Rule2023-24407
Medicare Program; Hospital Outpatient Prospective Payment System: Remedy for the 340B-Acquired Drug Payment Policy for Calendar Years 2018-2022
Primary source
Metadata and text below are from the Federal Register, a public-domain U.S. government work. Always verify the official published version before relying on it for any legal matter.
Published
November 8, 2023
Effective
January 8, 2024
Issuing agencies
Health and Human Services DepartmentCenters for Medicare & Medicaid Services
Abstract
This final rule describes the agency's actions on remand from the United States (U.S.) District Court for the District of Columbia to craft a remedy in light of the U.S. Supreme Court's decision in American Hospital Association v. Becerra, 142 S. Ct. 1896 (2022), relating to the adjustment of Medicare payment rates for drugs acquired under the 340B Program from calendar year (CY) 2018 through September 27th of CY 2022.
Full Text
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<title>Federal Register, Volume 88 Issue 215 (Wednesday, November 8, 2023)</title>
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[Federal Register Volume 88, Number 215 (Wednesday, November 8, 2023)]
[Rules and Regulations]
[Pages 77150-77194]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2023-24407]
[[Page 77149]]
Vol. 88
Wednesday,
No. 215
November 8, 2023
Part II
Department of Health and Human Services
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Centers for Medicare & Medicaid Services
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42 Part 419
Medicare Program; Hospital Outpatient Prospective Payment System:
Remedy for the 340B-Acquired Drug Payment Policy for Calendar Years
2018-2022; Final Rule
Federal Register / Vol. 88, No. 215 / Wednesday, November 8, 2023 /
Rules and Regulations
[[Page 77150]]
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DEPARTMENT OF HEALTH AND HUMAN SERVICES
Centers for Medicare & Medicaid Services
42 CFR Part 419
[CMS-1793-F]
RIN 0938-AV18
Medicare Program; Hospital Outpatient Prospective Payment System:
Remedy for the 340B-Acquired Drug Payment Policy for Calendar Years
2018-2022
AGENCY: Centers for Medicare & Medicaid Services (CMS), Department of
Health and Human Services (HHS).
ACTION: Final rule.
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SUMMARY: This final rule describes the agency's actions on remand from
the United States (U.S.) District Court for the District of Columbia to
craft a remedy in light of the U.S. Supreme Court's decision in
American Hospital Association v. Becerra, 142 S. Ct. 1896 (2022),
relating to the adjustment of Medicare payment rates for drugs acquired
under the 340B Program from calendar year (CY) 2018 through September
27th of CY 2022.
DATES: This rule is effective January 8, 2024.
FOR FURTHER INFORMATION CONTACT: Cory Duke, <a href="/cdn-cgi/l/email-protection#eead819c97c0aa9b858bae8d839dc086869dc0898198"><span class="__cf_email__" data-cfemail="5a19352823741e2f313f1a39372974323229743d352c">[email protected]</span></a>, or
(410) 786-0631.
SUPPLEMENTARY INFORMATION:
I. Background
A. OPPS Payment Policy for Drugs Acquired Through the 340B Program
1. Overview
Under the Hospital Outpatient Prospective Payment System
(hereinafter referred to as OPPS), we generally set payment rates for
separately payable drugs and biologicals (hereinafter referred to
collectively as ``drugs'') under section 1833(t)(14)(A) of the Social
Security Act (hereinafter referred to as ``the Act'') (42 U.S.C.
1395l(t)(14)(A)). Section 1833(t)(14)(A)(iii)(II) of the Act (42 U.S.C.
1395l(t)(14)(A)(iii)(II)) provides that, if hospital acquisition cost
data are not available, the payment amount is the average price for the
drug in a year established under sections 1842(o), 1847A, or 1847B of
the Act (42 U.S.C. 1395u(o), 42 U.S.C. 1395w-3a, & 42 U.S.C. 1395w-3b),
as the case may be. Payment rates for drugs are usually established
under section 1847A of the Act (42 U.S.C. 1395w-3a), which generally
sets a default rate of the average sales price (ASP) plus 6 percent.
Section 1833(t)(14)(A)(iii)(II) of the Act (42 U.S.C.
1395l(t)(14)(A)(iii)(II)) also provides that the average price for the
drug in the year as established under section 1847A of the Act (42
U.S.C. 1395w-3a), is calculated and adjusted by the Secretary of the
Department of Health and Human Services (Secretary) as necessary for
purposes of paragraph (14).
In the calendar year (CY) 2018 OPPS/ASC final rule with comment
period (82 FR 59353 through 59371), the Centers for Medicare & Medicaid
Services (CMS) reexamined the appropriateness of paying the ASP plus 6
percent for drugs acquired through the 340B Drug Pricing Program
(hereinafter referred to as the ``340B Program''), a Health Resources
and Services Administration (HRSA)-administered program that allows
covered entities to purchase certain covered outpatient drugs at
discounted prices from drug manufacturers. Based on findings of the
Government Accountability Office (GAO),\1\ the HHS Office of the
Inspector General (OIG),\2\ and the Medicare Payment Advisory
Commission (MedPAC) \3\ that 340B hospitals were acquiring drugs at a
significant discount under the 340B Program, CMS adopted a policy
beginning in 2018 generally to pay an adjusted amount of ASP minus 22.5
percent for certain separately payable drugs or biologicals acquired
through the 340B Program. This adjustment amount was based on our
concurrence with an analysis by MedPAC that concluded that the
estimated average minimum discount of 22.5 percent of ASP adequately
represented the average minimum discount that a 340B participating
hospital received for separately payable drugs under the OPPS (82 FR
59354 through 59371). Our intent in implementing this payment reduction
was to reflect more accurately the actual costs incurred by
participating hospitals in acquiring 340B drugs. We stated our belief
that such changes would allow Medicare beneficiaries and the Medicare
program to pay a more appropriate amount when hospitals participating
in the 340B Program furnished drugs to Medicare beneficiaries that were
purchased under the 340B Program (82 FR 59353 through 59371).
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\1\ Government Accountability Office. ``Medicare Part B Drugs:
``Action Needed to Reduce Financial Incentives to Prescribe 340B
Drugs at Participating Hospitals.'' June 2015. Available at <a href="https://www.gao.gov/assets/gao-15-442.pdf">https://www.gao.gov/assets/gao-15-442.pdf</a>.
\2\ Office of Inspector General. ``Part B Payment for 340B
Purchased Drugs. OEI-12-14-00030''. November 2015. Available at:
<a href="https://oig.hhs.gov/oei/reports/oei-12-14-00030.pdf">https://oig.hhs.gov/oei/reports/oei-12-14-00030.pdf</a>.
\3\ Medicare Payment Advisory Commission. March 2016 Report to
the Congress: Medicare Payment Policy. March 2016. Available at
Medicare Payment Advisory Commission. March 2016 Report to the
Congress: Medicare Payment Policy. March 2016. Available at <a href="https://www.medpac.gov/document/http-www-medpac-gov-docs-default-source-reports-may-2015-report-to-the-congress-overview-of-the-340b-drug-pricing-program-pdf/">https://www.medpac.gov/document/http-www-medpac-gov-docs-default-source-reports-may-2015-report-to-the-congress-overview-of-the-340b-drug-pricing-program-pdf/</a>.
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2. OPPS Payment for 340B Drugs in CY 2018 Through September 27th of
2022
From January 1, 2018, through September 27, 2022, under the OPPS we
generally paid for certain separately payable drugs acquired through
the 340B Program at ASP minus 22.5 percent. In the CY 2018 OPPS/ASC
final rule with comment period (82 FR 59369 through 59370), we
finalized our proposal and adjusted the payment rate for separately
payable drugs (other than drugs with pass-through payment status and
vaccines) acquired under the 340B Program from ASP plus 6 percent to
ASP minus 22.5 percent. We also noted that critical access hospitals
are not paid under the OPPS, and therefore were not subject to the OPPS
340B drug payment adjustment policy (hereinafter referred to as the
``340B Payment Policy''). We also exempted rural sole community
hospitals, children's hospitals, and PPS-exempt cancer hospitals from
the 340B payment adjustment primarily due to these hospitals receiving
special payment adjustments under the OPPS. In addition, as stated in
the CY 2018 OPPS/ASC final rule with comment period, this policy change
did not apply to drugs with pass-through payment status, which are
required to be paid based on the ASP methodology, or vaccines, which
are excluded from the 340B Program.
