CMS Proposes Remedy to 340BReimbursement Cuts

On July 7, 2023, the Centers for Medicare & Medicaid Services (CMS) issued a proposed rule to remedy $7.8 billion dollars in underpayments affecting 1,600 OPPShospitals which reported the JG modifier on expensive drugs acquired under 340B program between 1/1/2018 and 9/28/2022.

The discounting formula applied by CMSduring that period was deemed illegal by the Supreme Court of the United States in June of 2022; part of the court?s decision directed CMSto propose a remedy for the underpaymentsThe proposed remedy/rule Is open for public comment until September 11, 2023

A CMSFact Sheet on the proposal is available at the following link; a hyperlink to the full text of the proposed rule is found within the Fact Sheet:

Hospital Outpatient Prospective Payment System: Remedy for the 340B-Acquired Drug Payment Policy for Calendar Years 2018-2022 Proposed Rule (CMS1793-P)

In the rule, CMSproposes a lump-sum payment to each affected OPPShospital to correct for any claims which remain underpaid The lump sum would include both Medicare?s share and that portion of the reimbursement which would have been attributed to patient coinsurance, had each claim been re-adjudicated

Since Medicare will cover that coinsurance, hospitals would be prohibited from billing beneficiaries for coinsurance on the corrected transactionsCertain 2022 claims which were submitted for reprocessing have already been re-adjudicated, and therefore will not be included in the lump sum payment Presumably, the patient liability generated by the corrected payments on those claims will not be covered by Medicare

If Medicare finalizes the lump sum payment proposal in its present form, Medicare plans to impose reductions to reimbursement in other areas of OPPSin order to maintain budget neutrality. For example, the overall APCconversion factor could be reduced for several years, until the lump sum payments are offset from future OPPSexpenditures (Since Critical Access Hospitals were not subjected to the discounted OPPSpayment, the remedy does not apply to CAHs )

The final rule will be issued following the public comment period, coinciding with the release of the Calendar Year CY2024 OPPS/ASCFinal Rule in Fall 2023 (usually in early November )

OPPS-paid hospitals which submitted claims with the JG modifier, indicating a 340B purchased drug, may identify the amount of the proposed lump sum payment within the downloads section at the following website, Addendum AA: https://www.cms.gov/medicare/medicare-fee-service-payment/hospitaloutpatientpps/ hospital-outpatient-regulations-and/cms-1793-p

Background

The 340B program allows participating hospitals and providers to buy certain drugs at discounted prices

Before 2018, Medicare payment rates for these drugs in outpatient hospitals were generally based on the average sales price (ASP) plus 6%. In 2017, CMSadjusted the payment rate for 340B drugs to ASPminus 22.5%to reflect better the actual costs for hospitals acquiring these drugs This rate was in effect from 2018 to the third quarter of 2022 To meet the budget neutrality requirements set by law for the OPPS, CMSincreased payments to all hospitals, including 340B hospitals and non-340B hospitals, for non-drug items and services This increase in payments was implemented from CY2018 to CY2022

The Supreme Court ruled in June 2022 that the payment rates for 340B-acquired drugs were unlawful because HHSdid not survey hospitals' acquisition costs as required by the statute.

In September 2022, the District Court for the District of Columbia vacated the future payment rate cuts for 340B-acquired drugs. As a result, claims for these drugs on or after September 28, 2022, were paid at the ASP plus a 6%default rate

CMSset a general payment rate of ASPplus 6%for drugs acquired through the 340B program in the 2023 OPPS/ASCfinal rule CMSreduced payments for non-drug items and services by 3.09%in 2023 to maintain budget neutrality. CMSannounced in the 2023 OPPS/ASCfinal rule that it would address the remedy for 340B drug payments from 2018-2022 before the release of the 2024 OPPS/ASCproposed rule

Proposed Rem edy

CMSestimates that certain providers received $10.5 billion less in 340B drug payments from 2018 to the third quarter of 2022 due to the invalidated policy.

Some 2022 claims for 340B drugs have already been paid at the higher default rate, resulting in $1 5 billion of the owed $10 5 billion already being paid

For the remaining $9 billion owed to affected providers, CMSproposes to make a one-time lump-sum payment to each affected hospital The proposed rule calculates the amounts owed to an estimated 1,600 affected 340B participating hospitals.

Beneficiary Copaym ent s

About 20%of the payments affected hospitals did not receive due to the 340B payment policy comprised of beneficiary copayments Providers will not bill beneficiaries for cost sharing To account for the difference, Medicare plans to include the beneficiary cost-sharing within the one-time lump sum payments

Prospect ive Offset for Higher Paym ent s for Non-Drug It em s and Services (2018-2022)

CMSproposes to maintain budget neutrality by making a corresponding offset for the increased payments made for non-drug items and services from 2018-2022. CMSestimates that hospitals were paid $7.8 billion more for non-drug items and services during this period due to the 340B payment policy

To achieve budget neutrality, CMSproposes to reduce future payments for non-drug items and services by decreasing the OPPSconversion factor by minus 0 5%starting in 2025 According to the proposed rule:

?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

?? We propose to, beginning in CY2025, reduce all payments for non-drug items and services to all OPPSproviders, except new providers as defined later in this section, by 0 5 percent each year until the total offset is reached (approximately 16 years) ? ?

This adjustment will continue until the full $7 8 billion is offset, which CMShas estimated will take approximately 16 years The proposed offset may slightly decrease beneficiary co-payments for non-drug items and services Providers that enrolled in Medicare after January 1, 2018, and did not fully benefit from the increased payments for non-drug items and services from 2018-2022, would be excluded from the prospective rate reduction.

Lymphedema

Billing

Quest ion:

Can you help confirm if we are billing for lymphedema management correctly?This is our current practice: When both the compression wrap and the manual lymphatic drainage 97140 are performed on the same extremity, we charge only 29581 for the therapy done on the separate extremity than what was wrapped. However, we saw some literature that states we may change manual therapy and compression wraps on the same extremity now Can you confirm this?We want to make sure we are not under billing or over billing for this service, and are being consistent between therapists.

Answ er:

A Medicare edit prevents 29581 from being reported on the same claim without a modifier

In many cases, lymphatic drainage is necessary before compression systems are applied

The Medicare NCCI 2023 Coding Policy Manual ? Chapter 4 states a modifier may be necessary when manual therapy techniques (97140) are performed as a separate and distinct procedure from the multi-layer compression application (29581) An X{EPSU) or -59 modifier may be appended if documentation supports the medical necessity of both procedures