non-drug items and services as a
result of the 340B policy; (3) subtracting (2) from (1); and (4)
issuing a payment to, or requiring a recoupment from, each hospital for
the 5-year period in which the 340B payment policy was in effect.
While this approach would also have satisfied the statutory budget
neutrality concerns discussed above, we do not believe the statute
mandates such an inflexible approach in these circumstances. Cf. Shands
Jacksonville Med. Ctr., Inc., 959 F.3d at 1120. (For further discussion
of this point, see section II.B.1.a.) Such an approach would require
immediate, and in many cases large, retroactive recoupments from the
majority of OPPS hospitals and would impose a substantial, immediate
burden on these hospitals as well as an uncertain impact on
beneficiaries. Given these burdens, the financial strain many hospitals
experienced during the recent public health emergency, and the amount
of time that has transpired since the original payments for these
drugs, items, and services were made, we decided not to propose this
option and overly burden these hospitals in this way.
B. Proposed Remedy
1. Proposed Methodology for Calculating and Process for Remitting
Remedy Payments to Affected 340B Covered Entity Hospitals for 340B-
Acquired Drugs Furnished and Paid Adjusted Amounts Under the OPPS in CY
2018 Through September 27th of CY 2022
a. Statutory Authority
CMS believes that the best way to remedy our payment policy for
340B-acquired drugs for the period from CY 2018 through September 27th
of CY 2022, which the Supreme Court found unlawful, would be to make
one-time lump sum payments to affected 340B covered entities calculated
as the difference between what they were paid for 340B drugs (ASP minus
22.5 percent or an adjusted WAC or AWP amount) during the relevant time
period (from CY 2018 through September 27th of CY 2022) and what they
would have been paid had the 340B payment policy not applied. We
believe this approach comes as close to providing 340B covered entities
with make-whole relief as CMS can reasonably accomplish, without the
massive burden that would be associated with manually reprocessing all
claims. Assuming hospitals properly assigned the billing codes
discussed below when submitting their CY 2018 through 2022 claims, CMS
expects the remedy payment to each 340B covered entity for 340B-
acquired drugs to be the same as if CMS manually reprocessed those
claims.
We propose to make the remedy payments relying principally on: (1)
our rate-setting authority under section 1833(t)(14) of the Act; and
(2) our equitable adjustment authority under section 1833(t)(2)(E) of
the Act. To the extent this proposed rule is retroactive (in whole or
in part), we would rely on our retroactive rulemaking authority in
section 1871(e)(1)(A) of the Act.
The Supreme Court has held that if CMS has not conducted a survey
of hospitals' acquisition costs, it may not vary the payment rates for
outpatient prescription drugs by hospital group. Because we did not use
any survey of hospitals' acquisition costs, we believe it is necessary
for the remedy to apply the default rate (generally ASP plus 6 percent)
to comply with paragraph (14)(A)(iii) of section 1833(t) of the Act for
those years, as interpreted by the Supreme Court. Even if a retroactive
rule were not necessary to comply with section 1833(t)(14) of the Act,
we believe that failing to apply the default rate retroactively would
be contrary to the public interest in this specific situation in part
because it would leave the plaintiff 340B hospitals paid at a
substantially lower rate, due to the magnitude of payment, than we now
believe to be proper under the statute and that they have continually
pressed in court since we first announced the adjustment. We believe
the equities weigh in favor of a partially retroactive remedy here,
because a significant number of plaintiff hospitals have been
advocating for our current policy in court since we first announced our
340B payment policy for CY 2018 despite our view that there was no
administrative or judicial review for such claims, and because the
impact on the Part B Trust Fund will be lessened because we are
applying budget neutrality principles. We note that the position of
those plaintiff hospitals was ultimately vindicated by the Supreme
Court.
Section 1871(e)(1)(A) of the Act prohibits the application of a
substantive change in regulations to items and services furnished
before the effective date of the substantive change unless, ``such
retroactive application is necessary to comply with statutory
requirements'' or the ``failure to apply
[[Page 44084]]
the change retroactively would be contrary to the public interest.''
Assuming this proposal is viewed as a retroactive remedy (in whole or
in part), we believe it would be necessary to use this retroactive
rulemaking authority to implement the remedy by revising 340B payment
rates for this prior period to comply with the Supreme Court's
interpretation of the requirements of section 1833(t)(14) of the Act.
Section 1833(t)(2)(E) of the Act requires the Secretary to,
``establish, in a budget neutral manner, outlier adjustments . . .
transitional pass-through payments . . . and other adjustments as
determined to be necessary to ensure equitable payments, such as
adjustments for certain classes of hospitals.'' In this case, we
propose that the lump sum payment, calculated as the difference between
what an affected 340B covered entity hospital received for 340B-
acquired drugs during the time period at issue and what they would have
received for 340B-acquired drugs if the 340B adjustment had not been in
place, would be an equitable retroactive adjustment. Such an adjustment
is necessary to ensure equitable payments to affected 340B covered
entity hospitals by making them whole for the decreased payments for
340B-acquired drugs they received from CY 2018 through September 27th
of CY 2022 that are no longer proper in light of the Supreme Court's
decision. To the extent necessary, we are applying the adjustment
retroactively in accordance with the Court's ruling and for the reasons
discussed in the above paragraph.
We are proposing to use our authority under 1833(t)(14) of the Act
in conjunction with our equitable adjustment authority under
1833(t)(2)(E) of the Act, to accomplish an equitable outcome as we
remedy past payments made under the 340B payment policy. To the extent
necessary, we also propose to use our retroactive rulemaking authority
under section 1871(e)(1)(A) of the Act.
We solicit comment from the public on our proposed use of these
authorities in the remedy policies discussed in the rule. We also
solicit comment on other possible authorities (including implied
authority or common law authority) that might also be applicable to the
remedy policies discussed in this rule or on which we could rely to
make remedy payments.
b. Estimated Reduction in Drug Payments to Affected 340B Covered Entity
Hospitals in CY 2018 Through September 27, 2022
An estimated 1,649 340B covered entity hospitals were paid at the
340B payment rate, which was generally ASP minus 22.5 percent for 340B-
acquired drugs for CY 2018 through September 27th of 2022, rather than
the default rate, which is generally ASP plus 6 percent, due to the
340B payment policy. CMS estimates that these hospitals received
approximately $10.5 billion less in 340B drug payments (including money
that would have been paid by Medicare and money that would have come
from beneficiaries as copayments) than they would have for drugs
provided in CY 2018 through September 27th of 2022 had the 340B policy
not been implemented. We will update these estimated figures in the
final rule as we continue to receive updated CY 2022 claims data. We
expect to have sufficient CY 2022 340B drug claims at issue submitted
by September 27, 2023; therefore, by the publication date for the final
rule that corresponds to this proposed rule, we should have sufficient
claims data to state with more specificity the reduction in drug
payments to affected 340B covered entity hospitals in CY 2018 through
September 27, 2022. As previously discussed, we estimate that 340B
providers have already received $1.5 billion in remedy payments through
reprocessed claims for 340B drugs provided from January 1, 2022,
through September 27, 2022. Since $1.5 billion of the total $10.5
billion that we calculated affected 340B covered entity hospitals did
not receive as a result of this payment policy has already been
remedied through reprocessed claims, we estimate the remaining remedy
amount that affected 340B covered entity hospitals have not yet
received as a result of this policy is $9.0 billion.\12\
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\12\ We note that the additional amount CMS pays affected 340B
covered entity hospitals through this remedy could decrease if
additional CY 2022 claims are processed at the higher payment rate,
as discussed under section I.C. As previously explained, the agency
complied with the District Court's September 28, 2022, decision by
paying the default rate (generally ASP plus 6 percent) for all CY
2022 claims for 340B-acquired drugs paid from September 28, 2022,
onward. However, as some affected 340B providers are still filing,
or re-filing, claims for CY 2022, we are paying those claims at the
higher default payment rate for drugs, which is generally ASP plus 6
percent. Therefore, our estimate of the total amount of additional
drug payments that would be made through this remedy could change as
more claims from CY 2022 are processed, or reprocessed, at the
default payment rate of ASP plus 6 percent.
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We have calculated the estimated aggregate payments by isolating
340B drugs assigned status indicator ``K''(non-pass-through drugs and
non-implantable biologicals, including therapeutic
radiopharmaceuticals) and billed with modifier ``JG'' (drug or
biological acquired with 340B Program discount, reported for
informational purposes). We then calculated the difference between
these drugs' CY 2018 through 2022 340B payment rate and the 340B rate
proposed in this rule, which was generally the difference between ASP
minus 22.5 percent and ASP plus 6 percent. We used a similar process to
estimate aggregate payments owed for drugs with payment amounts based
on WAC or AWP. In particular, for drugs priced using WAC, we calculated
the difference between WAC minus 22.5 percent and WAC plus 3 or 6
percent, as applicable, and for drugs priced using AWP, we calculated
the difference between 69.46 percent of AWP and 95 percent of AWP. We
note that the WAC and AWP based payment rates outlined in this
paragraph are the common longstanding default OPPS drug payment rates
if ASP data are not available.
We welcome comment on this proposed methodology of estimating the
reduction in drug payments to affected 340B covered entity hospitals in
CY 2018 through September 27, 2022.
c. Proposed Methodology for Calculating Remedy Payments Owed to Each
Affected 340B Covered Entity Hospital
We propose the following process for calculating the amount of
payment owed to each affected 340B covered entity hospital and issuing
that payment. For each affected 340B covered entity hospital, we
propose to calculate the amount the hospital would have been paid under
the OPPS from CY 2018 through September 27th of CY 2022 for drugs the
hospital acquired through the 340B Program had that 340B policy not
been in effect. We would then subtract from this amount the amount each
affected 340B covered entity hospital was paid under the OPPS for 340B-
acquired drugs during the period of CY 2018 to September 27th of CY
2022.
