CMS Proposed 340B Rule Changes Jeopardize Safety Net Hospitals

Categories: Policy
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On July 13, the Centers for Medicare & Medicaid Services (CMS) issued a proposed rule that would drastically cut the 340B drug discount program for hospitals serving Medicare patients. The proposed rule would specifically affect safety net hospitals and significantly cut their drug-cost savings from the 340B program, jeopardizing their ability to continue to provide care to all patients of all incomes. The Primary Care Development Corporation (PCDC) submitted the following official comments to advocate for the 340B drug discount program and remind CMS how 340B makes it possible to provide more care and services to more patients.

September 11, 2017


RE: CMS-1678-P: Medicare Program: Hospital Outpatient Prospective Payment and Ambulatory Surgical Center Payment Systems and Quality Reporting Programs

Dear Administrator Verma,

The Primary Care Development Corporation (PCDC) appreciates the opportunity to comment on the proposed CY 2018 Hospital Outpatient PPS rule, specifically on the proposed changes to the 340B drug purchasing program.

PCDC is a nationally recognized nonprofit organization and a U.S. Treasury-certified community development financial institution, catalyzing excellence in primary care through strategic community investment, capacity building, and policy initiatives to achieve health equity. Since our founding in 1993, we have advocated for primary care and helped over 1,000 primary care practices in more than 30 states to improve delivery of care by providing capital as well as training and technical assistance services.

The proposed rule asserts that hospitals purchasing separately payable drugs through the 340B program would be paid at a significantly reduced average sales price (ASP) threshold rate and receive just 77.5 percent of ASP as compared with the current reimbursement of 106 percent of ASP.

PCDC is greatly concerned that this drastic cut totaling 27 percent will severely reduce reimbursement for safety net hospitals, which are already stretched to provide care for those with poor health status and limited financial means.

The value of these hospitals cannot be overstated. They provide essential primary care services for the country’s most vulnerable populations; in many rural areas, they may be the sole source of such care, particularly for low income people, and those on Medicaid or Medicare. The proposed rule would deprive safety net hospitals of 340B drug-cost savings, jeopardizing the ability to provide care to all patients of all incomes. Without access to primary care, families risk costly and serious complications from illnesses that can threaten their long-term well-being and financial security, as well as worsen other social and economic inequities.

As experts in lending to and working with safety net providers nationwide, we understand firsthand the importance of the 340B drug discount program — above all, its crucial role in helping offset the high unreimbursed costs of delivering comprehensive care services to the medically underserved.

This purpose is made explicit in the original report establishing the 340B program, created “to stretch scarce federal resources as far as possible, reaching more eligible patients, and providing more comprehensive services.” Congress specifically enumerated and identified entities qualifying for 340B as those serving low-income and disabled patients. And as we have seen in practice, the 340B program allows acute care and safety net hospitals to fund the care and ancillary services that ultimately keep a community healthy and out of the hospital, rather than just triaging those with immediate need. This objective is successfully met through 340B hospitals’ fundamental mission of providing care to all, including the uninsured and those unable to pay, and additional services to the community such as after-hours clinics.

Because 340B providers by definition see the most vulnerable populations, a significant cut to this program will jolt and diminish the overall health of these communities. Repercussions are also economic: Worse health outcomes correlate with exits from the workforce, whether temporary and permanent. In addition, downsizing or shuttering a hospital — often the largest employer in many communities — can devastate an area’s fiscal health.

Savings under this proposed change will be funneled to non-drug related services for all hospitals — benefiting hospitals that see higher-income patients while penalizing those that serve the most vulnerable. This structure will not only upend the very function of the 340B program, but also dismantle it.

We urge CMS to heed the advice of its own Advisory Panel on Hospital Outpatient Payment and withdraw these proposed cuts impacting 340B providers. Thank you for the opportunity to comment on the rule.

Primary Care Development Corporation (PCDC)
Patrick Kwan, Senior Director of Advocacy and Communications
(212) 437-3927 |