CMS Proposal to Make One-Time $9 Billion Lump Sum Payment to 340B-Covered Entity Hospitals

The Centers for Medicare & Medicaid Services ("CMS") recently announced its proposal to make a one-time lump sum payment of roughly $9 billion to 340B-covered entity hospitals that were impacted by the agency's unlawful reimbursement reductions for 340B drugs billed to Medicare Part B from 2018 to 2022. This proposal comes after the Supreme Court sided with affected 340B participating hospitals last June in American Hospital Association v. Becerra, ruling that the government must provide a remedy to the approximately 1,600 impacted hospitals for historical amounts owed.

The authority for these payments comes from proposed rule CMS 1793-P ("Hospital Outpatient Prospective Payment System: Remedy for the 340B-Acquired Drug Payment Policy for Calendar Years 2018-2022"), which will be formally published on the Federal Register's website on July 11, 2023. The rule has a stakeholder comment period ending on September 5, 2023. Pending any changes to the proposed rule, we expect CMS to begin making this lump-sum payment shortly after the proposed rule is finalized, likely later this year.

In an effort to remain budget neutral, CMS’s proposal involves offsetting the majority of the proposed lump sum repayments with corresponding hospital reimbursement cuts for services and non-drug items, although these cuts would be spread over approximately 16 years.

While hospital entities and advocacy groups have initially stated appreciation for the lump sum format of the repayments owed, there is some disappointment that the repayments do not include interest, and that CMS proposed corresponding repayment cuts that impact 340B and non-340B hospitals alike.

With this in mind, affected hospitals have a unique opportunity to provide input about CMS' repayment plan. If your entity is interested in submitting comments, please contact your Quarles attorney or:

• Brenda Maloney Shafer: (602) 229-5774 / brenda.shafer@quarles.com
• Richard Davis: (414) 277-5844 / richard.davis@quarles.com
• Michael French: (312) 715-5261 / michael.french@quarles.com
• Madison Hartman: (317) 399-2883 / madison.hartman@quarles.com