Additionally, as discussed in the CY 2018 OPPS/ASC final rule with
comment period (82 FR 59369 through 59370), to effectuate the payment
adjustment for 340B-acquired drugs, we implemented modifiers ``JG'' and
``TB'' effective January 1, 2018. Hospitals paid under the OPPS, other
than types of hospitals excluded from the OPPS (such as critical access
hospitals) or exempted from the 340B Payment Policy for CY 2018, were
required to report modifier ``JG'' on the same claim line as the drug
Healthcare Common Procedure Coding System (HCPCS) code to identify a
340B-acquired drug. For CY 2018, rural sole community hospitals,
children's hospitals, and PPS-exempt cancer hospitals were exempted
from the 340B payment adjustment. These hospitals were required to
report informational modifier ``TB'' for 340B-acquired drugs, and
continued to be paid the full applicable amount, generally ASP plus 6
percent.
In the CY 2019 OPPS/ASC final rule with comment period (83 FR
58981), we
[[Page 77151]]
continued the Medicare 340B payment policies that were implemented in
CY 2018 and adopted a policy to pay for non-pass-through 340B-acquired
biosimilars at ASP minus 22.5 percent of the biosimilar's ASP, rather
than the reference biological product's ASP. Additionally, in the CY
2019 OPPS/ASC final rule with comment period (83 FR 59015 through
59022), we finalized a policy to pay ASP minus 22.5 percent for 340B-
acquired drugs furnished in non-exempted off-campus provider-based
departments (PBDs) paid under the Physician Fee Schedule (PFS). We
adopted this payment policy for CY 2019 and subsequent years. Also,
during the CY 2019 OPPS/ASC rulemaking cycle, we clarified that the
340B payment adjustment applied to drugs priced using either wholesale
acquisition cost (WAC) or average wholesale price (AWP), and since the
policy was first adopted, we applied the 340B payment adjustment to
340B-acquired drugs priced using these pricing methodologies. The 340B
payment adjustment for WAC-priced drugs was WAC minus 22.5 percent.
340B-acquired drugs that were priced using AWP were paid an adjusted
amount of 69.46 percent of AWP (83 FR 37125).\4\
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\4\ The 69.46 percent of AWP was calculated by first reducing
the original 95 percent of AWP price by 6 percent to generate a
value that is similar to ASP or WAC with no percentage markup. Then
we applied the 22.5 percent reduction to ASP/WAC-similar AWP value
to obtain the 69.46 percent of AWP, which was similar to either ASP
minus 22.5 percent or WAC minus 22.5 percent.
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For more detailed descriptions of our OPPS payment policy for drugs
acquired under the 340B Program during this timeframe, we refer readers
to the CY 2018 OPPS/ASC final rule with comment period (82 FR 59353
through 59371); the CY 2019 OPPS/ASC final rule with comment period (83
FR 59015 through 59022); the CY 2020 OPPS/ASC final rule with comment
period (84 FR 61321 through 61327); the CY 2021 OPPS/ASC final rule
with comment period (85 FR 86042 through 86055); the CY 2022 OPPS/ASC
final rule with comment period (86 FR 63640 through 63649); and the CY
2023 OPPS/ASC final rule with comment period (87 FR 71972 through
71973).
3. Payment for Non-Drug Items and Services in CY 2018 Through CY 2022
In the CY 2018 OPPS/ASC final rule with comment period (82 FR
59216, 59258), to comply with the statutory budget neutrality
requirements under sections 1833(t)(9)(B) and (t)(14)(H) of the Act (42
U.S.C. 1395l(t)(9)(B) and (t)(14)(H)), we finalized our proposal to
redistribute our estimated reduction in payments for separately payable
drugs as a result of the 340B Payment Policy by increasing the
conversion factor used to determine the payment amounts for non-drug
items and services. As further described in the CY 2018 OPPS/ASC final
rule with comment period, we used updated CY 2016 claims data and a
list of 340B-eligible providers to calculate an estimated impact of
$1.6 billion based on the final CY 2018 policy to pay for OPPS 340B-
acquired drugs at a payment rate of generally ASP minus 22.5 percent.
In order to effectuate the budget neutrality provisions of the OPPS,
the estimated $1.6 billion in reduced drug payments from adoption of
the final 340B payment methodology was redistributed in an equal
offsetting amount to all hospitals paid under the OPPS by increasing
the payment rates by 3.19 percent for nondrug items and services
furnished by all hospitals paid under the OPPS for CY 2018. This same
conversion factor adjustment applied for CYs 2019 through 2022,
increasing payments for non-drug items and services in these CYs as a
result of the 340B Payment Policy.
For ease of reference, we refer to the adjustments we made to
payment rates for 340B-acquired drugs and the corresponding rate
adjustment for non-drug services and items as the 340B Payment Policy.
B. Litigation History of the 340B Payment Policy
The 340B Payment Policy has been the subject of extensive
litigation. See the 340B Remedy proposed rule for a more comprehensive
summary of the litigation history (88 FR 44079 through 44080).
On June 15, 2022, the Supreme Court held that because CMS had not
conducted a survey of hospitals' acquisition costs, it could not vary
the payment rates for outpatient prescription drugs by hospital group.
See Am. Hosp. Ass'n v. Becerra, 142 S. Ct. 1896, 1906 (2022).
The Supreme Court declined to opine on the appropriate remedy, id.
at 1903, and remanded the case to the U.S. Court of Appeals for the
D.C. Circuit, id. at 1906, which in turn remanded it to the U.S.
District Court for the District of Columbia, see Am. Hosp. Ass'n v.
Becerra, No. 19-5048, 2022 WL 3061709, at *1 (D.C. Cir. Aug. 3,
2022).\5\ On remand to the district court, the plaintiffs filed motions
seeking orders (1) vacating the portion of the CY 2022 final OPPS rule
that set the reimbursement rate for 340B drugs at ASP minus 22.5
percent, which was still in effect for the remainder of 2022, and (2)
requiring CMS to remedy the reduced payment amounts to 340B hospitals
under the final OPPS rules for CY 2018 through CY 2022 by reimbursing
them the difference between what they were paid and ASP plus 6 percent.
See Am. Hosp. Ass'n v. Becerra, 1:18-cv-02084-RC, Dkts.67, 69 (D.D.C.
Aug. 3, 2022).\6\ On September 28, 2022, the district court ruled on
the first motion, vacating the reimbursement rate for 340B-acquired
drugs for the remainder of 2022. See Am. Hosp. Ass'n v. Becerra, 1:18-
cv-2084-RC, 2022 WL 4534617, at *5.\7\
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\5\ <a href="https://ecf.cadc.uscourts.gov/n/beam/servlet/TransportRoom">https://ecf.cadc.uscourts.gov/n/beam/servlet/TransportRoom</a>.
\6\ <a href="https://ecf.dcd.uscourts.gov/doc1/04519382229">https://ecf.dcd.uscourts.gov/doc1/04519382229</a>; <a href="https://ecf.dcd.uscourts.gov/doc1/04509382365">https://ecf.dcd.uscourts.gov/doc1/04509382365</a>.
\7\ <a href="https://ecf.dcd.uscourts.gov/cgi-bin/show_public_doc?2018cv2084-79">https://ecf.dcd.uscourts.gov/cgi-bin/show_public_doc?2018cv2084-79</a>.
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On January 10, 2023, the district court ruled on the second motion,
issuing a remand without vacatur to give the agency the opportunity to
determine the proper remedy for the reduced payment amounts to 340B
hospitals under the payment rates in the final OPPS rules for CY 2018
through CY 2022. See Am. Hospital Ass'n v. Becerra, 1:18-cv-2084-RC,
2023 WL 143337, at *6.\8\ Both courts and the Departmental Appeals
Board have stayed pending challenges to payments made under the 340B
Payment Policy. See, for example, Vanderbilt Univ. Med. Ctr. v. Azar,
1:20-cv-01582 (D.D.C. May 23, 2023).\9\
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\8\ <a href="https://ecf.dcd.uscourts.gov/cgi-bin/show_public_doc?2018cv2084-86">https://ecf.dcd.uscourts.gov/cgi-bin/show_public_doc?2018cv2084-86</a>.
