Two More National Hospitals Groups Urge CMS to Stop 340B Drug Cost Survey

Your 340B Report for Thursday May 7, 2020

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340B Health and America’s Essential Hospitals this week sent letters to the Centers for Medicare & Medicaid Services asking it to halt its controversial survey of hospitals’ 340B drug costs. The American Hospital Association asked CMS on May 2 to stop the survey. | (Source: Pete Linforth/Pixabay)

Two More Hospitals Groups Urge CMS to Stop 340B Drug Cost Survey

Two more national hospital groups have asked the Centers for Medicare & Medicaid Services (CMS) to stop surveying 340B hospitals about their costs to acquire drugs that they bill to Medicare Part B.

As previously reported, the American Hospital Association (AHA) sent CMS Administrator Seema Verma a letter on May 2 asking her to withdraw the survey. Hospital group 340B Health sent Verma a similar letter on May 4, and America’s Essential Hospitals sent one on May 6. All three say complying with the survey detracts from patient care during the pandemic. All say the survey’s instructions are unclear. AHA and America’s Essential Hospitals say the way CMS is conducting the survey and the way CMS might use it violates federal law.

The survey began April 24 and ends May 15. CMS has said it might start basing 340B hospitals’ Medicare Part B drug reimbursement on the findings. It has already reduced the hospitals’ reimbursement by nearly 30 percent since 2018. If it starts paying hospitals for 340B-purchased drugs based on acquisition costs, their Part B drug reimbursement could fall even lower.

We asked CMS for its response to the hospital groups’ letters. It said “Medicare payment policy for 340B drugs is under litigation. Accordingly, CMS does not comment on pending or ongoing litigation.”

340B Health’s Letter

“Now is not the time to distract hospitals’ attention from the vital job at hand to complete a CMS survey on drug acquisition costs,” 340B Health wrote to Verma. “By launching the survey with no notice on April 24 and providing less than three weeks to respond, CMS is creating an unnecessary burden on hospitals at the worst possible moment. We urge you to stop the survey because…fundamental flaws in the survey, the burden in providing detailed acquisition cost data, and lack of clarity in the instructions place hospitals in an extremely difficult position within the narrow survey window.”

As previously reported, the survey gives hospitals two options: under the detailed option, they can choose to supply average acquisition costs over a six-month period for hundreds if not thousands types of 340B-purchased drugs billed to Part B; or under the quick option, they can choose to tell CMS they prefer that the agency use 340B ceiling prices from the Health Resources and Services Administration “as reflective of your hospital acquisition costs.”

“Given the immense amount of work required to complete the Detailed Survey and the limited time provided to respond, the Detailed Survey is not a viable option for safety-net hospitals whose resources are strapped dealing with the COVID-19 pandemic,” 340B Health wrote.

Meanwhile, “the instructions on electing the Quick Survey option are ambiguous,” the group continued. “Hospitals are concerned that electing the Quick Survey option may mean that they are making unintended representations about their acquisition costs in relation to the ceiling prices. This lack of clarity about when the Quick Survey may be used puts hospitals in a difficult situation about how to respond to the survey.”

“CMS has launched the 340B Hospital Survey at a terrible time, and both options it has provided for responding to the survey are flawed, presenting 340B hospitals with a difficult choice,” 340B Health wrote. “We urge the agency immediately to retract the survey, or alternatively, to clarify the meaning of the instructions on the Quick Survey option to assure hospitals that by choosing this option, they are not making unintended, unverified representations about their drug acquisition costs.”

America’s Essential Hospitals’ Letter

America’s Essential Hospitals told Verma it is “deeply troubled by CMS’ ill-timed launch of the 340B Drug Pricing Program acquisition cost survey during the COVID-19 crisis. The decision to issue this survey undermines the progress CMS has made in extending regulatory relief to providers.” The group “strongly urged” CMS to withdraw the survey immediately and “disregard any data that has been submitted during the survey window.”

With hospital costs rising and revenues falling during the pandemic, the survey “will require hospitals to expend additional resources,” America’s Essential Hospitals said. “The survey also is on tenuous legal grounds,” it said. The group also faulted CMS for launching the survey without warning and giving hospitals only three weeks to complete it. Many hospitals, it said, remain unclear about the survey instructions.

“Due to the survey’s burdensome nature, its poor timing amid an unprecedented pandemic, and the lack of clear communication of its launch, we urge CMS to withdraw the survey immediately,” America’s Essential Hospitals wrote. “Furthermore, CMS should disregard any data it has collected and not use it in future rulemaking.”


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Hospital Group Asks HRSA to Ease 340B Hospital Site Registration During Pandemic

America’s Essential Hospitals has asked the Health Resources and Services Administration (HRSA) to waive a 340B registration requirement that some hospitals say stops them from immediately enrolling otherwise eligible offsite facilities in the 340B program during the COVID-19 pandemic.

The group also asked HRSA to suspend 340B provider audits during the emergency and disregard changes in hospital disproportionate share (DSH) adjustment percentages during the emergency that could cause hospitals to lose their 340B eligibility.

Hospital Site Registration Concerns

As previously reported, some hospitals have told 340B Report they cannot take full advantage of HRSA’s 340B immediate enrollment flexibility during the pandemic. The reason, they say, is HRSA’s retention of its pre-pandemic policy of requiring hospital offsite outpatient sites, as condition of enrollment, to be listed as reimbursable on the hospital’s most recently filed Medicare cost report and have associated outpatient costs and charges.