When added to the adjusted amount paid under the OPPS from CY 2018
through September 27th of CY 2022 for separately payable drugs acquired
under the 340B Program, this proposed additional lump sum payment
amount would result in the affected 340B covered entity hospital
receiving the default ASP plus 6 percent rate (or WAC plus 3 or 6
percent or 95 percent of AWP, as applicable) for drugs acquired
[[Page 44085]]
under the 340B Program for CY 2018 through September 27th of CY 2022.
We illustrate the proposed process for calculating and paying an
affected 340B covered entity hospital's additional lump sum OPPS
payments for 340B drugs furnished from CY 2018 through September 27th
of CY 2022 in the following example. Based on claims data from CY 2018
through September 27th of CY 2022 for which those claims have been
processed and OPPS payments already made, we would calculate that a
particular 340B-covered entity hospital would have been paid an
estimated $10 million for 340B drugs had that 340B payment policy not
been in effect during that time period. Then, based on claims data for
the same hospital from the same time period, we would calculate that
the hospital was actually paid $7.31 million for 340B drugs from CY
2018 through September 27th of CY 2022. The difference between these
two amounts--$2.69 million--would be the amount of the additional lump
sum payment the 340B covered entity hospital would receive. Another
method to estimate the total amount an affected 340B covered entity
hospital would have been paid had the 340B payment policy not been in
effect (X) is to use the following formula:
X = (Y/0.775) * 1.06
Where Y is the total amount received under the 340B policy from CY 2018
to September 27th of CY 2022.
In this example, the Y is $7.31 million. Therefore, ($7.31 million/
0.775) * 1.06 = $10 million. The lump sum payment would be $10 million
minus $7.31 million, which equals $2.69 million. We solicit comment
from the public on our proposed calculation methodology for calculating
remedy payments owed to each affected 340B covered entity hospital.
d. Instruction to MACs To Remit Remedy Payments
Consistent with our past practice of remitting payments owed due to
litigation, we propose to make additional payments to each 340B covered
entity hospital by issuing instructions (such as a Change Request (CR)
or a Technical Direction Letter (TDL)) to the 340B covered entity
hospital's Medicare Administrative Contractor (MAC), instructing the
MAC to issue a one-time lump sum payment to the hospital in the amount
calculated using the above described methodology within a specified
timeframe, which we propose would be within 60 calendar days of the
MAC's receipt of the instruction. For instance, in the example above
CMS would issue instructions to the relevant MAC instructing it to
issue a payment to the 340B covered entity hospital in the amount of
$2.7 million within 60 calendar days of the MAC's receipt of the
instructions. (Note: MACs will continue to follow normal accounting
processes for collecting repayment amounts stemming from provider-
specific overpayment obligations, as well as other unique situations
such as provider bankruptcy or payment suspension, any of which may
impact the provider's net payment amount.) We solicit comment from the
public on our proposed approach to remitting remedy payments. We
specifically seek comment on the timeframe of 60 calendar days in which
we are proposing to have the MACs make the proposed lump sum payments.
Given the number of one-time lump-sum payments to hospitals, the size
of the payments, and the overall complexity of this remedy, we believe
60 calendar days is necessary for the MACs to accurately and precisely
make these payments to individual hospitals. With that being said, we
seek comment on this timeframe and if another such timeframe, such as
30 calendar days, is supported by rationale from commenters.
e. Accounting for Beneficiary Cost-Sharing
In most circumstances, beneficiaries would pay in the form of
coinsurance approximately 20 percent of any additional 340B drug
payments that affected 340B covered entity hospitals would have
received, absent the CY 2018 through 2022 340B policy. But as described
above, we are proposing to make each remedy payment as a one-time lump
sum payment through MAC instructions using a combination of statutory
authorities, including, if necessary, our retroactive rulemaking
authority under section 1871(e)(1)(A) of the Act and our equitable
adjustment authority under section 1833(t)(2)(E) of the Act. Because
these payments are remedy payments issued through MAC instructions
relying in part on our equitable adjustment authority under section
1833(t)(2)(E) of the Act, we do not believe these payments would be
340B drug payments subject to beneficiary copayments. Rather, we
believe that these remedy payments are analogous to the type of cost
report adjustments under section 1833(t)(2)(E) of the Act that we have
previously found do not authorize providers to seek additional
beneficiary copayments.\13\
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\13\ For example, section 3138 of the Affordable Care Act added
a new section 1833(t)(18) to the Social Security Act, providing for
an adjustment under section 1833(t)(2)(E) of the Social Security Act
to address higher costs incurred by cancer hospitals. Section
1833(t)(2)(E) of the Act, in turn, directs the Secretary to
establish, ``in a budget neutral manner,'' payment ``adjustments as
determined to be necessary to ensure equitable payments, such as
adjustments for certain classes of hospitals.'' In response to CMS's
proposal to implement this adjustment on a per claim basis through
increased APC payments, commenters expressed concern that doing so
would increase beneficiary copayments since beneficiary copayment is
a percentage of the APC payment. These commenters encouraged CMS to
implement the adjustment in a way that did not increase beneficiary
copayments. Consequently, CMS determined it was appropriate to make
the cancer hospital payment adjustment through the form of an
aggregate payment to each cancer hospital determined at cost report
settlement, as opposed to an adjustment at the APC level, thereby
eliminating the higher copayments for beneficiaries associated with
providing the adjustment on a claims basis through increased APC
payments. See CY 2012 OPPS/ASC final rule, 76 FR 74121, 74204
(2011), for our prior use of our equitable adjustment authority
under section 1833(t)(2)(E) of the Act to adjust cancer hospital
payments.
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We acknowledge that we have previously suggested that any remedy
might affect beneficiary cost-sharing. See, e.g., 84 FR 61323. But we
made that statement in 2019, before the litigation was concluded, and
well before we proposed here how to structure any remedy and determine
how it should impact beneficiary cost sharing many years later. With
the benefit of a concrete proposed remedy, we can clarify that our
proposed lump sum payments for the difference in 340B-acquired drug
payments due to the 340B payment policy would not affect beneficiary
cost-sharing.
We believe that in these unique circumstances, it is appropriate to
exercise our authority under section 1833(t)(2)(E) of the Act to make
adjustments ``as necessary to ensure equitable payments'' and for
Medicare to pay the full $9.0 billion difference between what 340B
hospitals were paid for 340B-acquired drugs from CY 2018 through
September 27, 2022, and what they would have been paid for 340B-
acquired drugs absent the 340B payment policy during this time period,
so that affected 340B covered entity hospitals are paid the amount they
would have been paid in full without application of the 340B payment
policy. While we do not believe it would necessarily be appropriate to
make this kind of adjustment under section 1833(t)(2)(E) of the Act to
ensure hospitals receive what they would have been paid from Medicare
and beneficiaries absent the 340B payment policy every time we make a
policy change or lose a lawsuit, we propose finding that such an
adjustment is necessary for equitable payments in these unique
circumstances in part because of the unprecedented
[[Page 44086]]
scope of the remedy in terms of the amount of money at issue; the
number of services, beneficiaries, and claims affected; and the number
of years that have passed between the claims and the remedy.
Accordingly, we believe that here, where we are remedying prior
payments, it would be appropriate to set the remedy payment amount
under section 1833(t)(2)(E) of the Act so that affected 340B covered
entity hospitals would be paid amounts that approximate what they would
have been paid for these drugs absent the 340B payment policy, which
includes what affected 340B covered entity hospitals would otherwise
have been paid by the beneficiary. Therefore, the $9.0 billion payment
amount includes $1.8 billion, an amount that is equivalent to what
affected 340B covered entity hospitals would have collected from
beneficiaries for these 340B-acquired drugs if the 340B payment policy
had not been in effect.
We emphasize that, if our proposal is finalized, affected 340B
covered entity hospitals may not bill beneficiaries for coinsurance on
remedy payments--regardless of this adjustment--because we would issue
this remedy payment through MAC instructions relying in part on our
equitable adjustment authority under section 1833(t)(2)(E). CMS would
consider appropriate administrative action for providers who
nevertheless bill beneficiaries for coinsurance. We solicit comments
from the public on our proposed approach to accounting for beneficiary
cost sharing.
f. Proposed Remedy Payment Amounts
The following data file contains our calculations of the amounts
owed under the above-described methodology to each affected 340B
covered entity hospital: https://www.cms.gov/medicare/medicare-fee-for-service-payment/hospitaloutpatientpps. We solicit comment from the
public on the accuracy of the data in Addendum AAA of this proposed
rule, particularly with respect to the estimated amount of remedy
payment due to each hospital. This addendum can be found online through
the CMS OPPS website.\14\
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\14\ https://www.cms.gov/medicare/medicare-fee-for-service-payment/hospitaloutpatientpps.
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g. Anticipated Timing of Proposed Remedy Payments
If we finalize the proposal to pay affected 340B covered entity
hospitals in the manner described above, we would propose to make these
additional payments at the end of CY 2023 or beginning of CY 2024,
after this rule has been finalized and the MAC instructions for each
affected 340B covered entity hospital have been issued.
h. Eligibility of Proposed Remedy Payments for Interest
CMS also considered its authority to pay interest on the remedy
payments but does not believe it has the authority to do so.
