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Remedy lump sum payment for the 340B-acquired drug payment policy for calendar years 2018-2022 Q&As
Last Modified: 1/18/2024
Location: FL, PR, USVI
Business: Part A
Q: What is the 340B drug discount program?
A: The 340B drug discount program was established under Section 340B of the Public Health Services Act (PHSA) and allows covered entities to purchase certain outpatient drugs and biologicals at discounted prices from drug manufacturers.
Q: What was the 340B drug payment policy?
A: The 340B OPPS drug payment policy started in 2018. The policy reduced the amount of reimbursement paid by Medicare to 340B covered entity hospitals for 340B drugs under OPPS.
Prior to 2018, the Medicare payment rate for all Part B covered outpatient drugs provided in outpatient hospitals was the statutory default—generally average sales price (ASP) plus 6% for covered outpatient drugs. A 340B covered entity hospital would acquire an outpatient drug from a manufacturer at the 340B discounted rate and then be reimbursed by Medicare for that drug at ASP plus 6%.
Starting in 2018, CMS adjusted the payment rate for 340B drugs and generally paid for certain separately payable drugs acquired through the 340B Program at ASP minus 22.5% to more accurately reflect the actual costs incurred by participating hospitals in acquiring 340B drugs.
Q: When did the 340B payment policy end?
A: The reduced payment rate for 340B drugs was in effect from January 1, 2018, through September 27, 2022. From September 28, 2022, forward, hospitals participating in the 340B program have been paid the statutory default—generally ASP plus 6%—for drugs acquired through the 340B drug pricing program.
Q: Why did the 340B payment policy end?
A: The 340B drug payment policy ended after the Supreme Court held that because CMS had not conducted a survey of hospitals’ acquisition costs, it could not vary the payment rates for outpatient prescription drugs by hospital group.
Q: What does the 340B Remedy Final Rule do?
A: The 340B remedy final rule aims to place affected 340B providers in as close to the same
position as if the 340B payment policy had not existed during calendar year (CY) 2018 through CY 2022 as is administratively feasible. To do so, the final rule with comment period (
88 FR 77150)
ensures affected 340B providers receive the $9.0 billion remedy payments for 340B drug payments that they would have received if the original 340B payment policy finalized in CY 2018 had not existed ($1.6 billion of the $10.6 billion has already been paid as processed or reprocessed CY 2022 claims), and (2) prospectively offsets $7.8 billion, which is primarily to address the non-drug item and service payments increased from CY 2018 through CY 2022 as a direct result of the 340B drug payment policy in order to maintain budget neutrality.
Q: Will this remedy impact beneficiary co-payments on the 340B drugs between CY 2018 to CY 2022?
A: Beneficiary co-payments should not increase as a result of this remedy rule. Affected 340B covered entity hospitals have been instructed not to bill beneficiaries for coinsurance on remedy payments because they are remedy payments issued through MAC instructions relying in part on our equitable adjustment authority under section 1833(t)(2)(E) of the Social Security Act and thus analogous to the type of cost report adjustments we have previously found not to be subject to beneficiary copayments.
Q: What does the remedy mean for 340B-acquired drugs moving forward?
A: This final rule does not impact OPPS payment for 340B-acquired drugs in CY 2023 or future years. This remedy ensures that all hospitals, including affected 340B entity hospitals, will receive the approximate payment they would have received if the original 340B payment policy, established in calendar year 2018, did not exist.
Q: When will CMS make the lump sum payments?
A: MACs will begin payment on January 8, 2024. It is anticipated that MACs will make all payments no later than February 7, 2024, except for, at CMS’s direction, payments for which a technical correction request has been requested by a hospital as discussed below.
Q: Is CMS paying interest on the remedy payments or collecting interest through the prospective offset?
A: No, CMS is not paying or collecting interest.
Q: Can a hospital request a correction to the lump sum payment amount calculated in Addendum AAA?
A: No. The deadline (November 30, 2023) for affected hospitals to request a technical correction to any errors on their lump sum payment amount in Addendum AAA has passed. A few hospitals requested a technical correction. CMS will inform the relevant MACs of the amount to be paid to these hospitals once the technical correction request has been addressed by CMS.
Q: Does the 340B drug remedy lump sum payment include an amount equal to the beneficiary coinsurance portion that affected 340B covered entity hospitals would have received had the original 340B payment policy never existed?
A: Yes, the 340B remedy payment includes an amount equal to the beneficiary coinsurance portion that affected 340B covered entity hospitals would have received had the original 340B payment policy never existed.
Q: My hospital did not participate in the 340B Program from calendar year 2018 to calendar year 2022 but was identified on Addendum AAA as eligible for payment. Is there an error that the hospital is receiving a lump sum remedy payment?
A: No. Our calculations are based on the information that hospitals themselves originally used when submitting claims with the 340B billing modifier, “JG.” Any hospitals that used the 340B billing modifier “JG” for claims during the time period in which the 340B Payment Policy was in effect received reduced payments under the 340B Payment Policy. Our analysis suggests that these hospitals may have erroneously included the “JG” modifier when initially submitting claims. We are making remedy payments even to providers who submitted the “JG” modifier incorrectly, because they received reduced payments under the 340B Payment Policy.
Q: Why does the remedy payment my hospital received not match the amount on Addendum AAA that was published with the 340B Remedy Final Rule?
A: All remedy payments are subject to the MAC’s normal accounting procedures and may in effect be combined with other payment released on the same date and /or include any applicable outstanding Medicare offsets that are the result of provider-specific overpayment obligations, adjustments resulting from errors identified through the lump-sum technical correction process, any of which may impact the provider’s net payment amount.
Q: How will the 340B remedy payment affect the cost report?
A: The MAC will not include these lump sum payments on any cost report.
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