How could the proposed Medicare payment cut for 340B drugs affect the American Hospital Association?
The proposed Medicare payment cut threatens the revenue and operational viability of the American Hospital Association's members. The HHS brief, authored by Casey B. Mulligan, supports a Centers for Medicare and Medicaid Services (CMS) proposal to significantly reduce Medicare payments for drugs acquired through the 340B Program. Under the CMS proposal, Medicare would pay for these drugs at the average sales price minus 33.4%, a sharp reduction from the current average sales price plus 6%. Hospital groups, including the American Hospital Association, strongly oppose this cut, warning that it would make drugs less affordable for vulnerable patients and threaten the revenue streams of safety-net hospitals. The agency estimates the change would reduce Original Medicare drug payments by about $4.55 billion in the first year.
- Effect
- Strong negative
- How direct
- 2 steps, 1 inferred by Brind
- When
- Within months
- The story
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How it reaches American Hospital Association
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Economists at the Department of Health and Human Services produced an internal agency analysis arguing that the federal drug discount program, the 340B Program, may incentivize hospitals to overuse expensive drugs and expand through consolidation. The analysis, which was authored by Casey B. Mulligan, supports a Medicare payment cut that the administration has proposed. Hospital groups have strongly opposed this proposed cut.
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The HHS brief argues that the 340B Program incentivizes the overuse of high-cost drugs. This analysis supports the CMS proposal, which would change Medicare payments for 340B-acquired drugs from the average sales price plus 6% to the average sales price minus 33.4%.
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- medicaldaily.com Saturday
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The proposed payment cut would reduce the revenue hospitals receive for 340B-acquired drugs. Hospital groups warn that this loss of revenue could force safety-net hospitals to cut services, which the American Hospital Association opposes.
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The facts so far
As reported. Each one links to where it comes from.
- The CMS proposal would pay for 340B-acquired drugs at the average sales price minus 33.4%, down from plus 6%.medicaldaily.com
- CMS estimated the change would reduce Original Medicare drug payments by about $4.55 billion in the first year.medicaldaily.com
- The American Hospital Association states that 340B hospitals provide about 77% of Medicaid hospital care and 67% of the nation's unpaid care.medicaldaily.com
- A final rule on the 2027 hospital outpatient payment rule is expected later this fall, with changes set to take effect Jan. 1, 2027.medicaldaily.com
Why it matters
The financial stability of safety-net hospitals is at stake. These hospitals provide essential, reduced-cost care for vulnerable patients, and the American Hospital Association argues that the proposed payment cut would jeopardize this ability to provide care by reducing hospital revenue.
This dispute is part of a larger debate over the 340B Program, which was created in 1992 to ensure drugmakers sell outpatient drugs at reduced prices to qualifying hospitals serving low-income patients. The HHS brief argues the program has expanded beyond its original intent, while hospital groups argue the savings fund critical care.
What we don't know yet
- Will the final 2027 outpatient payment rule implement the proposed payment cut?
- How will the CMS offset the savings with higher payments for other hospital outpatient services?
What would change this answer
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Beyond this explainer
Questions worth asking
Ideas the web ties closely to this story that the explainer doesn't mention. These are prompts for your own research: Brind hasn't answered them.
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About National Plan and Provider Enumeration System
How does the National Plan and Provider Enumeration System track the specific services provided by hospitals receiving 340B drugs?
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About Fee For Service
If the 340B payment cut is implemented alongside existing fee-for-service payment rules, how might this affect overall hospital revenue?
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About Esrd
Since safety-net hospitals serve vulnerable patients, how might the 340B payment cut specifically impact the care provided to patients with End-Stage Renal Disease?
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Who else could feel it
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Reporting
- medicaldaily.comSaturday
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