2. OPPS Non-Drug Item and Service Payments From CY 2018 Through CY 2022
a. Background
As mentioned earlier in section I.A.3, the 340B payment policy was
implemented in a budget neutral manner under sections 1833(t)(9)(B) and
1833(t)(14)(H) of the Act by increasing non-drug item and service
payments to all OPPS providers for CY 2018 through CY 2022. To comply
with the statutory budget neutrality requirements in sections
1833(t)(9)(B) of the Act and 1833(t)(14)(H) of the Act, as well as
section 1833(t)(2)(E), CMS must account for these additional payments,
which were made solely due to the 340B payment policy that was in
effect from CY 2018 through CY 2022, in determining a remedy for the
340B policy. After the Supreme Court's decision in American Hospital
Association, those additional payments became a windfall--payments the
hospitals should not have received but did anyway. To comply with
budget neutrality and restore the situation as closely as reasonably
possible to the state that would exist if we simply re-ran all the
claims from 2018 to 2022 under the correct payment rules, we must find
a means of recovering this windfall.
The reduction in 340B drug payments made to affected 340B covered
entity hospitals from CY 2018 through CY 2022 was offset by an increase
in non-drug item and service payments made to all hospitals paid under
the OPPS during the same time period to comply with statutory budget
neutrality requirements. In other words, all hospitals were paid more
under the OPPS for non-drug items and services for CY 2018 through CY
2022 than they would have been paid in the absence of the 340B payment
policy. Starting in CY 2018, CMS applied an approximate 3.19 percent
increase to the OPPS conversion factor to offset the decreased OPPS
340B drug payments in order to maintain budget neutrality in those
years. Because we are now making additional payments to affected 340B
covered entity hospitals to pay them what they would have been paid had
the 340B policy never been implemented, we must correspondingly make an
offset to maintain budget neutrality as if the 340B payment policy had
not been in effect during CY 2018 through CY 2022. This is consistent
with the policy finalized in the CY 2023 OPPS/ASC final rule with
comment period (87 FR 71976) where CMS finalized a minus 3.09 percent
adjustment to the conversion factor as this adjustment removes the
effect of the 340B policy as originally adopted in CY 2018, again, as
described in more detail above in section I.C. The CY 2023 adjustment
to the conversion factor ensures it is equivalent to the conversion
factor that would be in place if the 340B payment policy had never been
implemented.
To calculate the additional amount CMS paid for non-drug items and
services, we propose to include those assigned the following status
indicators, SI = J1, J2, P, Q1, Q2, Q3, R, S, T, U, V. These status
indicators generally capture the non-drug items and services impacted
by a change in the OPPS conversion factor. For additional details on
these status indicators, we refer readers to Addenda D1 of the CY 2023
OPPS/ASC final rule with comment period for the most recent OPPS status
indicators and their definitions. This file is available on the CMS
website.\15\ We calculated the adjusted payment (the payment that would
have been made for the non-drug item or service absent the budget
neutrality adjustment to the conversion factor due to the 340B payment
policy) by taking the amount paid for the non-drug item or service and
dividing it by 1.0319 (the amount by which the conversion factor was
increased during CYs 2018 through 2022 to budget neutralize the effect
of the 340B payment policy). We propose that the amount that would need
to be offset to maintain budget neutrality in crafting this remedy
would be based on the payments to providers that would have been made
for non-drug items and services absent the 340B payment policy during
CY 2018 through CY 2022, and the Medicare payment to 340B providers for
the amount equivalent to the additional drug payments that would have
otherwise been paid as beneficiary cost-sharing. Based on these
factors, we are proposing prospectively to offset $7.8 billion in order
to maintain budget neutrality. This figure was calculated based on past
claims data with 80 percent of this amount based on the Medicare share
and 20 percent based on the beneficiary share.
[[Page 44087]]
As we explain below, our budget-neutrality adjustment in the 2018
through 2022 OPPS rules reflected a prediction regarding how much we
would spend on 340B drugs--a prediction that turned out to be too low.
As it turns out, 340B hospitals spent more on drugs than we expected,
so our policy ended up saving the Trust Fund (and beneficiaries) more
money from cutting the rates paid for 340B drugs than the Trust Fund
(and beneficiaries) paid for non-drug services in our budget-neutrality
adjustment to offset the savings. Our proposed remedy achieves budget
neutrality by reversing that imbalance. In aggregate, the total
additional payment that providers will receive as a result of this
remedy, $10.5 billion, will be larger than the amount of payment that
will be prospectively offset, $7.8 billion. As we explain below, we
believe that our proposed remedy, which effectively reverses the
imbalance that arose under the policy the Supreme Court deemed
unlawful, and reasonably approximates the results that would occur if
we simply re-ran the claims after eliminating the 340B adjustment,
reflects the best approach to budget neutrality in these unique
circumstances. We solicit comments from the public on our proposed
approach to implementing budget neutrality.
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\15\ https://www.cms.gov/medicaremedicare-fee-service-paymenthospitaloutpatientppshospital-outpatient-regulations-and-notices/cms-1772-fc.
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b. Proposed Prospective Adjustment to Payments for Non-Drug Items and
Services To Offset the Increased Payments for Non-Drug Items and
Services Made in CY 2018 Through CY 2022
As discussed previously in section II.A.1, we believe that sections
1833(t)(2)(E) and 1833(t)(14) of the Act, under which we propose to
make this proposed remedy payment, are properly read to require budget
neutrality. Section 1833(t)(2)(E) of the Act provides that adjustments
under that provision must be made in a budget neutral manner. Section
1833(t)(14)(H) of the Act states that additional expenditures resulting
from this paragraph shall not be taken into account in establishing the
conversion, weighting, and other adjustment factors for 2004 and 2005
under paragraph (9), but shall be taken into account for subsequent
years, while section 1833(t)(9)(B) of the Act states that the
adjustments for a year may not cause the estimated amount of
expenditures under this part for the year to increase or decrease from
the estimated amount of expenditures under this part that would have
been made if the adjustments had not been made. To implement these
requirements, we propose to unwind the additional payments that were
made for non-drug items and services to all providers from CY 2018
through CY 2022. In other words, along with reversing the rate change
discussed earlier in this rule, we propose to reverse the accompanying
increase in the conversion factor for CYs 2018 through 2022 that was
solely attributable to the adoption of the 340B payment policy.
In order to reduce the burden on providers of offsetting this
amount required to maintain budget neutrality, estimated to be $7.8
billion, we are proposing to implement this adjustment prospectively.
We propose to, beginning in CY 2025, reduce all payments for non-drug
items and services to all OPPS providers, except new providers as
defined later in this section, by 0.5 percent each year until the total
offset is reached (approximately 16 years). We believe starting this
reduction in CY 2025 would allow CMS time to finalize the appropriate
methodology, and then calculate and publish the payment rates derived
from this policy in the CY 2025 OPPS/ASC proposed rule, allowing
adequate time for impacted parties to assess and prepare for the new
payment rates that would be calculated using a reduced conversion
factor. Additionally, we believe a 0.5 percent annual reduction in the
conversion factor would be appropriate because it would balance the
need to address the past payments for non-drug items and services to
ensure budget neutrality while also ensuring the offset is not overly
financially burdensome on impacted entities, especially those in rural
communities, which we believe would be the case if we were to apply an
adjustment for the full offset amount in a single year.
We acknowledge that, in litigation, we at one point questioned the
American Hospital Association's suggestion that we could achieve budget
neutrality by decreasing Medicare payments in future years, noting that
section 1833(t)(9) of the Act requires budget neutrality for a
particular ``year.'' See Am. Hosp. Ass'n v. Becerra, Br. for the
Respondents, at 30 (U.S. No. 20-1114).\16\ At the same time, however,
the government pointed to the district court's conclusion that if the
Secretary was to retroactively increase the 2018 and 2019 payments for
340B hospitals, ``budget neutrality would require him to retroactively
lower the 2018 and 2019 rates for other Medicare Part B products and
services.'' Ibid. We have now further considered section 1833(t)(9) in
light of the Supreme Court's decision holding that judicial review is
available and also recognizing the statutory requirement of budget
neutrality, and distinct possible ways of approaching the remedy issue
have come into focus.
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\16\ https://www.supremecourt.gov/DocketPDF/20/20-1114/197027/20211020212647625_20-1114bsUnitedStates.pdf.
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As explained below, we believe that the proposal here is consistent
with paragraph (t)(9) of the Act: It would offset the amounts of money
that constitute excess payments in past years--which are effectively
overpayments for each past year in question (that is, 2018 to 2022) in
light of the Supreme Court's decision. In other words, while we propose
reducing the conversion factor in future years, we would be doing so
not by seeking to budget neutralize payments across a period of years
rather than in a particular ``year'', but instead by adjusting payment
rates for each year from 2018 to 2022 to account for the Supreme
Court's decision. We would then make the requisite additional payments
to 340B hospitals for those years, and collect the excess payments from
other hospitals in future years. Because the estimated amount of
expenditures for each of 2018 to 2022 would still be budget
neutralized--indeed, it is our best effort to implement the policy that
would have been in effect had the 340B policy never been implemented in
the first place--we believe it is consistent with the provision that
adjustments may not ``cause the estimated amount of expenditures under
this part for the year to increase or decrease.'' See SSA section
1833(t)(9)(B). We believe that this interpretation would balance any
reliance interests hospitals may have in payments already made while
staying consistent with the budget neutrality requirements repeated
throughout the OPPS statute in sections 1833(t)(2)(E), 1833(t)(9), and
1833(t)(14)(H). And, as discussed above in section II.A.1, avoiding a
windfall to providers is consistent with the agency's recoupment
authority. We welcome comments on these aspects of our proposal.
