The AHA last week criticized as “misdirected” and a blow to patient care the Medicare Payment Assessment Commission’s (MedPAC) recommendation that Congress reduce Part B drug payment rates to hospitals participating in the 340B Drug Pricing Program.

At its Jan. 14 meeting, the commission voted 14 to 3 to reduce Part B drug payment rates to 340B hospitals by 10% of the average sales price of the drugs. The proposal would redistribute the estimated $300 million in savings to hospitals providing uncompensated care services.

Another recommendation would require Medicare to distribute uncompensated care payments made under the disproportionate share hospital program based on data from Schedule S-10 of the hospital’s Medicare cost report, where hospitals outline uncompensated-care spending. The change would be phased in over three years. The Centers for Medicare & Medicaid Services currently distributes the funds based on Medicaid and Medicare Supplemental Security Income data.

The AHA and many other hospital and health system leaders expressed strong disappointment in the recommendations, which will be formally submitted to Congress in March.   

“MedPAC is penalizing hospitals and the patients they serve instead of addressing the real issue, the skyrocketing cost of pharmaceuticals,” said AHA Executive Vice President Tom Nickels. “We are disappointed MedPAC has ventured so far afield from their mission.”

Before MedPAC’s vote, the AHA laid out its concerns about the proposals in a detailed Jan. 11 letter to the commission. The association urged MedPAC to withdraw its draft recommendation.

“This recommendation is outside of the scope of MedPAC’s mission, lacks a clear purpose and penalizes certain hospitals for their ability to obtain discounts on the items and services they purchase,” wrote Ashley Thompson, the AHA’s senior vice president for public policy analysis and development. She urged the commission to “undertake an analysis of the trend of rapidly increasing drug prices, which presents the Medicare program and its beneficiaries with remarkable challenges.

In its letter to MedPAC, the AHA noted that Congress created the 340B Drug Pricing Program 23 years ago to allow eligible entities to stretch limited resources to expand access to care for vulnerable patients. “The 340B program is crucial to helping provide low-cost pharmacy services to patients, and it remains a critical component of helping safety-net health care providers create healthier communities – especially in the face of rapidly increasing drug costs,” the AHA wrote MedPAC. “Many 340B hospitals treat a high number of low-income patients, face cuts to disproportionate share hospital payments and have negative operating margins.”

The association faulted the commission for “venturing beyond its scope” by seeming to question Congress’s design of the 340B program. The AHA also said it is unclear exactly what MedPAC’s proposal is meant to accomplish. At its December meeting, commissioners expressed concern about the growth of the program and suggested tying 340B savings to hospitals that provide more compensated care. Commissioners also indicated an interest in reducing the Part B drug copayments of Medicare beneficiaries.

But the commission offered no evidence that its proposal would result in better or more care for elderly patients, said the AHA. It also pointed out that 340B hospitals provide uncompensated care that is about 95% higher than other hospitals as a percent of their revenue.

And the AHA said MedPAC’s recommended policy changes “would not directly benefit many Medicare beneficiaries, dually eligible Medicare beneficiaries included, but would instead penalize 340B hospitals, including those serving high numbers of dually eligible beneficiaries,” the AHA stated.

The AHA said it was wrong for the commission to propose cutting hospital payments “as a back-door method of obtaining discounts on drugs,” and suggested it review alternatives that would let Medicare access discounts directly through Medicare Part D.

The association also pointed out that the Health Resources and Services Administration (HRSA) on Aug. 28 proposed comprehensive changes to the 340B program. HRSA’s proposed omnibus guidance, issued as a notice, covers entity eligibility; patient definition; Group Purchasing Organization prohibition; contract pharmacy; duplicate discounts; and covered entity audits. It also includes enhanced program integrity requirements for pharmaceutical manufacturers participating in the 340B program.

“MedPAC should refrain from considering any recommendations related to the 340B program until HRSA finalizes these programmatic changes,” the AHA told the commission. 

The AHA recently released an animated video detailing how hospitals use 340B savings to they receive from discounts on high prescription drug prices to reinvest in programs that enhance patient services and access to care. 


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