\9\ <a href="https://ecf.dcd.uscourts.gov/cgi-bin/DktRpt.pl?145369228216471-L_1_0-1">https://ecf.dcd.uscourts.gov/cgi-bin/DktRpt.pl?145369228216471-L_1_0-1</a>.
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C. Payment for 340B-Acquired Drug Claims for September 28, 2022,
Through December 31, 2022, and for CY 2023
The agency complied with the District Court's September 28, 2022,
decision by uploading revised OPPS drug files to pay the default rate
(generally ASP plus 6 percent) for all CY 2022 claims for 340B-acquired
drugs paid from September 28, 2022, through the end of CY 2022.
In the CY 2023 OPPS/ASC final rule with comment period (87 FR
71970), we finalized a policy reversing the 340B Payment Policy. To do
so, we first provided that drugs acquired through the 340B Program
would be paid at the default rate (generally ASP plus 6 percent) for CY
2023. Second, to ensure budget neutrality for CY 2023 OPPS payment
rates as required by statute, we finalized a reduction of 3.09 percent
to the 2023 OPPS conversion factor. This 3.09 percent reduction for CY
2023 offsets the prior increase of 3.19 percent
[[Page 77152]]
that was applied to the conversion factor by the 340B Payment Policy in
CY 2018. This is because a downward adjustment involves a smaller
percentage reduction from a larger number to get the same dollar amount
as the original upward adjustment from a smaller number. More
specifically, in order to achieve the original budget neutrality
adjustment for CY 2018, we had to multiply the conversion factor by
1.0319. In order to offset this prior increase for the CY 2023 rule, we
had to make a downward adjustment to the conversion factor, which
involved dividing 1 by 1.0319, which equals 0.9691. And 1 minus 0.9691
equals 0.0309, which is where we derived the 3.09 percent reduction to
the conversion factor for CY 2023. As we explained in the CY 2023 OPPS/
ASC final rule, we decreased the OPPS conversion factor to offset the
increase in the OPPS conversion factor in CY 2018, which originally
implemented the 340B policy in a budget neutral manner. We stated:
``This adjustment to the conversion factor is appropriate in these
circumstances, including because it removes the effect of the 340B
policy as originally adopted in CY 2018, which was recently invalidated
by the Supreme Court as explained above, from the CY 2023 conversion
factor and ensures it is equivalent to the conversion factor that would
be in place if the 340B Payment Policy had never been implemented'' (87
FR 71975). Additionally, we explained that we agreed with commenters,
including the American Hospital Association, that under these specific
circumstances it was appropriate to decrease payments for non-drug
items and services by a percentage that would offset the percentage by
which they were increased by the 340B Payment Policy in CY 2018 (87 FR
71975).
For more detail on the payment rate for drugs acquired under the
340B Program for CY 2023 and the corresponding adjustment to the
conversion factor to maintain budget neutrality as a result of
reversing the 340B adjustment and paying for all separately payable
drugs at ASP plus 6 percent (or WAC plus 3 or 6 percent or 95 percent
of AWP), we refer readers to the CY 2023 OPPS/ASC final rule with
comment period (87 FR 71973 through 71976).
II. Summary of and Responses to Public Comments on Remedy Payment
Adjustment for 340B-Acquired Drugs From CY 2018 Through September 27th
of CY 2022
A. Remedy Options Considered By CMS
In the proposed rule (88 FR 44080), we evaluated several options to
determine which remedy would best achieve the objective of unwinding
the unlawful 340B Payment Policy while making certain OPPS providers
(hereinafter referred to as ``affected 340B covered entity hospitals''
\10\) as close to whole as is administratively feasible.
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\10\ Throughout the duration of the policy, the 340B payment
adjustment did not apply to critical access hospitals, rural sole
community hospitals, children's hospitals, and PPS exempt cancer
hospitals.
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We describe the different proposed remedy options and aspects of
those alternative options that we considered in the proposed rule
below.
1. Make Additional Payments to Affected 340B Covered Entity Hospitals
for 340B-Acquired Drugs From CY 2018 Through September 27th of CY 2022
Without an Adjustment To Maintain Budget Neutrality
In the proposed rule (88 FR 44080), we considered calculating the
additional amount each affected 340B covered entity hospital would have
been paid for 340B-acquired drugs from CY 2018 through September 27th
of CY 2022 if not for the 340B Payment Policy, and then considered
paying that amount to each hospital without applying a corresponding
adjustment to the conversion factor for the increased payments for non-
drug items and services that were made from CY 2018 through CY 2022 due
to the 340B Payment Policy. As we described, we believe that we would
have the authority to make remedy payments under sections 1833(t)(2)(E)
and 1833(t)(14) of the Act (42 U.S.C. 1395l(t)(2)(E) and (t)(14)),
along with our retroactive rulemaking authority in section
1871(e)(1)(A) of the Act (42 U.S.C. 1395hh(e)(1)(A)). We noted that
sections 1833(t)(2)(E) and (t)(14) of the Act (42 U.S.C. 1395l(t)(2)(E)
and (t)(14)) require budget neutrality with respect to payment
adjustments to the OPPS made under those sections and there are no
exceptions with respect to remedy payments. Consequently, we stated
that we believe the best reading of both of those provisions is that
these remedy payments are subject to budget neutrality requirements, at
least when the budget neutrality adjustment would not be de minimis.
That was consistent with the statute's general approach of budget
neutralizing OPPS payment adjustments. See, for example, section
1833(t)(9)(B) of the Act (42 U.S.C. 1395l(t)(9)(B)).
We explained that section 1833(t)(2)(E) of the Act (42 U.S.C.
1395l(t)(2)(E)) straightforwardly requires adjustments made under that
provision to be made ``in a budget neutral manner.'' (Accord 65 FR
18438 (noting (t)(2)(E)'s budget neutrality requirement).) And section
1833(t)(14)(H) of the Act (42 U.S.C. 1395l(t)(14)(H)), relating to drug
APC payment rates, states that ``Additional expenditures resulting from
this paragraph shall not be taken into account in establishing the
conversion, weighting, and other adjustment factors for 2004 and 2005
under paragraph (9), but shall be taken into account for subsequent
years.'' (Emphasis added.) In addition, section 1833(t)(9)(B) of the
Act (42 U.S.C. 1395l(t)(9)(B)), referenced in section 1833(t)(14)(H) of
the Act (42 U.S.C. 1395l(t)(14)(H)), states in relevant part [i]f the
Secretary makes adjustments under subparagraph (A),\11\ then the
adjustments for a year may not cause the estimated amount of
expenditures under this part for the year to increase or decrease from
the estimated amount of expenditures under this part that would have
been made if the adjustments had not been made.
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\11\ Subparagraph (A) reads: Periodic review.--The Secretary
shall review not less often than annually and revise the groups, the
relative payment weights, and the wage and other adjustments
described in paragraph (2) to take into account changes in medical
practice, changes in technology, the addition of new services, new
cost data, and other relevant information and factors.
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We explained that these statutes require us to account for budget
neutrality in these remedy payments. To the extent these remedy
payments are understood as a payment adjustment under section
1833(t)(2)(E) of the Act (42 U.S.C. 1395l(t)(2)(E)), they are subject
to that section's budget neutrality constraints. And to the extent
these payments are understood as a payment under section 1833(t)(14) of
the Act (42 U.S.C. 1395l(t)(14)), we explained that they are
``[a]dditional expenditures resulting from'' paragraph (t)(14) of the
Act for years other than 2004 or 2005 and thus are subject to budget
neutrality constraints under section 1833(t)(14)(H) of the Act (42
U.S.C. 1395l(t)(14)(H)).