We also acknowledge that under our proposal the Part B Trust Fund
would pay out more for remedial payments than it would recover over
time based on the reduction in payments for non-drug items and
services. That is a consequence of many factors, including our estimate
in the CY 2018 OPPS/ASC final rule of the amount that expenditures for
340B-acquired drugs would decrease under the 340B payment policy, which
we budget neutralized by applying a corresponding adjustment to the
conversion factor to increase expenditures for non-drug
[[Page 44088]]
items and services by 3.19 percent. We acknowledged this limitation in
Medicare's ability to calculate a precise estimate for purposes of the
CY 2018 final rule with comment period in which this original budget
neutrality adjustment was made. In the CY 2018 final rule with comment
period we discussed that because data on drugs that are purchased with
a 340B discount are not publicly available, we did not believe it was
possible to more accurately estimate the amount of the aggregate
payment reduction and the offsetting amount of the adjustment that was
necessary to ensure budget neutrality through higher payment rates for
other services. Further we discussed that there were potential
offsetting factors, including possible changes in provider behavior and
overall market changes that would likely have lowered the impact of the
payment reduction (82 FR 52623).
As previously discussed, we now know our estimate of the reduction
in expenditures for 340B drugs was lower than the actual amount by
which expenditures for 340B drugs were reduced in CYs 2018 through
2022. Therefore, our budget neutrality calculations for those years
ended up increasing payments for non-drug services by less than we
decreased payments for 340B drugs. In an effort to come as close as is
reasonably possible to turning back the clock to restore the position
in which we would have been absent the policy the Supreme Court
invalidated, we believe the budget neutrality calculation should
reverse that result. The total amount of our proposed remedy payments
to 340B hospitals for 340B drugs would thus be greater than the
prospective reduction to the conversion factor. Given the unique
posture of this remedy rule, we do not propose at this time to revise
retroactively our estimated expenditures for CY 2018 through 2022, as
readjusting our past estimated expenditures in order to prospectively
adjust the conversion factor is not our standard practice for budget
neutrality, nor is it required by the statute.
While our CY 2018 through 2022 predictions are the primary reasons
that our proposed method of budget neutralization would not fully align
with the money we predict the Part B Trust Fund would pay out in lump
sum payments for 340B-acquired drugs as a result of this remedy, there
are additional reasons. Some of these reasons increase the gap between
our lump sum payment and our reduction in prospective non-drug
spending; others do the opposite. First, as previously discussed, a
large portion of the CY 2022 340B drug claims for dates of service
between January 1, 2022, and September 27, 2022, have already been
remedied as a result of being processed or reprocessed at the default
drug payment rate. However, none of the non-drug item and service
claims from CY 2022 have been offset yet to account for our proposed
method of budget neutralization. Second, as previously noted, during CY
2022 CMS began making payment for 340B drugs at the default drug
payment rate, generally ASP plus 6 percent, for claims processed after
September 28, 2022; however, no adjustment was made for the increased
payment of the non-drug item and service claims that were processed
during this time. Therefore, there is over an entire quarter of claims
for non-drug items and services that were paid a higher rate due to the
340B payment policy that still need to be offset, while the 340B drug
claims for this quarter have already been paid correctly. We note that
in aggregate, the total additional payment that providers will receive
as a result of this remedy, $10.5 billion ($9 billion in lump sum
payments and $1.5 billion for claims in 2022 that were processed or
reprocessed at the default drug payment rate), will be larger than the
amount of payment that will be prospectively offset, $7.8 billion. All
of these figures include the beneficiary co-insurance portion in order
to ensure providers receive what they would have absent the unlawful
340B payment policy.
As discussed above at section II.B.1.e, our proposal includes in
the remedy payments the amount that affected 340B covered entity
hospitals would otherwise have been paid by the beneficiary, so that
the payments approximate what the hospitals would have been paid for
these drugs absent the previous policy. Because the statute requires
that this adjustment be budget neutral, we are proposing to include in
the prospective offset calculation an amount to offset this increase in
Medicare payments. As also discussed, we are proposing a total
prospective offset of $7.8 billion to maintain budget neutrality as if
the 340B payment policy had never been in effect and therefore had
never adjusted the OPPS conversion factor. That offset encompasses both
the money hospitals unwarrantedly received from the Medicare Trust Fund
for non-drug services between 2018 and 2022, as well as the additional
copayments they received from beneficiaries on those services. And we
are using it to offset both the payments we are making to compensate
340B hospitals for the lower amounts Medicare paid them and the
equitable adjustment we are making to compensate for the additional
beneficiary copayments they would have received.
To avoid potentially overburdening providers with an immediate
downward adjustment to the OPPS conversion factor, we believe applying
a delayed offset to every non-drug item and service for every hospital
is appropriate over a period of time. This is similar to the original
340B payment policy budget neutrality adjustment that increased the
payment for every non-drug item and service for CY 2018 through CY 2022
to offset the downward adjustment in the payment rate for drugs
acquired under the 340B program. We are aware that, depending on how a
hospital's future mix of drug and non-drug services compares to its
past mix of drug and non-drug services, as well as any absolute growth
in a hospital's non-drug services, some hospitals may ultimately
receive slightly more (or less) of a payment reduction than the payment
increase they received in CY 2018 through CY 2022. But there is often
some imprecision inherent in budget neutrality calculations, and the
alternative would require that we recalculate the additional amount
that each hospital received under the prior policy and then apply a
specific reduction to that hospital's future non-drug service payment
rates to offset that amount. That is very similar to the claims
reprocessing alternative that we discussed previously in section
II.A.2, which would impose significant burdens and payment delays for
340B providers and it is faster and more certain than prospectively
offsetting for all OPPS providers. In addition, it would be
administratively unworkable to tailor individual payment reductions for
each of the thousands of impacted hospitals for over a decade and a
half, meaning we would likely need to collect a lump sum budget
neutrality recoupment. That would impose all the burdens of an up-front
budget neutrality recoupment we decided against proposing, as explained
previously in section II.A.3. Except in the case of truly new
hospitals, which we propose to exclude from the prospective offset as
described under section II.B.2.c below, we generally do not believe our
proposed approach would so significantly undercompensate hospitals to
require that outcome, despite these potential distributional
consequences. See Shands Jacksonville Med. Ctr., Inc. v. Azar, 959 F.3d
1113, 1120 (D.C. Cir. 2020) (rejecting challenge to remedy rule even
when it left some hospitals
[[Page 44089]]
``slightly better off and others slightly worse off than they would
have been had the rate reduction never taken effect''). Rather, we
believe that our remedy would come as close as reasonably possible to
turning back the clock to restore us to the place in which we would
have been absent the policy the Supreme Court held unlawful. This
remedy applies in truly unique circumstances: we must apply budget
neutrality not purely prospectively but in a partially retroactive
rulemaking to rectify an adjudicated past violation of law. As
previously discussed, re-running all the relevant claims as if the 340B
payment policy didn't occur would be close to impossible
administratively. In these unique circumstances, we believe our
proposed approach properly applies the budget neutrality principle,
even if it results in some effectively unavoidable imprecision.
Accordingly, beginning in CY 2025, we propose annually to reduce
OPPS payments for non-drug items and services, by decreasing the OPPS
conversion factor by 0.5 percent each year until the total offset,
estimated to be $7.8 billion, is reached. We recognize this rule is
unique and therefore requires a unique prospective offset period. We
believe an annual reduction of 0.5 percent would offset this amount in
a reasonable amount of time while not imposing too significant of a
reduction on hospitals in any particular year. At this time, we
estimate that this process would take approximately 16 years (Table 1).
This estimate is based on current OPPS payments that are made through
the OPPS conversion factor and typical year-over-year increases in OPPS
payments over the past ten years. We note that, similar to the original
340B budget neutrality adjustment to the conversion factor, both
Medicare payments under the OPPS and beneficiary cost-sharing will be
impacted by the change in the conversion factor. In this instance,
beneficiaries will generally have lower co-insurance payments for non-
drug items and services as a result of this proposed 0.5 percent annual
reduction to the OPPS conversion factor for the duration of the
required budget neutrality offset. We invite comment on our estimated
budget neutrality offset calculations, including the discussion of our
method of budget neutralization not fully aligning with the money we
predict the Part B Trust Fund would pay out in lump sum payments for
340B-acquired drugs as a result of this remedy, in advance of our
application of the 0.5 percent reduction to the conversion factor
starting in CY 2025. We would adjust this estimate in future CY annual
OPPS rules after CY 2025, based on updated data, such as claims and
aggregate OPPS spending estimates, to account for how much of the total
additional non-drug item and service payment amount has been offset by
the time of each annual rule. In the final CY rulemaking for this
process, we propose that when we estimate the remaining amount of
Medicare payment that would be needed to be fully offset within the
prospective year, we propose that the 0.5 percent reduction amount
would be reduced in the final year in which the adjustment applies, if
needed, to the percentage estimated to be sufficient to offset the
remaining amount by the end of that calendar year. After this final
prospective adjustment is made, we propose that we would not make any
additional adjustments to the OPPS conversion factor for purposes of
offsetting the additional Medicare payments made to remedy the OPPS
340B payment policy, nor would we make any additional future
adjustments if the amount of the offset in the final year of this
adjustment is more or less than we had estimated in rulemaking for that
CY. We propose to codify the 0.5 percent reduction in the OPPS
conversion factor effective for CY 2025 in the regulations by adding
new paragraph (b)(1)(iv)(B)(12) to Sec. 419.32.
Table 1--Illustration of the Proposed 0.5 Percent Conversion Factor Adjustment to the OPPS Non-Drug Items and
Services Beginning CY 2025 To Maintain Budget Neutrality
----------------------------------------------------------------------------------------------------------------
CY 2024 CY 2025 CY 2026 CY 2027 CY 2028 CY 2029
----------------------------------------------------------------------------------------------------------------
Total Applicable OPPS Non-Drug Item and $63,724 $66,910 $70,256 $73,769 $77,457 $81,330
Service Spending (millions)..................
