CMS Proposes Major Changes to Medicare Part B Under 340B Program

The Centers for Medicare & Medicaid Services (CMS) has introduced a proposal in the CY 2027 Hospital Outpatient Prospective Payment System (OPPS) Proposed Rule. This proposal aims to adjust Medicare Part B payments for certain outpatient drugs and biologicals acquired through the 340B Program. The changes seek to align payments more closely with acquisition costs rather than the standard OPPS drug payment rate.

In 2018, CMS made adjustments that reduced OPPS payments for certain 340B Program drugs from the average sales price (ASP) plus 6 percent to ASP minus 22.5 percent. This significant reduction was contested and led to a Supreme Court decision in 2022 in American Hospital Association v. Becerra. The court determined that the U.S. Department of Health and Human Services must conduct an acquisition cost survey before altering payment rates for 340B hospitals.

Subsequent to this decision, CMS was required to reverse previous payment reductions and issue corrective payments, totaling approximately $9 billion, to 340B providers. The new proposal reintroduces the use of acquisition cost surveys to ensure Medicare payments to 340B hospitals reflect actual purchase costs for outpatient drugs.

Beginning in CY 2027, CMS proposes further reductions in Part B payments for 340B-acquired drugs, from ASP plus 6 percent to ASP minus 33.4 percent, nearly a 40 percent decrease. This adjustment will apply a reduced rate to drug claims from 340B hospitals to better estimate acquisition costs.

Healthcare providers must evaluate which hospitals, drugs, and claim types would be affected by the proposed payment reduction. Identifying exceptions, such as specific hospitals or drug categories, and understanding CMS’s criteria for indicating 340B-acquired drugs on claims is crucial.

The financial implications are significant, especially for hospitals relying on the 340B Program to support outpatient pharmacy, oncology, and specialty drug services for underinsured patients. Although intended to be budget neutral within OPPS, the realignment could cause financial redistribution, impacting high-cost drug claims.

This proposal also brings legal challenges as CMS seeks to reinstate a previously invalidated policy using statutory survey-based authority. Stakeholders should assess the survey's credibility and the rationale for the proposed payment rates. Hospitals are encouraged to model potential reimbursement changes and review identification processes for 340B claims, including the use of billing modifiers.