We noted that this reading of these provisions is consistent with
the statute's general approach of budget neutralizing OPPS payment
adjustments, see, for example, section 1833(t)(9)(B) of the Act (42
U.S.C. 1395l(t)(9)(B)), except when expressly
[[Page 77153]]
exempted, see sections 1833(t)(7)(I), (t)(14)(H), (t)(16)(D)(iii),
(t)(18)(C), (t)(19)(A), (t)(20) of the Act (42 U.S.C. 1395l(t)(7)(I)
(t)(14)(H), (t)(16)(D)(iii), (t)(18)(C), (t)(19)(A), (t)(20)). Budget
neutrality in OPPS serves the important interest of limiting
expenditures under Part B and thus protecting the public fisc. Cf. H.R.
Rep. No. 106-436, at 33-34 (1999) (noting the goal of prospective
payment systems, including the OPPS, is to slow growth rate of Medicare
expenditures).\12\ The Supplementary Medicare Insurance Trust Fund
(hereinafter referred to as the Part B Trust Fund) that makes OPPS
payments is mostly financed by premiums from participants and
contributions from the general fund of the Treasury. We pointed to the
Trustees' of the Part B Trust Fund warning that unexpected increases in
Medicare Part B or D expenditures may require increases to beneficiary
premiums and coinsurance, which already represent a growing share of
beneficiaries' total income and are projected to reflect about three-
quarters of the average Social Security retired-worker benefit by the
end of this century. See The 2023 Annual Report of the Boards of
Trustees of the Federal Hospital Insurance and Federal Supplementary
Medicare Insurance Trust Funds at 40-41.\13\ Additionally, unexpected
increases in Medicare Part B or D expenditures could require tax
increases or expenditure reductions elsewhere in the Federal budget;
the Trustees already project expenditures to consume more than 30
percent of Federal income tax revenue in just 50 years. Id. at 43.
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\12\ <a href="https://www.govinfo.gov/content/pkg/CRPT-106hrpt436/pdf/CRPT-106hrpt436-pt1.pdf">https://www.govinfo.gov/content/pkg/CRPT-106hrpt436/pdf/CRPT-106hrpt436-pt1.pdf</a>.
\13\ <a href="https://www.cms.gov/oact/tr/2023">https://www.cms.gov/oact/tr/2023</a>.
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Accordingly, we summarized that when changes to payment policy are
made, we generally make an adjustment to the OPPS conversion factor in
order to maintain budget neutrality. (See 70 FR 68542 (noting
outpatient drugs are included in the budget neutrality calculation
beginning in 2006).) We do not believe the Congress intended the
statute to permit regulated entities to achieve policy outcomes through
litigation that would be statutorily unavailable to them through the
regular rulemaking process, especially policy outcomes that increase
total Medicare expenditures.
We acknowledged that, in the past, not all OPPS payment policy
changes based on sections 1833(t)(14) and (t)(2)(E) of the Act (42
U.S.C. 1395l(t)(14) and (t)(2)(E)) have resulted in adjustments to the
budget neutrality factor or actual expenditures from the Part B Trust
Fund equaling zero in all circumstances. We stated that the method CMS
uses to account for changes to the ``estimated number of expenditures''
referenced in section 1833(t)(9)(B) of the Act (42 U.S.C.
1395l(t)(9)(B)) and incorporated by section 1833(t)(14)(H) of the Act
(42 U.S.C. 1395l(t)(14)(H)) is the OPPS conversion factor (for example,
71 FR 68193 through 68194). We explained that in situations that have
not had any estimated impact on the OPPS conversion factor or that
would otherwise have a de minimis impact, such as a 0.0001 change to
the conversion factor, which would have an inconsequential effect on
Medicare payments, CMS has effectively rounded the estimated impact on
expenditures to zero.\14\ Thus, in circumstances when there would be a
de minimis impact on estimated OPPS payment to meet the budget
neutrality requirements as a result of a post-annual-rulemaking policy
change, we have not changed OPPS payments to reflect the minimal impact
of the policy change. When considering whether the estimated amount of
expenditures is de minimis, we have taken into account relevant
context, such as the size of the change comparable to the OPPS payments
overall, the relative number of interested parties and any reliance
interests, as well as the anticipated impact on the Part B Trust Fund
of the change in payment due to the post-annual rulemaking policy
versus the anticipated administrative burden and cost of ratesetting
disruption.
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\14\ In the CY 2007 OPPS/ASC final rule with comment period,
using our authority under section 1833(t)(2)(E) of the Act (42
U.S.C. 1395l(t)(2)(E), we implemented a quality improvement program
which required hospitals eligible to participate in the Inpatient
Prospective Payment Systems (IPPS) Reporting Hospital Quality Data
for the Annual Payment Update (RHQDAPU) to meet the requirements for
receiving the full FY 2007 IPPS payment in order to qualify for the
CY 2007 OPPS update. Hospitals failing to meet the requirements
would receive a reduced OPPS conversion factor update in CY 2007,
the amount of which would then, if not deemed ``negligible,'' be
offset by a corresponding increase to the OPPS conversion factor to
maintain budget neutrality. See 71 FR 68193 through 68194.
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We then applied these principles to the remedy payments for the
340B Payment Policy, concluding that a budget neutrality adjustment is
statutorily required and, even if not statutorily required, warranted
as a matter of sound public policy. The estimated impact of our one-
time lump sum remedy payments is significant and reflects a substantial
fraction of total OPPS spending for any one calendar year, one that
goes well beyond any impact of which we have previously rounded to
zero. The specifics of the lump sum are discussed in greater detail in
the following section, II.B.1 of this final rule. Additionally, we
noted that reliance interests or administrative burdens would not
outweigh the impact of the remedy payments on the Part B Trust Fund
sufficiently to justify disregarding the principle of budget
neutrality, even if that were statutorily possible. We further
explained that the potential reliance interests implicated by the need
to recover unwarranted payments made over many years, combined with the
unique difficulties in calculating and collecting these payments
through retroactive rulemaking, should properly affect the way the
budget neutrality principle applies to these unique circumstances.
We noted that we budget neutralized the 340B Payment Policy from CY
2018 to CY 2022 by increasing the rate for non-drug items and services
by 3.19 percent. See also section I.A.3 of this final rule. That
resulted in $7.8 billion in additional spending on non-drug items and
services during that time period. We acknowledged that some OPPS
providers were still filing, or re-filing, claims for CY 2022;
therefore, our estimate of the total amount of additional spending on
non-drug items and services during that time period could change as
more claims from CY 2022 are processed, or reprocessed. As of this
final rule, that number still rounds to $7.8 billion, but is more
precisely $7,768,568,239. To assist readers, we will refer to this
number as $7.8 billion throughout this document. We cited our
consistent statements in both litigation and OPPS rules in the Federal
Register that any remedy payments could be subject to budget neutrality
constraints. See, for example, Am. Hosp. Ass'n, 142 S. Ct. at 1903
(acknowledging HHS's position that ``a judicial ruling invalidating the
2018 and 2019 reimbursement rates for certain hospitals would require
offsets elsewhere in the program''); 84 FR 61323 (``Recognizing
Medicare's complexity in formulating an appropriate remedy, any changes
to the OPPS must be budget neutral, and reversal of the policy change,
which raised rates for non-drug items and services by an estimated $1.6
billion for 2018 alone, could have a significant economic impact on the
approximate[ly] 3,900 facilities that are paid for outpatient items and
services covered under the OPPS.''). Additionally, because the 340B
Payment Policy this rule proposed to remedy was itself budget
neutralized, failing to budget neutralize the remedy payments would
[[Page 77154]]
mean that the additional payments for non-drug items and services that
were made from CY 2018 through CY 2022 to achieve budget neutrality for
the 340B Payment Policy as described under section I.A.3 of this final
rule would be a windfall, especially to non-340B hospitals that were
not subject to decreased drug payments from CY 2018 through CY 2022.
The Trust Fund has a strong interest in recovering that windfall, and
those who received it have no legitimate reliance interest in
permanently retaining that windfall.