In an April 30 letter, America’s Essential Hospitals asks HRSA to waive the filed cost report requirement for offsite facilities for the duration of the COVID-19 public health emergency. Requiring a clinic to appear as reimbursable on a filed cost report “has created a needless administrative barrier to adding outpatient facilities to the 340B program,” the group wrote. It explained:

Because cost reports are retroactive, gaps exist between the point at which a new facility begins operations and the end of a hospital fiscal year; the end of a hospital fiscal year and the due date for a filed cost report (up to five months); and the quarterly deadlines to enroll in the 340B program. As such, a covered entity could be forced to wait longer than a year to receive discounts on drugs dispensed to covered entity patients seen at a new outpatient facility. Especially as hospitals respond to the COVID-19 pandemic by expanding access to patients through outpatient clinics, it is critical that they be immediately able to register these new sites and realize savings on covered outpatient drugs.

Waiving the filed cost report requirement and letting hospitals register their child sites in 340B immediately is “consistent with past HRSA guidance” published in 1994, America’s Essential Hospitals said.

On April 27, 340B Report asked HRSA for comment on a consulting firm’s observation that if a hospital site was not listed as being reimbursable on the hospital’s most recently filed cost report, it still might be granted immediate enrollment under HRSA’s COVID-19 program flexibilities. HRSA told us:

Regardless of the COVID-19 pandemic, HRSA verifies eligibility of offsite outpatient facilities using the hospital’s most recently filed Medicare cost report. The off-site facilities must be listed as reimbursable on the hospital’s most recently filed Medicare cost report and have associated outpatient costs and charges in order to be listed on the 340B Office of Pharmacy Affairs Information System (OPAIS).  Please see the Federal Register Notice at https://www.hrsa.gov/sites/default/files/opa/programrequirements/federalregisternotices/outpatienthospitalfacilities091994.pdf and our Hospital Registration Instructions here: https://www.hrsa.gov/sites/default/files/hrsa/opa/hospital-registration-instruction-details.pdf. This requirement to enroll an offsite facility into the 340B Program has not changed as a result of the COVID-19 pandemic.

Providers seeking immediate enrollment in 340B under HRSA’s COVID-19 flexibilities are directed to Apexus, the 340B prime vendor, for an evaluation of its circumstances on a case-by-case basis. According to a covered entity consultant, during the latter part of April, hospitals seeking to register sites immediately in 340B during the emergency were being asked these questions:

  • Please confirm that the need for immediate registration of this facility is related to the hospital’s response to COVID-19.

  • Please detail the urgency for an immediate registration of this facility.

  • What specifically will the facility be used for?

  • Please confirm that the facility is listed as reimbursable on the Medicare cost report and meets all other 340B Program requirements.

For contract pharmacy registration, covered entities were being asked:

  • Please confirm that the need for immediate contract pharmacy registration is related to the entity’s response to COVID-19.

  • Please detail the urgency for an immediate contract pharmacy registration.

  • Please also confirm that the covered entity currently has a contract pharmacy agreement in place with the contract pharmacy.

Audit and Hospital Eligibility Concerns

America’s Essential Hospitals also asked HRSA to suspend covered entity audits and disregard changes in hospitals’ Medicare disproportionate share (DSH) adjustment percentages that could cause them to lose their 340B eligibility.

“Responding to detailed audit requests is a significant time and resource investment for essential hospitals that they cannot afford as they respond to COVID-19,” the group wrote. It also noted that changes in the types of patients hospitals see and alterations in their payer mix brought on by the pandemic will change hospitals’ DSH percentages. Hospitals must maintain certain minimum DSH percentages to remain eligible for 340B. “To ease this unintended consequence of treating COVID-19 patients, HRSA should disregard any changes in DSH adjustment that arise as a result of a hospital’s response to the COVID-19 crisis,” it said.

New York Lawmakers Ask Azar to Protect Hospitals From Losing 340B Eligibility During Pandemic

A bipartisan group of 23 members of New York State’s congressional delegation have asked U.S. Health and Human Services (HHS) Secretary Alex Azar to protect hospitals from losing eligibility for 340B drug discounts during the COVID-19 pandemic.

“For over a month, New York hospitals and health centers have halted all elective procedures and very few patients are seeking non-urgent care,” the lawmakers told Azar in a May 1 letter. “This is essential to stop the spread of the disease, but it has resulted in far fewer Medicaid patients receiving services at New York hospitals and other 340B entities, potentially harming eligibility under the Medicare DSH threshold.”

“Essential public health emergency measures should not result in hospitals losing their ability to purchase affordable drugs for their patients,” the lawmakers wrote. “We strongly urge the Department of Health & Human Services and the Health Resources & Services Administration to hold hospitals harmless and recertify current 340B entities that are still eligible, even if they have seen temporary changes to their patient mix during this pandemic.”

The signers include Rep. Elise Stefanik (R-N.Y.), who attracted national attention late last year for her defense of President Trump during House impeachment hearings. Earlier, Stefanik cosponsored legislation to block the nearly 30 percent cut in 340B hospitals’ Medicare Part B drug reimbursement.

A few days earlier, Reps. Doris Matsui (D-Calif.) and Chris Stewart (R-Utah) made the same appeal about protecting hospitals from losing 340B eligibility in a letter to House Speaker Nancy Pelosi (D-Calif.) and Minority Leader Kevin McCarthy (D-Calif.). They also asked their party leaders to support letting 340B hospitals buy covered outpatient drugs through group purchasing organizations during the pandemic.

Matsui and Stewart are also circulating a Dear Colleague letter asking fellow House members to sign on to their letter.

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