CMS Releases CY 2018 OPPS and ASC Payment System Final Rules Slashing Reimbursement for the 340B Program

by Paul L. Croce

On November 1, 2017 the Centers for Medicare and Medicaid Services (CMS) issued its final rule updating payment rates and policy changes for the Hospital Outpatient Prospective Payment System and Ambulatory Surgical Center Payment System.

The most controversial aspect of the Rule is the significant reductions to reimbursement for drugs purchased through the 340B program. The final Rule reduces reimbursement for such drugs from the Average Sale Price (ASP) plus 6% to ASP minus 22.5%.  CMS indicated that it selected this reimbursement rate based on an analysis previously performed by the Medicare Payment Advisory Commission (MedPAC).  However, this reduction greatly exceeds that suggested by MedPAC who when commenting on the proposed Rule recommended a reduction of only 10% of the ASP.  Thus, it is unclear exactly what CMS ultimately relied upon to determine the appropriateness of the ASP minus 22.5% rate.

These reductions exclude certain facilities including Rural Sole Community Hospitals, Children’s’ Hospitals and PPS-Exempt Cancer Hospitals. The Rule also does not apply to Critical Access Hospitals and non-excepted provider based sites under Section 603 of the Bipartisan Budget Act.  Each of these facilities will continue to be paid at the prior rate of ASP plus 6%.

CMS anticipates this policy will result in a decrease of $1.6 billion in drug payments which will be redistributed to non-drug items and services throughout the OPPS to maintain budget neutrality. CMS indicates that overall OPPS payments will increase in 2018 by 1.4%.  Nevertheless, 340B facilities will see significant decreases in drug reimbursement in CY 2018.

Unsurprisingly, the reductions in 340B reimbursement have been met with great criticism from the impacted parties. Indeed, within two weeks of the issuance of the final rule several hospital associations and hospitals filed suit seeking to enjoin the implementation of this provision in the CY 2018 OPPS Rule.  The government has moved to dismiss and a hearing on the matter is scheduled for December 21, 2017.

While the reduction in 340B payments is the most significant change in the final Rule, there are several other aspects of the Rule worth commenting on:

  • The Rule increases OPPS payment rates by 1.35% and ASC payment rates by 1.2%.
  • The Rule removes Total Knee Arthroplasty from the Medicare inpatient only list, thereby allowing reimbursement for such procedures performed on an outpatient basis.
  • The Rule also establishes a new modifier, “FY” to be used to identify X-rays taken using computed radiography technology. Claims submitted with this modifier will be subject to phased-in payment reductions of 7% for services provided in CY 2018 through CY 2022 and 10% for services provided in or after CY 2023.
  • The Rule will also allow laboratories to bill Medicare directly for molecular pathology tests and advanced diagnostic laboratory tests in order to reduce concerns that the current date of service policy known as the “14 Day Rule” creates operational burdens for hospitals and laboratories.

Absent the Court issuing a preliminary injunction in the previously mentioned lawsuit, each of these rule changes will become effective January 1, 2018.