We also considered the administrative burden specific to
maintaining budget neutrality noting CMS was already obliged on remand
to remedy the 340B policy. We concluded that the decision to include a
budget neutrality component in this remedy does not appreciably change
this burden, though of course the burden could be greater or lesser
depending on how the remedy is crafted. As set forth more fully below,
our proposed budget neutrality adjustment does not directly recoup
money already paid to providers; rather, it is a proposed adjustment to
future payment rates, allowing hospitals to take such rates into
account rather than forcing them to open their bank accounts and
disgorge their windfall immediately. On balance, the billions of
dollars the proposed payments to affected 340B covered entity hospitals
would cost the Part B Trust Fund outweigh the potential administrative
expenses or disruption resulting from a broad change in OPPS payment to
offset these additional costs.
Finally, even if this remedy rule were exempt from budget
neutrality requirements as a matter of statutory interpretation, we
noted that we would still exercise our authority under section
1833(t)(2)(E) of the Act (42 U.S.C. 1395l(t)(2)(E)) to offset the extra
payments we made for non-drug items and services from 2018 through
2022. Those payments have proven to be an unwarranted windfall, and the
Trust Fund has a strong interest in recovering them. We identified that
avoiding a windfall to providers would also be consistent with the
agency's longstanding inherent and common-law (and common-sense)
recoupment authority, through which ``the Secretary generally has the
duty and power to protect against overpayments to providers.'' Chaves
Cnty. Home Health Serv., Inc. v. Sullivan, 931 F.2d 914, 918 (D.C. Cir.
1991); see also, for example, United States v. Lahey Clinic Hosp.,
Inc., 399 F.3d 1, 16 (1st Cir. 2005) (``Although provisions of the
Medicare Act expressly authorize the Secretary to reopen initial
payment determinations and to recoup overpayments administratively in
certain circumstances, the statute does not displace the United States'
long standing power to collect monies wrongfully paid through an action
independent of the administrative scheme, nor is there any
inconsistency.'' (internal citations omitted)); Mount Sinai Hosp. of
Greater Miami, Inc. v. Weinberger, 517 F.2d 329, 345 (5th Cir.),
modified, 522 F.2d 179 (5th Cir. 1975) (similar). For that reason and
those discussed above, unwinding those payments is necessary to ensure
equitable payments under these circumstances.
Therefore, we concluded that it is required by the statute--but
even if not required, that it would be consistent with the statute--and
consistent with our past practices, and appropriate, to offset the
additional payments for non-drug items and services that were made from
CY 2018 through CY 2022 in order to maintain budget neutrality or
equitable payments when remedying this policy. But the context of this
rule, we clarified, remains unique: We are adjusting payments
prospectively in order to provide a remedy for a previous unlawful
payment decision. Precisely because that previous payment decision
itself followed budget neutrality principles, it provided unwarranted
payments to some at the same time it improperly took payments from
others. In applying budget neutrality principles to this remedy, we
seek to rectify this imbalance and restore matters as closely as
possible to where they would have been absent the policy the Supreme
Court determined to be unlawful. We solicited comments from the public
on our proposed interpretation of our statutory budget neutrality
obligations, equitable payment authorities, and recoupment authority.
Comment: We received many comments on our proposed interpretation
of our statutory budget neutrality obligations, equitable payment
authorities, and recoupment authority.
Response: These comments are addressed in section II.B.2.b of this
final rule.
2. Full Claims Reprocessing From CY 2018 Through September 27th of CY
2022
In the proposed rule (88 FR 44082), we explained that perhaps the
most perfect measure of achieving budget neutrality in circumstances
like this would be to turn back the clock to the day the unlawful
payment decision was first made, undo that decision, and start over. We
identified that CMS would have to reprocess all OPPS claims for 340B-
acquired drugs and non-drug items and services from CY 2018 through
September 27th of CY 2022 using the default payment rate under section
(t)(14) of the Act (42 U.S.C. 1395l(t)(14)) and our retroactive
rulemaking authority in section 1871(e)(1)(A) of the Act (42 U.S.C.
1395hh(e)(1)(A)). This approach would have the benefit of putting
providers, beneficiaries, and Medicare back in the same situation they
would have been in if CMS had never adopted the ASP minus 22.5 percent
rate for 340B-acquired drugs in 2018. But remedial rulemaking need not
provide this type of precise make-whole relief. See Shands Jacksonville
Med. Ctr., Inc. v. Azar, 959 F.3d 1113, 1118 (D.C. Cir. 2020) (agreeing
that the agency need not restore ``each individual hospital . . . at
least to the position it would have occupied had the rate reduction
never taken effect'').
We acknowledged that reprocessing every single claim might be a
potential approach to remedy this situation if it were administratively
achievable. But we feared that reprocessing such an unprecedentedly
large volume of claims and issuing payment to affected 340B covered
entity hospitals in a timely fashion would impose an immense
administrative burden on CMS, its contractors, and providers. We
accordingly concluded that this approach is not feasible in this case.
It would require the reprocessing of virtually all claims submitted to
the OPPS system during the affected period of time, but that system
processes more than 100 million claims each year. We remarked that
reprocessing almost 5 years' worth of OPPS claims could take several
years, resulting in some affected 340B covered entity hospitals having
to wait multiple years to receive payment, and leading to widespread
beneficiary cost sharing uncertainty, as beneficiaries could be caught
by surprise by a significant change in cost sharing responsibility from
a claim they thought had been closed many years ago. The large quantity
of claims and the amount of time required to reprocess them while
continuing normal claims processing likewise would not result in timely
payments or adjustments to hospitals. Additionally, we indicated that
reprocessing these claims would lead to the need for significant
recoupments of payments for non-drug items and services that would have
already been paid at the higher rate based on the budget neutrality
adjustment applied as a result of the original 340B Payment Policy. The
D.C. Circuit has held that it
[[Page 77155]]
is not necessary ``to recalculate each individual claim paid under the
reduced rate'' that was the subject of litigation when doing so would
cause significant administrative burden and delayed payments. See
Shands, 959 F.3d at 1120. But we did allow that the expected results of
such a calculation can certainly inform an alternative approach to
budget neutrality, as we discuss below.
We noted that the vast majority of 340B drug claims from CY 2022
have been reprocessed at the higher 340B payment rate, generally ASP
plus 6 percent, which we believe was allowable under the District
Court's order prospectively vacating the CY 2022 340B payment rate and
the typical timely filing requirements described at 42 CFR 424.44. We
confirmed this was appropriate for CY 2022 claims given that providers
were able to follow the regular claims processing conventions for these
claims, and clarified that we will ensure CMS does not make duplicate
payments for these claims already remedied by the usual claims
processing methods. As part of this final rule, we estimate that for CY
2022, $1.6 billion in remedy payments (including the Medicare and
beneficiary portions) have already been made to providers through
reprocessed claims, or claims that had dates of service of January 1,
2022, through September 27, 2022, but were held until, or reprocessed
after, the 340B rule was vacated and the standard drug payment rates
were in effect for 340B-acquired drugs. We consider these reprocessed
claims to be partially remedied as 340B providers no longer received
the lower 340B drug payment rate for these 340B-acquired drugs. This
$1.6 billion is one component of the total remedy payments accounted
for in this final rule. We also note that these claims only had the
340B drug portion of the claim adjusted, and that for these claims to
be fully remedied the non-drug item and service components of these
claims would also need to be adjusted as discussed in subsequent
sections.
We thank commenters for their input on our policy proposals. We
have summarized the comments received and our responses to those
comments in the following section.
Comment: Commenters generally agreed with CMS's conclusion that
reprocessing all claims is not administratively feasible. Commenters
appreciated that CMS considered this option but did not formally
propose it in the proposed rule.
Response: We appreciate commenters' concurrence with our
conclusion.
Comment: One commenter requested that CMS pay providers that
elected to submit adjusted claims for dates of service between January
1, 2022, through September 27, 2022, the beneficiary copayment amount
for those claims. The commenter points out that providers who elected
not to submit adjusted claims for those dates of service will receive
both the Medicare portion and the beneficiary copayment portion through
the remedy payment. Failing to pay the beneficiary copayment amounts
for providers that elected to submit adjusted claims, the commenter
argues, results in different remedies for the beneficiary portion for
providers that submitted adjustment claims and those that did not
submit adjustment claims, which is an inequitable outcome.