0.5-Percent Payment Reduction Amount ......... 335 351 369 387 407
(millions)...................................
Estimated Total Cumulative Offset (millions).. ......... 335 686 1,055 1,442 1,849
----------------------------------------------------------------------------------------------------------------
CY 2030 CY 2031 CY 2032 CY 2033 CY 2034 CY 2035
----------------------------------------------------------------------------------------------------------------
Total Applicable OPPS Non-Drug Item and $85,369 $89,667 $94,150 $98,858 $103,801 $108,991
Service Spending (millions)..................
0.5-Percent Payment Reduction Amount 427 448 471 494 519 545
(millions)...................................
Estimated Total Cumulative Offset (millions).. 2,276 2,724 3,195 3,689 4,208 4,753
----------------------------------------------------------------------------------------------------------------
CY 2036 CY 2037 CY 2038 CY 2039 CY 2040
----------------------------------------------------------------------------------------------------------------
Total Applicable OPPS Non-Drug Item and Service Spending $114,440 $120,162 $126,170 $132,479 $139,102
(millions)..............................................
0.5-Percent Payment Reduction Amount (millions).......... 572 601 631 662 * 581
Estimated Total Cumulative Offset (millions)............. 5,325 5,926 6,557 7,219 7,800
----------------------------------------------------------------------------------------------------------------
* Note, the final year's offset is estimated to be less than 0.5 percent in order to meet the total estimated
offset of $7.8 billion.
We also note the Total Applicable OPPS Non-Drug Item and Service Spending are estimates based on an assumption
of 5 percent annual growth. The 5 percent annual growth is determined from a 10-year baseline percentage
increase.
We seek comments on the annual percent reduction method described
above and whether an alternative option--including those discussed
previously in section II.A--would be appropriate. Additional possible
alternative timelines for maintaining budget neutrality could be to
offset a fixed dollar amount each year over a fixed period of time,
such as 5, 10, or 15 years. For example, we could divide the $7.8
billion number by ten in order to offset $780 million per year from CY
2025 through CY 2034 by making an adjustment to the conversion factor
to reflect an estimated $780 million reduction in non-drug item and
service spending for each year.
We are also considering whether hospitals need additional time to
prepare following any finalized policy, and, as such, seek comment on
whether delaying the proposed reduction in the conversation factor from
CY 2025 to CY 2026 would provide hospitals with additional time to make
necessary arrangements.
[[Page 44090]]
c. Exclusion of New Providers
CMS recognizes that any hospital that enrolled in Medicare after
January 1, 2018, received less than the full amount of the increased
non-drug item and service payments made during that time than they
otherwise would have received if enrolled prior to that date. This is
because the increased non-drug item and service payments were being
paid during all of CY 2018 through CY 2022, so any hospital that was
not enrolled in Medicare for the full duration of this time period did
not receive the full amount of increased non-drug items and service
payments. We note that while the 340B drug payments increased to the
default rate effective September 28, 2022 following the Supreme Court's
decision, the increased conversion factor and associated increased non-
drug item and service payments were in effect until December 31, 2022.
We are therefore proposing that these providers would not be subject to
the prospective rate reduction, which is predominantly designed to
offset those non-drug item and service payments made during CY 2018
through CY 2022.
Consequently, we propose to designate any hospital that enrolled in
Medicare after January 1, 2018, as a ``new provider'' for purposes of
the conversion factor adjustment to offset those additional
expenditures by Medicare to remedy the 340B payment policy and to pay
these hospitals the rate for non-drug items and services that would
apply in the absence of the conversion factor adjustment implemented
due to the 340B payment policy remedy. This means that we would
calculate payment rates for new providers using the conversion factor
before applying the proposed 0.5 percent annual adjustment that would
apply for hospitals that are not ``new providers'' for purposes of this
policy. For the purpose of designating a new provider, we are proposing
the date of enrollment in Medicare as the provider's CMS certification
number (CCN) effective date. Providers that would meet this definition,
and that we propose would be excluded from the prospective payment
adjustment, are listed in the Addendum BBB to this proposed rule. This
addendum can be found online through the CMS OPPS website.\17\ As
reflected in this file, we have determined that approximately 300
providers of the approximately 3,900 OPPS providers meet this
definition. We propose to codify the exclusion of new providers from
the prospective payment adjustment to the conversion factor for the
duration of its application in the regulations by adding new paragraph
(b)(1)(iv)(B)(12) to Sec. 419.32.
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\17\ https://www.cms.gov/medicare/medicare-fee-for-service-payment/hospitaloutpatientpps.
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This proposed ``new provider'' designation is intended to apply
only to truly new providers, meaning those that were not enrolled in
Medicare as of January 1, 2018. Our proposal to exclude ``new
providers'' from the prospective rate reduction would not apply to
providers that were enrolled in Medicare before January 1, 2018, and
subsequently had a change in ownership that resulted in a new CCN, in
part due to the fact that these providers would have received increased
non-drug item and service payments for the duration of the 340B payment
policy from CY 2018 through CY 2022. We recognize that this approach
will exempt some hospitals receiving the 340B lump sum payment from the
prospective offset. We considered creating various levels of exclusion
from the proposed prospective offset depending on how long the specific
hospital received increased non-drug item and service payments as a
result of the 340B payment policy. However, we do not think it is
feasible for CMS, or likely preferred by providers, to create many
different sets of payment rates for different groups of hospitals for
the duration of the proposed 16-year offset period depending on how
much of the period of CY 2018 through CY 2022 the provider was enrolled
in Medicare for. This is why we are proposing that any hospital that
enrolled in Medicare after January 1, 2018, which would have received
less than the full amount of the increased non-drug item and service
payments made during CY 2018 through CY 2022 due to the 340B payment
policy than they otherwise would have received if enrolled prior to
that date, would be exempt from the annual adjustment to the conversion
factor to offset lump sum payments to affected 340B covered entity
hospitals.
We solicit comments on our proposed definition of a ``new
provider'' and our proposal to exempt new providers from the annual
adjustment to the conversion factor to offset lump sum payments to
affected 340B covered entity hospitals. We also solicit comments on
whether there are any other easily-identifiable categories of providers
who should be similarly exempted from the annual adjustment to the
conversion factor.
III. Collection of Information Requirements
This document does not impose information collection requirements;
that is, reporting, recordkeeping or third-party disclosure
requirements. Consequently, there is no need for review by the Office
of Management and Budget under the authority of the Paperwork Reduction
Act of 1995 (44 U.S.C. 3501 et seq.).
IV. Response to Comments
Because of the large number of public comments we normally receive
on Federal Register documents, we are not able to acknowledge or
respond to them individually. We will consider all comments we receive
by the date and time specified in the DATES section of this preamble,
and, when we proceed with a subsequent document, we will respond to the
comments in the preamble to that document.
V. Regulatory Impact Analysis
A. Statement of Need
From CY 2018 through September 27th of CY 2022, CMS paid a lower
rate (generally ASP minus 22.5 percent) to certain hospitals for drugs
acquired through the 340B discount program. The purpose of this policy
was to pay these hospitals for 340B drugs at a rate that more
accurately reflected the actual costs they incurred to acquire them.
This 340B policy was the subject of several years of litigation, which
culminated in a decision of the Supreme Court of the United States in
American Hospital Association v. Becerra, 142 S. Ct. 1896 (2022), which
held that if CMS has not conducted a survey of hospitals' acquisition
costs, it may not vary the payment rates for outpatient prescription
drugs by hospital group. The Supreme Court subsequently remanded the
case, and the district court ultimately ordered CMS to implement a
remedy to address the reduced payment amounts to the plaintiff
hospitals from CY 2018 through September 27th of CY 2022.
This proposed rule describes the remedy CMS is proposing to comply
with the district court's remand. It would remedy the reduced payment
amounts to the affected 340B covered entity hospitals by (1)
calculating the amount each hospital would have received for 340B drugs
from CY 2018 through September 27th of 2022 had the 340B policy not
been in place; (2) subtracting from that total the amount each hospital
received for 340B drugs from CY 2018 through September 27th of CY 2022;
and (3) paying each affected 340B covered entity hospital the
difference between these amounts by issuing instructions to the
relevant MAC instructing it to issue a one-time lump sum payment to the
hospital. The
[[Page 44091]]
amount of the lump sum payment would include the portion of the payment
amount that would have been paid from the Part B Trust Fund and the
portion of the payment amount that would have been paid in the form of
beneficiary coinsurance if not for the 340B payment policy.
To comply with statutory budget neutrality requirements, we are
proposing to annually reduce OPPS payments for non-drug items and
services beginning in CY 2025 by decreasing the OPPS conversion factor
by 0.5 percent each year, until a total offset of an estimated $7.8
billion is reached.
B. Overall Impact
We have examined the impacts of this proposed rule as required by
Executive Order 12866 on Regulatory Planning and Review (September 30,
1993), Executive Order 13563 on Improving Regulation and Regulatory
Review (January 18, 2011), Executive Order 14094 on Modernizing
Regulatory Review (April 6, 2023), the Regulatory Flexibility Act (RFA)
(September 19, 1980, Pub. L. 96-354), section 1102(b) of the Act,
section 202 of the Unfunded Mandates Reform Act of 1995 (March 22,
1995; Pub. L. 104-4), and Executive Order 13132 on Federalism (August
4, 1999), and the Congressional Review Act (5 U.S.C. 804(2)).
