Hospital Groups to Sue CMS Over Slashed Drug Payments

Three leading US hospital associations are suing the Centers for Medicare and Medicaid Services (CMS) in response to a final rule slashing the 340B Medicare Drug Pricing Program by $1.6 billion, which would mean CMS could make drug payments at 22.5 percent less than the average sales price, according to Modern Healthcare.

The American Hospital Association, America’s Essential Hospitals, and the Association of American Medical Colleges plan to file a lawsuit against the agency, claiming that CMS has overstepped its statutory authority with the cut.

“CMS’ decision in today’s rule to cut Medicare payments to hospitals for drugs covered under the 340B program will dramatically threaten access to healthcare for many patients, including uninsured and other vulnerable populations,” said Tom Nickels, executive vice president of the American Hospital Association, in a statement.

The Drug Pricing Program helps hospitals stretch federal resources in order to give more patients lifesaving prescription drugs and comprehensive healthcare that would not otherwise have access to such care. Nickels went on to state that the cut to the program “is not based on sound policy and punishes hospitals and patients for participation in a program outside of CMS’ jurisdiction,” and that the cuts would in fact cause out-of-pocket costs for some Medicare beneficiaries to increase.

CMS has said the cut is needed to better align their payments with the actual costs incurred by hospitals.

“We are changing our current Medicare Part B drug payment methodology for 340B hospitals that we believe will better, and more appropriately, reflect the resources and acquisition costs that these hospitals incur. These changes will lower drug costs for Medicare beneficiaries for drugs acquired by hospitals under the 340B Program,” the rule states.

The rule also establishes a modifier in the program meant to better help CMS track what drugs are being purchased through the Drug Pricing Program. Payments for vaccines would not change under the new rule.

While some critics of the program say that hospitals exploit the savings gained, according to Modern Healthcare, providers assert that this cut puts safety-net hospitals in particular at risk. CMS has already been asked to rescind its proposal for the cut prior to the issuing of the final rule, when the Advisory Panel on Hospital Outpatient Payment raised concerns in August about the potential harm for safety-net providers.

Sarah Sheber is assistant editor/web editor at Journal of AHIMA.


  1. Decreased Drug Reimbursement Leads To Provider Outrage - Medical Management Institute (MMI) - […] understandably upset. The Centers for Medicare and Medicaid Services (CMS) recently announced their plan to cut the 340B Medicare…

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