Response: We do not agree that CMS should pay providers that
elected to submit adjusted CY 2022 claims additional payment for
beneficiary cost sharing. We are paying amounts equal to lost
beneficiary cost sharing amounts providers are not otherwise legally
entitled to collect based on a finding that, under the unique
circumstances of this rule, it is necessary to ensure equitable
payments under section 1833(t)(2)(E) of the Act (42 U.S.C.
1395l(t)(2)(E)). (See infra at II.B.1.e.) Because CY 2022 adjustments
followed regular claims processing conventions, providers are legally
entitled to collect cost sharing from beneficiaries on those claims. If
providers are unable to do so, such payments would be subject to our
usual standards governing payments to which providers are legally
entitled but unable to collect. See, for example, 42 CFR 413.89. We
thus do not believe the same rationale applies to reprocessed claims.
Permitting providers to submit adjustment claims also allowed for
prompt payment to providers and partially approximated how the claim
would have been processed and paid absent the 340B Payment Policy.
Indeed, many of these claims have already been finalized and the
beneficiaries have paid their cost sharing obligation. Because
providers can collect cost sharing for reprocessed CY 2022 claims from
beneficiaries and potentially under our bad medical debt regulations,
we do not believe it would be equitable under section 1833(t)(2)(E) of
the Act (42 U.S.C. 1395l(t)(2)(E)) to make additional, potentially
duplicative payments to reflect lost cost sharing.
As described in the proposed rule, we considered these reprocessed
claims to be partially remedied as 340B providers no longer received
the lower 340B drug payment rate. These claims will be fully remedied
when we address the non-drug item and service payment portion of these
claims.
Comment: CMS received several comments requesting a mass
reprocessing of all CY 2022 claims and instructions to the Medicare
Administrative Contractors (MACs) to make one mass adjustment for
claims going back to January 1, 2022.
Response: We do not have an existing procedure to make the mass
adjustment commenters proposed for CY 2022 claims without reprocessing
each individual claim, and we believe that our proposed lump sum
payment achieves a very similar result. While reprocessing just the
remaining CY 2022 claims would be less burdensome than reprocessing all
claims back to 2018, it would still impose a large administrative
burden on CMS, our contractors, and providers. Approximately two
hundred million dollars worth of payments would have to be reprocessed,
and, importantly, such an undertaking could cause an additional delay
in making payments relative to the proposed lump sum payment
methodology. Otherwise, the main practical difference between
reprocessing the remaining CY 2022 claims or including them in the lump
sum payment is whether providers can seek cost sharing payments from
beneficiaries, as discussed above. But because we have increased the
lump sum payment under section 1833(t)(2)(E) of the Act (42 U.S.C.
1395l(t)(2)(E)) to cover lost beneficiary cost sharing, we do not view
that as a material difference between the options. Because including
remaining CY 2022 claims in the one-time lump sum payment will provide
nearly equivalent remedy funds to affected 340B covered entity
hospitals, and will do so more quickly and efficiently than a mass
reprocessing of all CY 2022 claims, we decline to treat remaining CY
2022 claims differently from other claims years.
3. Aggregate Hospital Payments From CY 2018 Through September 27th of
CY 2022
In the proposed rule (88 FR 44083), we considered calculating one-
time aggregate payment adjustments for each provider for the CY 2018
through September 27th of CY 2022 time-period, including both
additional payments for 340B-acquired drugs and reduced payments for
non-drug items and services under sections 1833(t)(2)(E) and
1833(t)(14) of the Act (42 U.S.C. 1395l(t)(2)(E) and (t)(14)), along
with our retroactive rulemaking authority in section 1871(e)(1)(A) of
the Act (42
[[Page 77156]]
U.S.C. 1395hh(e)(1)(A)), to the extent the policy would be retroactive.
This option would have involved: (1) calculating the total additional
payments for each hospital that would have been paid for separately
payable non-pass-through 340B-acquired drugs from CY 2018 through
September 27th of 2022 in the absence of the 340B Payment Policy; (2)
calculating the additional amount each hospital was paid under the OPPS
from CY 2018 through CY 2022 for non-drug items and services as a
result of the 340B policy; (3) subtracting (2) from (1); and (4)
issuing a payment to, or requiring a recoupment from, each hospital for
the 5-year period in which the 340B Payment Policy was in effect. This
is similar to the approach we ultimately adopt in this rule, except
that it would have effectively implemented budget neutrality
requirements through an immediate lump sum recoupment that would mirror
the lump sum remedy payment.
While this approach would also have satisfied the statutory budget
neutrality concerns discussed above, we did not read the statute to
mandate such an inflexible approach in these circumstances. Cf. Shands
Jacksonville Med. Ctr., Inc., 959 F.3d at 1120. (For further discussion
of this point, see section II.B.1.a of this final rule.) Such an
approach would require immediate, and in many cases large, retroactive
recoupments from the majority of OPPS hospitals and would impose a
substantial, immediate burden on these hospitals as well as an
uncertain impact on beneficiaries. After accounting for these burdens,
the financial strain many hospitals experienced during the recent
COVID-19 public health emergency (hereinafter referred to as the
``PHE''), and the amount of time that has transpired since the original
payments for these drugs, items, and services were made, we decided not
to propose this option as our suggested approach.
Comment: Several commenters expressed general support for our
decision not to propose a one-time aggregate payment adjustment for
each provider.
Response: We thank commenters for their support.
B. Remedy
1. Methodology for Calculating and Process for Remitting Remedy
Payments to Affected 340B Covered Entity Hospitals for 340B-Acquired
Drugs Furnished and Paid Adjusted Amounts Under the OPPS in CY 2018
Through September 27th of CY 2022
a. Statutory Authority
In the proposed rule (88 FR 44083), we stated that CMS believes
that the best way to remedy our 340B Payment Policy for the period from
CY 2018 through September 27th of CY 2022, which the Supreme Court
found unlawful, would be to make one-time lump sum payments to affected
340B covered entity hospitals calculated as the difference between what
they were paid for 340B drugs (ASP minus 22.5 percent or an adjusted
WAC or AWP amount) during the relevant time period (from CY 2018
through September 27th of CY 2022) and what they would have been paid
had the 340B Payment Policy not applied. We explained that this
approach comes as close to providing 340B-covered entities with make-
whole relief as CMS can reasonably accomplish, without the burden that
would be associated with manually reprocessing all claims. Assuming
hospitals properly assigned the billing codes discussed below when
submitting their CY 2018 through 2022 claims, as they were required to
do, CMS noted that it expects the remedy payment to each 340B covered
entity for 340B-acquired drugs to be approximately the same as if CMS
manually reprocessed those claims. Calculating the approximate
repayment amount based on claims data is relatively straightforward
administratively as it involves only an aggregated analysis of the
claims in question, whereas reprocessing all claims requires
significantly more administrative effort as the claims actually have to
be individually reprocessed through the claims processing system. This
is practically infeasible for the reasons discussed earlier in this
rule. Please see the previous section titled ``Full Claims Reprocessing
from CY 2018 through September 27th of CY 2022'' for additional detail.
We proposed to make the remedy payments relying principally on (1)
our rate-setting authority under section 1833(t)(14) of the Act (42
U.S.C. 1395l(t)(14)); and (2) our equitable adjustment authority under
section 1833(t)(2)(E) of the Act (42 U.S.C. 1395l(t)(2)(E)). To the
extent this rule is retroactive (in whole or in part), we explained
that we would rely on our retroactive rulemaking authority in section
1871(e)(1)(A) of the Act (42 U.S.C. 1395hh(e)(1)(A)).
First, we evaluated our authority under section 1833(t)(14) of the
Act (42 U.S.C. 1395l(t)(14)). We pointed to the Supreme Court's holding
that if CMS has not conducted a survey of hospitals' acquisition costs,
the agency may not vary the payment rates for outpatient prescription
drugs by hospital group. We acknowledged that because we did not use
any survey of hospitals' acquisition costs when setting rates for 340B-
acquired drugs between CY 2018 and September 27, 2022, it is necessary
for the remedy to apply the default rate (generally ASP plus 6 percent)
to comply with paragraph (14)(A)(iii) of section 1833(t) of the Act (42
U.S.C. 1395l(t)(14)(A)(iii)) for those years, as interpreted by the
Supreme Court.