Executive Orders 12866 and 13563 direct agencies to assess all
costs and benefits of available regulatory alternatives and, if
regulation is necessary, to select regulatory approaches that maximize
net benefits (including potential economic, environmental, public
health and safety effects, distributive impacts, and equity). Executive
Order 14094 amends section 3(f) of the Executive Order 12866 to define
a ``significant regulatory action'' as an action that is likely to
result in a rule: (1) having an annual effect on the economy of $200
million or more in any 1 year, or adversely affect in a material way
the economy, a sector of the economy, productivity, competition, jobs,
the environment, public health or safety, or State, local, territorial,
or tribal governments or communities; (2) creating a serious
inconsistency or otherwise interfering with an action taken or planned
by another agency; (3) materially altering the budgetary impacts of
entitlements, grants, user fees, or loan programs or the rights and
obligations of recipients thereof; or (4) raising legal or policy
issues for which centralized review would meaningfully further the
President's priorities or the principles set forth in this Executive
order.
A regulatory impact analysis (RIA) must be prepared for rules with
significant regulatory action(s) and/or with significant effects as per
section 3(f)(1) as measured by the $200 million or more in any 1 year.
Based on our estimates, the Office of Management and Budget's (OMB's)
Office of Information and Regulatory Affairs has determined this
rulemaking is significant per section 3(f)(1) as measured by the $200
million or more in any 1 year. Accordingly, we have prepared a
Regulatory Impact Analysis that to the best of our ability presents the
costs and benefits of the rulemaking. Therefore, OMB has reviewed these
proposed regulations, and the Department has provided the following
assessment of their impact. We solicit comments on the regulatory
impact analysis provided.
As required by statute, we are implementing this court-ordered
remedy in a budget neutral manner, and we estimate that the total
increase in Federal Government expenditures, due only to the proposed
changes in this proposed rule, would be $2.8 billion. We took into
consideration the additional Medicare drug payments of $9.0 billion to
the estimated 1,649 340B covered entity hospitals to which the drug
payment remedy would apply, and the $6.2 billion in reduced Medicare
prospective payments for non-drug items and services beginning in CY
2025 to offset the additional payments that were made for non-drug
items and services from CY 2018 through CY 2022 as part of the 340B
payment policy and the amount of the 340B drug remedy payments that
would otherwise have been paid by the beneficiary. We note that this
$6.2 billion figure is the portion of reduced Medicare prospective
payments specifically, and this represents approximately 80 percent of
the total $7.8 billion offset that we are proposing. Beneficiaries will
experience reduced prospective co-insurance payments representing
approximately the remaining 20 percent of the total $7.8 billion
offset. The $9.0 billion amount is an estimate of the total aggregate
additional payments that still need to be made to 340B hospitals for
drugs that were paid less due to the 340B policy from CY 2018 through
September 27, 2022.
While we consider the amount of additional payment made to affected
340B covered entity hospitals for 340B-acquired drug claims with dates
of service from January 1, 2022, through September 27, 2022, that were
processed or reprocessed at the default drug payment rate after the
340B payment policy was vacated, estimated at $1.5 billion, for
purposes of the total aggregate remedy payment to affected 340B covered
entity hospitals, we are not including that $1.5 billion in our
calculation here, which estimates the total increase in Federal
Government expenditures due only to the proposed changes in this
proposed rule. This $1.5 billion in remedy payments has already been
made after the District Court's order.
The two amounts described above, $9.0 billion and $6.2 billion, are
not equal because the separate amounts associated with restoring 340B-
acquired drug payments to ASP plus 6 and offsetting the impact of
additional Medicare spending to remedy this 340B payment policy are not
equal to each other. This is due to many factors, including but not
limited to, (1) Medicare's payment policy adjustment for 340B acquired
drugs ended on September 27, 2022, while the original conversion factor
adjustment of minus 3.19 percent remained in effect until December 31,
2022, (2) most of the 340B drug claims with dates of service between
January 1, 2022, and September 27, 2022, have already been reprocessed
at the higher default drug payment rate, while none of the increased
non-drug item and service payment during this time period have been
remedied, (3) Medicare's payment of an amount equivalent to the
increased beneficiary cost-sharing 340B providers would have received
for 340B-acquired drugs if the 340B payment policy had not been in
effect as part of the lump sum payments to providers, and (4) the
original budget neutrality adjustment to increase the conversion factor
in CY 2018 did not keep pace with the reduction in 340B drug payments
for the remainder of the years for which the 340B payment policy
previously applied. We note that, in aggregate, the total additional
payment that providers will receive as a result of this remedy, $10.5
billion, will be larger than the amount of payment that will be
prospectively offset, $7.8 billion.
Most notable of the aforementioned factors is factor (4). From CY
2018 through CY 2022, the actual spending associated with 340B-acquired
drugs changed from what was prospectively projected. The actual total
reduction in 340B-acquired drug payments during this time period
outpaced the corresponding increase in non-drug item and service
payments. The proposed changes in this proposed rule are to maintain
budget neutrality by undoing the original 340B payment policy.
Additionally, this is consistent with our past practice described in
the CY 2023 OPPS/ASC final rule with comment period (87 FR 71975),
which
[[Page 44092]]
had the support of commenters, where we maintained budget neutrality by
removing the effect of the 340B policy as originally implemented in CY
2018 from the CY 2023 conversion factor and ensured it was equivalent
to the conversion factor that would be in place if the 340B payment
policy had never existed, rather than budget neutralizing the increase
in 340B drug spending by making a corresponding conversion factor
decrease to account for the actual increase in the payment rates for
these drugs. This proposed remedy complies with the budget neutrality
requirement that Medicare should pay a total amount for the additional
340B-acquired drug payments that is generally offset by the estimated
amount that would have paid absent the 340B payment policy. In Table 2
of this proposed rule, we display the impact of these proposed policy
changes on drug payments, including aggregate payment by hospital type.
Specific proposed additional 340B-acquired drug lump sum payment
amounts by individual hospital can be found in Addendum AAA. If we
adopt our proposal as proposed, the impact for specific hospital types
of the reduced prospective payment for non-drug items and services
beginning in CY 2025 would be included in each proposed and final rule
for calendar years in which the prospective reduction would apply,
beginning in CY 2025.
C. Detailed Economic Analysis
Column 1: Total Number of Hospitals
The first line in Column 1 in Table 2 shows the total number of
facilities (1,661), including designated cancer and children's
hospitals and Community Mental Health Centers (CMHCs), for which we
expect that the remedy payments included in this proposed rule, if
finalized, would be made. We excluded all hospitals and CMHCs for which
we would not expect any direct effect from the remedy payments in this
proposed rule. We show the total number of OPPS hospitals (1,649) for
which we expect remedy payments would be made, excluding the PPS-exempt
cancer and children's hospitals and CMHCs, on the second line of the
table. We excluded cancer and children's hospitals because section
1833(t)(7)(D)(ii) of the Act provides transitional outpatient payments
(TOPs) which permanently holds harmless cancer hospitals and children's
hospitals to their ``pre-Balanced Budget Act of 1997 (BBA) amount'' as
specified under the terms of the statute.
Column 2: Remedy for the 340B Payment Policy (in Millions)
Column 2 shows the estimated remedy payments that would be made
under this proposed rule to various categories of affected providers.
We note that certain categories of providers may experience limited
effects due to either having no providers in the category or limited
billing associated with 340B-acquired drugs. We also note that a
provider's placement within the categories may vary due to their
characteristic information potentially changing across the years in
question (CY 2018 through CY 2022).
Column 3 displays the estimated payment impact of any CY 2022
claims that have been reprocessed by the MACs. We note that if these
claims, which include dates of service for services furnished prior to
September 28, 2022, were not reprocessed their payments would otherwise
have been included as remedy payments in Column 2. Column 4 includes
the total remedy payments, which is the sum of column 2 and column 3.
Table 2--Estimated Financial Impact of the Proposed Remedy Payments on OPPS Providers
----------------------------------------------------------------------------------------------------------------
(3) CY 2022
(1) Number (2) Lump sum reprocessed (4) Total 340B
Row of drug remedy drug payment drug remedy
hospitals payment (in remedy (in payments (sum of
millions) millions) Columns 2 and 3)
----------------------------------------------------------------------------------------------------------------
1.................. ALL PROVIDERS *......... 1,661 9,003.4 1,540.5 10,543.9
2.................. ALL HOSPITALS (excludes 1,649 9,003.4 1,540.5 10,543.9
hospitals held harmless
and CMHCs).
3.................. URBAN HOSPITALS......... 1,297 8,538.2 1,491.5 10,029.7
4.................. LARGE URBAN.......... 611 4,326.8 815 5,141.8
5.................. (GT 1 MILL.).........
6.................. OTHER URBAN (LE 1 686 4,211.4 676.5 4,887.9
MILL.).
7.................. RURAL HOSPITALS......... 324 457.3 47.2 504.5
8.................. SOLE COMMUNITY....... 147 95.1 5.9 101.0
9.................. OTHER RURAL.......... 177 362.2 41.4 403.6
BEDS (URBAN)............
10................. 0-99 BEDS............ 213 258.3 44.4 302.7
11................. 100-199 BEDS......... 374 827.1 124.7 951.8
12................. 200-299 BEDS......... 252 1,208.8 192.6 1,401.4
13................. 300-499 BEDS......... 267 1,982.7 338.9 2,321.6
14................. 500 + BEDS........... 191 4,261.3 790.9 5,052.2
BEDS (RURAL)............
15................. 0-49 BEDS............ 124 80.6 7.7 88.3
16................. 50-100 BEDS.......... 116 104.3 13.3 117.6
17................. 101-149 BEDS......... 40 89.4 8.7 98.1
18................. 150-199 BEDS......... 21 89.9 8.1 98.0
19................. 200 + BEDS........... 23 93.2 9.3 102.5
REGION (URBAN)..........
