September 20, 2012—Hospitals that provide much of the nation’s charity care are applauding the Centers for Medicare and Medicaid Services’ (CMS) proposal to remove a flaw in its Medicare outpatient prospective payment system (OPPS) payment methodology that the safety-net care providers had previously asked it to address.
Safety Net Hospitals for Pharmaceutical Access (SNHPA) and the National Association of Public Hospitals and Health Systems (NAPH) expressed their appreciation in comments on CMS’s July 30 proposed rule.[ms-protect-content id=”2799″]
CMS is calling for a default reimbursement rate for separately paid drugs and biologicals without pass-through status of average sales price (ASP) plus 6 percent. Since 2006, CMS has reimbursed hospitals for these drugs under an ASP-based rate that has varied each year, ranging from ASP + 6% to the current ASP + 4%.
Separately paid drugs and biologicals without pass-through status are those that (1) generally cost more than $75 per day, (2) are not packaged into the payment for the related procedure, and (3) have been reimbursable under OPPS for more than two or three years.
Under the standard payment rate now in place, CMS uses ASP data to determine a separately paid drug’s acquisition cost. It uses hospital charge data to determine total drug costs and then calculates an add-on payment to cover overhead and other costs.
SNHPA, NAPH, and other hospital and pharmacy groups have long argued that the standard payment rate underestimates drug costs. The default payment rate that CMS now proposes to use would reimburse hospitals more accurately and adequately, the groups say.
In addition, under the proposed default payment rate, CMS would stop including 340B sales in its methodology for calculating the add-on payment for overhead and other costs. Hospital and pharmacy groups have argued that the inclusion of 340B sales in this calculation resulted in an underestimate of overhead costs.
BIO, the biopharmaceuticals trade association, and the drug manufacturer Bayer also submitted comments noting that the inclusion of 340B sales in the calculation results in inadequate reimbursement for non-340B entities.
On a separate topic, SNHPA reminded CMS of the importance of reimbursing 340B hospitals at the same rate as other hospitals. In recent years, CMS had invited comments on whether Medicare should set 340B-specific reimbursement rates given that 340B hospitals pay less than others for drugs. SNHPA urged CMS to continue applying the same rates to all hospitals. Without adequate reimbursement, SNHPA said, 340B hospitals cannot stretch their resources and provide more services to indigent patients.
Also in its proposed rule, CMS invited comments on how it might “improve clarity and consensus” regarding patient status as either an inpatient or outpatient for billing purposes. Bayer told CMS it is concerned that 340B hospitals are overusing outpatient stays to maximize revenue from the drug discount program. It asked CMS to issue guidance stating that “it is improper to manipulate outpatient in any manner in an effort to seek an advantage under the 340B program.”[/ms-protect-content]