We then considered our authority to adjust the prior payment rate.
We explained that section 1871(e)(1)(A) of the Act (42 U.S.C.
1395hh(e)(1)(A)) prohibits a substantive change in regulations to items
and services furnished before the effective date of the substantive
change unless ``such retroactive application is necessary to comply
with statutory requirements'' or the ``failure to apply the change
retroactively would be contrary to the public interest.'' We explained
that, assuming this remedy is viewed as a retroactive remedy (in whole
or in part), it would also be necessary to use this retroactive
rulemaking authority to implement the remedy by revising 340B payment
rates for this prior period to comply with the Supreme Court's
interpretation of the requirements of section 1833(t)(14) of the Act
(42 U.S.C. 1395l(t)(14)).
But even if a retroactive rule were not necessary specifically to
comply with section 1833(t)(14) of the Act (42 U.S.C. 1395l(t)(14)), we
found that failing to apply the default rate retroactively would be
contrary to the public interest in this specific situation in part
because it would leave the plaintiff 340B hospitals paid at a
substantially lower rate, due to the magnitude of payment, than we now
understand to be proper under the statute. We found that the equities
weigh in favor of a partially retroactive remedy here, because a
significant number of plaintiff hospitals have been advocating for this
current policy in court since we first announced our 340B Payment
Policy for CY 2018 despite our view that there was no administrative or
judicial review for such claims. The equities further align with a
partially retroactive remedy, to the extent required, because the
impact on the Part B Trust Fund will be
[[Page 77157]]
lessened as we are applying budget neutrality principles. We noted that
the position of those plaintiff hospitals was ultimately vindicated by
the Supreme Court.
We proceeded to consider our authority under section 1833(t)(2)(E)
of the Act (42 U.S.C. 1395l(t)(2)(E)), which requires the Secretary to,
``establish, in a budget neutral manner, outlier adjustments . . .
transitional pass-through payments . . . and other adjustments as
determined to be necessary to ensure equitable payments, such as
adjustments for certain classes of hospitals.'' In this case, we
proposed that the lump sum payment, calculated as the difference
between what an affected 340B covered entity hospital received for
340B-acquired drugs during the time period at issue and what they would
have received for 340B-acquired drugs if the 340B adjustment had not
been in place, would be an equitable adjustment. We found that such an
adjustment is necessary to ensure equitable payments to affected 340B
covered entity hospitals by making them whole for the decreased
payments for 340B-acquired drugs they received from CY 2018 through
September 27th of CY 2022 that are no longer proper in light of the
Supreme Court's decision. To the extent necessary, we explained we
would apply the adjustment retrospectively in accordance with the
Court's ruling and for the reasons discussed in the above paragraph.
We therefore proposed to use our authority under section
1833(t)(14) of the Act (42 U.S.C. 1395l(t)(14)) in conjunction with our
equitable adjustment authority under section 1833(t)(2)(E) of the Act
(42 U.S.C. 1395l(t)(2)(E)), to accomplish an equitable outcome as we
remedy past payments made under the 340B Payment Policy. To the extent
necessary, we also proposed to use our retroactive rulemaking authority
under section 1871(e)(1)(A) of the Act (42 U.S.C. 1395hh(e)(1)(A)).
We solicited comment from the public on our proposed use of these
authorities in the remedy policies discussed in the proposed rule. We
also solicited comment on other possible authorities (including
inherent authority or common law authority) that might also be
applicable to the remedy policies discussed in the proposed rule or on
which we could rely to make remedy payments.
We thank commenters for their input on our policy proposals. We
have summarized the comments received and our responses to those
comments in the following section.
Comment: Nearly all commenters supported our proposal to pay via a
one-time lump sum payment.
Response: We appreciate commenters' support.
Comment: Several commenters encouraged CMS and MACs to agree on
documentation and treatment of these funds on cost reports, cost report
audits, and subsequent Medicare payment adjustments and reviews.
Response: We agree that it is important to coordinate with MACs to
ensure consistent documentation and treatment of the one-time lump sum
payments. These payments will not be made on cost reports. To ensure
timely payment for all impacted providers, CMS shall issue guidance to
all MACs to allow consistent documentation and tracking of the 340B
payments.
Comment: Two commenters opposed our proposal to pay via a one-time
lump sum payment due to concerns that a massive influx of funds to 340B
hospitals would enable those hospitals to further dominate local
markets by purchasing independent community clinics and other
hospitals. One of these commenters requested that repayments be spread
out over time, suggesting 5 years for this time-period or,
alternatively, 16 years to align it with the budget neutrality
adjustment schedule discussed later in this rule. The other commenter
suggested that CMS provide remedy funds for 2018 to 2020 and use a 340B
drug acquisition cost survey to determine the remedy payments for
subsequent years.
Response: We appreciate commenters' concerns. As previously
discussed, the aim of this rule is to situate all OPPS providers as
closely as possible to the financial situation they would have been in
if the 340B OPPS Payment Policy had never existed. Had we never
implemented the 340B Payment Policy, hospitals would already have these
payments. We thus believe the fairest policy is to pay hospitals as
promptly as administratively feasible. We acknowledge that this means
that until the budget neutrality adjustment is fully implemented,
hospitals will temporarily have additional funds from our payments for
non-drug services and items they would not otherwise have had. But
commenters have not identified authority requiring us to withhold
payments based on competition concerns once we have determined the
amount due from Medicare. As such, we believe the payment timeline
described in this rule is appropriate.
We acknowledge that we previously suggested that we might use our
survey of CY 2018 and 2019 cost data to inform the remedy as discussed
in the CY 2020 OPPS/ASC final rule with comment period (84 FR 61322).
But as we subsequently noted, we received many comments on the survey
data, and using that data, which surveyed only 340B hospitals, might
not comport with the Supreme Court's decision. Using it would introduce
new complexities into the rate calculation, for instance, by requiring
consideration of adjustments to the data and other factors as discussed
in the CY 2021 OPPS/ASC final rule with comment period (85 FR 86052).
We do not believe it is worth delaying the remedy payments to allow for
such considerations or for us to conduct a new survey many years after
the fact.
Comment: We received many comments on the statutory authority we
proposed to rely upon to make lump sum payments. While nearly all
commenters supported our proposal to implement this remedy via a one-
time lump sum payment, industry commenters disagreed with our proposal
to rely on sections 1833(t)(14) and (t)(2)(E) of the Act (42 U.S.C.
1395l(t)(14) and (t)(2)(E)) to do so. Many of these commenters argued
that these statutory provisions do not apply to the remedy payments.
These commenters stated that CMS is attempting to rely on statutes
designed for, and limited to, making prospective adjustments to
spending estimates, or discretionary adjustments based on equity to
make remedy payments required by the Supreme Court's decision.
With respect to section 1833(t)(14) of the Act (42 U.S.C.
1395l(t)(14)), these commenters maintained that the expenditures to
which the statute applies do not contemplate court-ordered remedy
payments. Referencing the text of section 1833(t)(14) of the Act (42
U.S.C. 1395l(t)(14)), ``[a]dditional expenditures resulting from this
paragraph shall not be taken into account in establishing the
conversion, weighting, and other adjustment factors for 2004 and 2005
under paragraph (9), but shall be taken into account for subsequent
years,'' these commenters argue that the proposed lump-sum payment is
neither an ``additional'' expenditure nor an expenditure ``resulting
from this paragraph.'' In their view, there is nothing additional about
the lump sum payment, it is what 340B hospitals should have been paid
in the first place and the payment is not being made as a result of
this paragraph but rather the agency's loss of a court case. One
commenter argued that the additional expenditures are those that could
result from CMS electing to refine its payment methodology as permitted
[[Page 77158]]
under section 1833(t)(14) of the Act (42 U.S.C. 1395l(t)(14)). The
commenter shared that this means performing a survey and changing the
drug payment methodology or refining the overhead cost payment. In this
case, they stated that the additional expenditures are neither of these
and are instead ``a loss at the Supreme Court, not a payment
methodology refinement.''