20................. NEW ENGLAND.......... 73 613.4 114.8 728.2
21................. MIDDLE ATLANTIC...... 163 1,173.0 2,36.3 1,409.3
22................. SOUTH ATLANTIC....... 218 1,593.3 280.2 1,873.5
23................. EAST NORTH CENT...... 232 1,318.6 240 1,558.6
24................. EAST SOUTH CENT...... 75 644.2 106 750.2
25................. WEST NORTH CENT...... 79 749.3 129.4 878.7
26................. WEST SOUTH CENT...... 145 610.5 99.6 710.1
27................. MOUNTAIN............. 86 566.2 90.2 656.4
28................. PACIFIC.............. 223 1,269.7 195.1 1,464.8
29................. PUERTO RICO.......... 3 0.0 0 0.0
REGION (RURAL)..........
30................. NEW ENGLAND.......... 11 25.0 1.4 26.4
31................. MIDDLE ATLANTIC...... 22 32.1 3.5 35.6
32................. SOUTH ATLANTIC....... 52 97.1 5.5 102.6
33................. EAST NORTH CENT...... 48 66.9 8 74.9
[[Page 44093]]
34................. EAST SOUTH CENT...... 75 145.5 19.5 165.0
35................. WEST NORTH CENT...... 29 6.8 0.6 7.4
36................. WEST SOUTH CENT...... 54 19.6 1.4 21.0
37................. MOUNTAIN............. 20 28.9 2.7 31.6
38................. PACIFIC.............. 13 35.4 4.6 40.0
TEACHING STATUS.........
39................. NON-TEACHING......... 795 1,682.2 273.2 1,955.4
40................. MINOR................ 514 2,792.9 435.5 3,228.4
41................. MAJOR................ 312 4,520.3 830 5,350.3
DSH PATIENT PERCENT.....
42................. 0.................... 0 0.0 0 0.0
43................. GT 0-0.10............ 31 16.5 0.4 16.9
44................. 0.10-0.16............ 62 6.9 0.1 7.0
45................. 0.16-0.23............ 167 53.7 15.5 69.2
46................. 0.23-0.35............ 715 3,819.4 6,71.4 4,490.8
47................. GE 0.35.............. 635 5,098.9 8,51.4 5,950.3
48................. DSH NOT AVAILABLE **. 11 0.1 0 0.1
URBAN TEACHING/DSH......
49................. TEACHING & DSH....... 766 7,157.8 1,252 8,409.8
50................. NO TEACHING/DSH...... 521 1,380.3 239.5 1,619.8
51................. NO TEACHING/NO DSH... 0 0.0 0 0.0
52................. DSH NOT AVAILABLE2... 10 0.1 0 0.1
TYPE OF OWNERSHIP.......
53................. VOLUNTARY............ 1,215 7,202.2 1,241.7 8,443.9
54................. PROPRIETARY.......... 150 32.2 6.6 38.8
55................. GOVERNMENT........... 256 1,761.1 290.5 2,051.6
----------------------------------------------------------------------------------------------------------------
Column (1) shows total hospitals that are expected to receive payments related to the 340B policy under this
proposed rule.
Column (2) includes the estimated drug remedy payment made to account for the policies described in this
proposed rule during the time period of CY 2018 through CY 2022.
Column (3) displays the estimated payment impact of any CY 2022 claims that have been reprocessed by the MACs.
We note that if these claims, which include dates of service for services furnished prior to September 28,
2022, were not reprocessed their payments would otherwise have been included as remedy payments in Column 2.
Column (4) includes the total remedy payments, which is the sum of column 2 and column 3.
These 1,661 providers include children and cancer hospitals, which are held harmless to pre-BBA amounts, and
CMHCs.
** Complete disproportionate share hospital (DSH) numbers are not available for providers that are not paid
under IPPS, including rehabilitation, psychiatric, and long-term care hospitals.
We estimate that the total proposed monetary transfer in this
proposed rule would be approximately $9.0 billion. The $9.0 billion
includes the proposed additional lump sum drug payments to the 1,649
affected 340B covered entity hospitals. The $9.0 billion amount is an
estimate of the total aggregate additional payments that would need to
be made to the affected 340B covered entity hospitals for drugs that
were paid less due to the 340B policy from CY 2018 through September
27th of CY 2022. As noted previously, the estimated total amount
required to remedy providers is $10.5 billion, which includes the $1.5
billion that has already been paid through 340B drug claims processing
and reprocessing that occurred for CY 2022 claims.
We note that in this proposed rule we also describe our proposal to
annually reduce OPPS payments for non-drug items and services beginning
in the CY 2025 OPPS, by decreasing the OPPS conversion factor by 0.5
percent each year until we have offset the full amount of the
additional payments made for non-drug items and services from CY 2018
through CY 2022 due to the increase in the conversion factor in those
years in response to the 340B payment policy. This proposed prospective
offset will apply to all OPPS providers, including 340B providers,
aside from those OPPS providers explicitly excluded as previously
discussed. The overall impact of these prospective reductions is
estimated to be minus $6.2 billion in Medicare payments alone over the
full span of this proposed offset. The estimated impact of this offset
for each calendar year for which the offset is estimated to apply is
detailed in Table 1 of this proposed rule.\18\ The impact of this
offset on payments to each provider type for each calendar year in
which the offset is in effect would be included in the regulatory
impact analysis for the applicable annual OPPS rulemaking, beginning
for CY 2025. However, we note that generally the impact of that annual
0.5 percent reduction to the OPPS conversion factor on individual
providers as well as categories of providers will depend on the
percentage of their OPPS payments that are conversion factor based, and
in most cases will be a decrease of slightly less than 0.5 percent
relative to overall OPPS payment. Please see Table 3 below for our
estimated total impact to the OPPS payments based on the information
provided in Table 1.
---------------------------------------------------------------------------
\18\ We note that Table 1 illustrates the prospective reductions
of $7.8 billion that represent the reduced Medicare payments as well
as reduced cost-sharing paid by the beneficiary. The $6.2 billion of
the financial impacts discussed here represents only the Medicare
payments over the full span of this proposed offset.
[[Page 44094]]
Table 3--Estimated Annual Impact to OPPS Spending Based on 0.5 Percent Adjustment to the Conversion Factor
----------------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------------
CY 2025 CY 2026 CY 2027 CY 2028 CY 2029 CY 2030
----------------------------------------------------------------------------------------------------------------
0.5-Percent Payment Reduction Amount $335 $351 $369 $387 $407 $427
(millions).............................
----------------------------------------------------------------------------------------------------------------
CY 2031 CY 2032 CY 2033 CY 2034 CY 2035 CY 2036
----------------------------------------------------------------------------------------------------------------
0.5-Percent Payment Reduction Amount $448 $471 $494 $519 $545 $572
(millions).............................
----------------------------------------------------------------------------------------------------------------
CY 2037 CY 2038 CY 2039 CY 2040
----------------------------------------------------------------------------------------------------------------
0.5-Percent Payment Reduction Amount $601 $631 $662 $581
(millions).............................
----------------------------------------------------------------------------------------------------------------
Total Offset...............................$7.8 billion.....
----------------------------------------------------------------------------------------------------------------
4. Regulatory Review Cost Estimation
If regulations impose administrative costs on private entities,
such as the time needed to read and interpret this proposed rule, we
should estimate the cost associated with regulatory review. Due to the
uncertainty involved with accurately quantifying the number of entities
that will review the rule, we assume that the total number of unique
commenters on last year's CY 2023 OPPS/ASC proposed rule will be the
number of reviewers of this proposed rule. We acknowledge that this
assumption may understate or overstate the costs of reviewing this
rule. It is possible that not all commenters reviewed last year's rule
in detail, and it is also possible that some reviewers chose not to
comment on the proposed rule. For these reasons we thought that the
number of past commenters would be a fair estimate of the number of
reviewers of this rule. We welcome any comments on the approach in
estimating the number of entities which will review this proposed rule.
For the purposes of our estimate we assume that each reviewer reads
100 percent of the proposed rule. We seek comments on this assumption.
Using the mean hourly wage information from the Bureau of Labor
Statistics (BLS) for medical and health service managers (Code 11-
9111), we estimate that the cost of reviewing this rule is $123.06 per
hour, which is double the BLS hourly rate in order to account for
fringe benefits and other indirect costs in addition to the hourly wage
itself.\19\ Assuming an average reading speed, we estimate that it
would take approximately 3 hours for the staff to review this proposed
rule. For each entity that reviews the rule, the estimated cost is
$369.18 (3 hours x $123.06). Therefore, we estimate that the total cost
of reviewing this regulation is $608,778 ($369.18 x 1,649).
---------------------------------------------------------------------------
\19\ https://ww.bls.gov/oes/current/oes_nat.htm.
---------------------------------------------------------------------------
D. Alternatives Considered
We evaluated several options to determine which remedy would best
achieve the objectives of unwinding the unlawful 340B payment policy
while making certain OPPS providers as close to whole as is
administratively feasible.
For example, we considered making additional payments to affected
340B covered entity hospitals for 340B-acquired drugs from CY 2018
through September 27th of CY 2022 without implementing a budget neutral
adjustment. Additionally, we considered retrospectively reprocessing
all claims from CY 2018 through September 27th of CY 2022, which as for
the reasons stated in section II.A.2 we determined not to be
operationally feasible. We further considered making additional
payments to affected 340B covered entity hospitals for 340B-acquired
drugs from CY 2018 through September 27th of CY 2022 without proposing
an adjustment to maintain budget neutrality, which as for the reasons
stated in section II.A.1 we determined not to be operationally
feasible.
