Debate Over Medicare Rule Cutting Drug Reimbursements Continues


While Avalere Health says most hospitals will benefit from payment changes in a Medicare rule that has been criticized for cutting drug reimbursements to some facilities, hospitals say the rule takes away funds that they use to serve low-income patients.

Research released Jan. 29 by Avalere Health, a health-care consulting firm, found that 85 percent of outpatient hospitals will see an increase in their overall Medicare Part B (outpatient services) reimbursement under the rule that took effect Jan. 1. This is despite the rule’s 30 percent reduction in Part B payments for drugs that hospitals obtained under the 340B pricing program. The 340B program, which is not part of Medicare, allows hospitals serving low-income populations to obtain discounted medications from drug companies for outpatient care. 

The report comes as the 340B hospitals are being criticized by pharmaceutical companies and some congressional Republicans for misusing the discounts they get on drugs. The 340B program, created under a 1992 law, has been growing. In 2013, there were 7,806 hospital sites participating in the 340B program, and in 2017 that number grew to 21,554 hospital sites in the program, according to the Government Accountability Office. 

America’s Essential Hospitals criticized Avalere’s study in a statement saying it skews “the conclusions in a way that masks the real harm of the” 340B reimbursement cuts. The group said “the 340B payment cuts subvert the very intent of the 340B program by taking savings away from the safety net. For hospitals that operate on narrow margins—those that fill a safety-net role and depend most on 340B support—the payment cuts are unsustainable.” 

Also, Tom Nickels, executive vice president of the American Hospital Association, told me the study focuses only on selective measures to conclude that the Centers for Medicare & Medicaid Services policy reduces patient costs, when it actually has increased copayments for 97 percent of Medicare patients who are being treated at 340B hospitals. 

Nickels said Avalere “completely misses the point,” which is that the nearly 30 percent payment reduction for 340B drugs is “unlawful.” He said the reduction to 340B drug payments isn’t permitted by the Medicare statute and the agency can’t “concoct its own reimbursement rules that effectively eviscerate the benefits and intent of the 340B program.” 

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