We also considered calculating one-time aggregate payment
adjustments for each provider for the CY 2018 through September 27th of
CY 2022 time-period, including both additional payments for 340B-
acquired drugs and reduced payments for non-drug items and services
under sections 1833(t)(2)(E) and 1833(t)(14) of the Act, along with our
retroactive rulemaking authority in section 1871(e)(1)(A) of the Act.
This option would have involved: (1) calculating the total additional
payments for each hospital that would have been paid for separately
payable non-pass-through 340B-acquired drugs from CY 2018 through
September 27th of 2022 in the absence of the 340B payment policy; (2)
calculating the additional amount each hospital was paid under the OPPS
from CY 2018 through CY 2022 for non-drug items and services as a
result of the 340B policy; (3) subtracting (2) from (1); and (4)
issuing a payment to, or requiring a recoupment from, each hospital for
the 5-year period in which the 340B payment policy was in effect, which
as for the reasons stated in section II.A.3 we determined not to be
feasible or appropriate. Such an approach would require immediate, and
in many cases large, recoupments from the majority of OPPS hospitals
and would impose a substantial, immediate burden on these hospitals as
well as an uncertain impact on beneficiaries. Given this burden, the
financial strain many hospitals experienced during the recent public
health emergency, and the amount of time that has transpired since the
original payments for these drugs, items, and services were made, we
decided not to propose this option and overly burden these hospitals in
this way, making our proposed option much more generous to OPPS
providers.
We refer readers to section II.A of this proposed rule for
additional discussion of all the alternatives we considered, including
our reasons for not proposing them.
As previously discussed, we are proposing the prospective offset to
begin in CY 2025, which we believe is appropriate rather than other
years, as we believe starting this reduction in CY 2025 would allow CMS
time to finalize the appropriate methodology, and then calculate and
publish the payment rates derived from this policy in the CY 2025 OPPS/
ASC proposed rule, allowing adequate time for impacted parties to
assess and prepare for the new payment rates that would be calculated
using a reduced conversion factor.
E. Accounting Statement and Table
As required by OMB Circular A-4 (available at https://
[[Page 44095]]
www.whitehouse.gov/wp-content/uploads/legacy_drupal_files/omb/
circulars/A4/a-4.pdf), we have prepared an accounting statement in
Table 4 showing the classification of the impact associated with the
provisions of this proposed rule.
We note readers can find provider-level estimates of proposed
Medicare payments in Addendum AAA to this proposed rule. We welcome
comment on these payment estimates because, if finalized without
further comment by affected providers, these payment amounts will be
made by MACs 60 calendar days after receiving relevant instructions
from CMS.
Table 4--Accounting Statement
----------------------------------------------------------------------------------------------------------------
Category Estimate Source citation Year dollar
----------------------------------------------------------------------------------------------------------------
Transfers
----------------------------------------------------------------------------------------------------------------
One-time monetized transfers...... $9.0 billion.............. Impact table and impact CY 2018 through CY
file, based on the 2022.
respective 2018 through
2022 claims.
From whom to whom?................ Federal Government to
affected 340B covered
entity hospitals.
Previously monetized transfers $1.5 billion.............. 340 drug claims with dates CY 2022.
(occurring before the of service from January
finalization of this rule). 1, 2022, through
September 27, 2022, that
have already been
processed or reprocessed
at the default drug
payment rate, generally
ASP plus 6 percent.
From whom to whom?................ Federal Government and
beneficiaries to affected
340B covered entity
hospitals.
Total............................. $10.5 billion.............
Monetized transfers............... $7.8 billion.............. Future reductions to the Estimated to be CY
OPPS conversion factor 2025 through CY
based on the parameters 2040.
in this proposed rule
(estimated 2025 through
2040).
From whom to whom?................ Hospitals and other
providers who receive
payment under the
hospital OPPS (other than
new providers) to the
Federal Government and
beneficiaries.
Total............................. $7.8 billion..............
----------------------------------------------------------------------------------------------------------------
We note that the approximately $9.0 billion of expected transfers
in this proposed rule is the $9.0 billion in expected additional lump
sum drug remedy payments associated with this proposed rule. $1.5
billion of the total $10.5 billion in transfers to providers has
already been remedied through processed or reprocessed 340B drug claims
for claims with dates of service from January 1, 2022, through
September 27, 2022. We also outline the anticipated $7.8 billion offset
to Medicare spending and beneficiary cost-sharing to be implemented
through a 0.5 percent reduction to the OPPS conversion factor for
certain providers.
F. Regulatory Flexibility Act (RFA)
The RFA requires agencies to analyze options for regulatory relief
of small entities, if a rule has a significant impact on a substantial
number of small entities. For purposes of the RFA, many hospitals are
considered small businesses either by the Small Business
Administration's size standards with total revenues of $41.5 million or
less in any single year or by the hospital's not-for-profit status. For
details, we refer readers to the Small Business Administration's
``Table of Size Standards'' at https://www.sba.gov/content/table-small-business-size standards. As its measure of significant economic impact
on a substantial number of small entities, HHS uses a change in revenue
of more than 3 to 5 percent. We believe that this threshold will be
reached by the requirements in this proposed rule with comment period.
As a result, the Secretary has determined that this rule will have a
significant impact on a substantial number of small entities.
In addition, section 1102(b) of the Act requires us to prepare a
regulatory impact analysis if a rule may have a significant impact on
the operations of a substantial number of small rural hospitals. This
analysis must conform to the provisions of section 603 of the RFA. For
purposes of section 1102(b) of the Act, we define a small rural
hospital as a hospital that is located outside of a metropolitan
statistical area and has 100 or fewer beds. We estimate that this
proposed rule with comment period would result in approximately $190
million in remedy payments to 240 small rural hospitals. We note that
the estimated payment impact for any category of small entity would
depend on the degree to which these entities furnished 340B-acquired
drugs.
The analysis, together with the remainder of this proposed rule,
provides a regulatory flexibility analysis and a regulatory impact
analysis. We note that the policies contained in this proposed rule
would apply more broadly to OPPS providers and would not specifically
focus on small rural hospitals. As a result, the impact on those
providers may depend more significantly on their case mix of services
provided as well as the extent to which they furnished 340B-acquired
drugs.
G. Unfunded Mandates Reform Act (UMRA)
Section 202 of the Unfunded Mandates Reform Act of 1995 (UMRA) also
requires that agencies assess anticipated costs and benefits before
issuing any rule whose mandates require spending in any 1 year of $100
million in 1995 dollars, updated annually for inflation. In 2023, that
threshold is approximately $177 million. This proposed rule does not
mandate any requirements for State, local, or tribal governments, or
for the private sector.
H. Federalism
Executive Order 13132 establishes certain requirements that an
agency must meet when it promulgates a proposed rule (and subsequent
final rule) that imposes substantial direct requirement costs on State
and local governments, preempts State law, or otherwise has federalism
implications.
We have examined the OPPS and ASC provisions included in this
proposed rule in accordance with Executive Order 13132, Federalism, and
have determined that they will not have a substantial direct effect on
State, local, or tribal governments, preempt State law, or otherwise
have a federalism implication. As reflected in Table 2 of this proposed
rule, we estimate that payments to impacted governmental hospitals
(including State and local governmental hospitals) would increase by
approximately $1,800,000,000 if the policies included in this proposed
rule
[[Page 44096]]
are finalized. Future adjustments to the OPPS conversion factor to
offset the additional non-drug item and service payments made from CY
2018 through CY 2022 due to the 340B payment policy would be discussed
in the annual rulemaking to which the adjustment would apply. The
analyses we have provided in this section of this proposed rule, in
conjunction with the remainder of this document, demonstrate that this
proposed rule is consistent with the regulatory philosophy and
principles identified in Executive Order 12866 as amended by Executive
Order 14094, the RFA, and section 1102(b) of the Act. This proposed
rule would affect payments to a small number of small rural hospitals,
as well as other classes of hospitals, and some effects may be
significant.
In accordance with the provisions of Executive Order 12866, this
regulation was reviewed by the Office of Management and Budget.
Chiquita Brooks-LaSure, Administrator of the Centers for Medicare &
Medicaid Services, approved this document on June 15, 2023.
List of Subjects in 42 CFR Part 419
Hospitals, Medicare, Reporting and recordkeeping requirements.
For the reasons set forth in the preamble, the Centers for Medicare
& Medicaid Services proposes to amend 42 CFR chapter IV as set forth
below:
PART 419--PROSPECTIVE PAYMENT SYSTEMS FOR HOSPITAL OUTPATIENT
DEPARTMENT SERVICES
0
1. The authority citation for part 419 continues to read as follows:
Authority: 42 U.S.C. 1302, 1395l(t), and 1395hh.
0
2. Section 419.32 is amended by revising paragraph (b)(1)(iv)(B)(11)
and adding paragraph (b)(1)(iv)(B)(12) to read as follows:
Sec. 419.32 Calculation of prospective payment rates for hospital
outpatient services.
* * * * *
(b) * * *
(1) * * *
(iv) * * *
(B) * * *
(11) For calendar year 2020 through calendar year 2024, a
multifactor productivity adjustment (as determined by CMS).
(12) Beginning in calendar year 2025, a multifactor productivity
adjustment (as determined by CMS) and 0.5 percentage point, except that
the 0.5 percentage point reduction shall not apply to hospital
outpatient items and services, not including separately payable drugs,
furnished by a hospital with a CMS certification number (CCN) effective
date of January 2, 2018, or later. This reduction and associated
exception to the reduction will be in effect until such time that
estimated payment reductions equal $7.8 billion.
* * * * *
Dated: July 6, 2023.
Xavier Becerra,
Secretary, Department of Health and Human Services.
[FR Doc. 2023-14623 Filed 7-7-23; 4:15 pm]
BILLING CODE 4120-01-P