With respect to section 1833(t)(2)(E) of the Act (42 U.S.C.
1395l(t)(2)(E)), which provides the Secretary with the authority to
establish, ``in a budget neutral manner, outlier adjustments . . . and
transitional pass-through payments . . . and other adjustments as
determined to be necessary to ensure equitable payments,'' commenters
argued that this provision is not applicable to the remedy payments
because, in their view, CMS is not exercising any payment discretion
(but is required to make the payments) and the payments are not being
made for equitable reasons (but to comply with a court judgment) and,
like section 1833(t)(14) of the Act (42 U.S.C. 1395l(t)(14)), the
provision is purely prospective in nature. Commenters suggested that in
the introductory text of subsection section 1833(t)(2)(E) of the Act
(42 U.S.C. 1395l(t)(2)(E)), ``under the payment system'' refers to the
prospective payment system addressed in section (t) as a whole:
``Prospective Payment System for Hospital Outpatient Department
Services'' and section 1833(t)(2)(E) of the Act's inclusion within that
system prohibits its use for recoupments. One commenter argued that CMS
construes ``adjustment'' too broadly and that its meaning under section
1833(t)(2)(E) of the Act (42 U.S.C. 1395l(t)(2)(E)) refers to outliers
and transitional pass-through payments, which the commenter
characterizes as ``cornerstone features'' of the outpatient prospective
payment system.
Many commenters argued that if section 1833(t)(2)(E) of the Act (42
U.S.C. 1395l(t)(2)(E)) did apply to the proposed lump sum payments,
that the amount of the payments is too large to qualify as an
adjustment under the statute. In support of this position, these
commenters referenced Biden v. Nebraska, 143 S. Ct. 2355, 2368 (2023),
which interpreted the term ``modify'' in a different statute to mean
``to change moderately and in minor fashion.'' According to the
commenters, the D.C. Circuit has interpreted HHS's adjustment authority
to have the same limits that the Supreme Court found in the word
``modify'' in other contexts, and the remedy payment here is too large
to qualify. See Amgen, Inc v. Smith., 357 F.3d 103, 117 (D.C. Cir.
2004). These commenters agreed that CMS may use section 1833(t)(2)(E)
of the Act (42 U.S.C. 1395l(t)(2)(E)) to increase the remedy payments
by $1.8 billion (the amount of beneficiary cost sharing).
Response: We continue to believe that we should rely on sections
1833(t)(14) and (t)(2)(E) of the Act (42 U.S.C. 1395l(t)(14) and
(t)(2)(E)) to make these remedy payments. No commenter identified any
alternate statutory authority on which we could rely, and we disagree
with commenters' arguments that these provisions are inapplicable.
While we agree that section 1833(t) creates a prospective payment
system, see section 1833(t)(1)(A) of the Act (42 U.S.C.
1395l(t)(1)(A)), the Supreme Court declined to find this fact
foreclosed all retrospective review. Cf. Am. Hosp. Ass'n v. Becerra,
Br. for Respondents at 21-22 (government brief arguing the statute
foreclosed ``'administrative or judicial review of the prospective
payment system,' '' and noting invalidation of an OPPS component ``
`could result in the retroactive ordering of payment adjustments' ''
(quoting H.R. Rep. No. 149, 105th Cong., 1st Sess. 724 (1997) (House
Report) and Amgen, Inc., 357 F.3d at 112)). Indeed, at least one court
has rejected an argument that CMS lacks the authority to make
retroactive adjustments when required to comply with other provisions
in section 1833(t) of the Act (42 U.S.C. 1395l(t)). See H. Lee Moffitt
Cancer Ctr. & Rsch. Inst. Hosp., Inc. v. Azar, 324 F. Supp. 3d 1, 16
(D.D.C. 2018) (``HHS has not shown that such a retroactive adjustment
would be incompatible with the generally prospective nature of
OPPS.'').
We disagree with commenters that stated that a court has
``ordered'' payments, or that court-ordered payments necessarily fall
outside of section 1833(t)(14) of the Act (42 U.S.C. 1395l(t)(14)). No
court has yet weighed in on the appropriate remedy, much less ordered
any particular payment. See, for example, Am. Hosp. Ass'n, 2023 WL
143337, at *3 (rejecting argument that court should order agency to
``repay[] those hospitals that were unlawfully underpaid, from 2018 to
the present, the difference between what they were paid and ASP plus
6%'').
We also disagree that our remedy payment is not ``equitable''
within the meaning of section (t)(2)(E) of the Act (42 U.S.C.
1395l(t)(2)(E)) simply because it remedies legal error. Ensuring that
providers are paid according to Congress' policy judgments is a
legitimate way to ensure fairness, in the most common meaning of the
term ``equitable.'' Indeed, to the extent the term ``equitable'' under
section (t)(2)(E) of the Act (42 U.S.C. 1395l(t)(2)(E)) might be
informed by courts' historic equitable authority, the fact that we are
seeking to restore parties to as close a state as they would have been
without the now-invalidated 340B Payment Policy makes the rule
analogous to historic equitable remedy of recession and restitution.
See Restatement (Third) of Restitution and Unjust Enrichment section 54
(2011) (``[T]he expression ``rescission and restitution'' aptly
describes cases in which the claimant may be restored to the status quo
ante by obtaining the fungible equivalent of personal property
previously transferred to the other party.'').
Nor do we agree with commenters that this rule exceeds our
statutory authority to make ``adjustments'' to the payment system ``as
determined to be necessary to ensure equitable payments'' under section
1833(t)(2)(E) of the Act (42 U.S.C. 1395l(t)(2)(E)). Both the Supreme
Court and the D.C. Circuit have declined to define the outer bounds of
that term. See Am. Hosp. Assoc'n, 142 S. Ct. at 1904 (``[W]e need not
determine the scope of HHS's authority to adjust the price up or
down.''); Amgen, Inc., 357 F.3d at 117 (``[T]he court has no occasion
to engage in line drawing to determine when `adjustments' cease being
`adjustments.' ''). While we acknowledge that the Supreme Court has
held that in certain contexts the statutory authority to ``modify'' a
program limits the amount by which an agency can change the program, we
believe the statutory term ``adjustment'' has a different focus here.
For example, in Nebraska, when construing the term ``modify,'' the
Supreme Court relied in part on Black's Law Dictionary's definition of
modify which built in ``a connotation of increment or limitation.'' 143
S. Ct. at 2368 (citing MODIFY, Black's Law Dictionary (11th ed. 2019)
(``To make somewhat different; to make small changes to (something) by
way of improvement, suitability, or effectiveness'').) But that same
dictionary defines ``adjustment'' to focus on adapting something to
better apply in a particular circumstance. ADJUSTMENT, Black's Law
Dictionary (11th ed. 2019) (``That which adapts one thing to another or
to a particular use''). We therefore believe our adjustment authority
under section 1833(t)(2)(E) of the Act (42 U.S.C. 1395l(2)(E)) fairly
encompasses adapting generally prospective payments to remedy legal
errors made in those payments. And even if adjustment carries a
connotation
[[Page 77159]]
of increment or limitation, the 28.5 percent adjustment this final rule
makes to the payments made to hospitals for 340B-acquired drugs would
not exceed it. The cases in which the Supreme Court has found that
agencies exceeded their modification authority are those where the
Court found that there was a change in kind to the affected program,
not simply a change in degree. See Nebraska, 143 S. Ct. at 2369
(changes exceeded modification authority when agency ``created a novel
and fundamentally different loan forgiveness program''); MCI
Telecommunications Corp. v. Am. Tel. & Tel. Co., 512 U.S. 218, 230
(1994) (changing statute ``from a scheme of rate regulation in long-
distance common-carrier communications to a scheme of rate regulation
only where effective competition does not exist'' exceeded modification
authority); cf. also Amgen, Inc., 357 F.3d at 117 (adjustment does not
include a ``total elimination or severe restructuring of the statutory
scheme''). Here, CMS is adjusting payment rates back to their default
under the statute. Restoring a default payment provision is the
opposite of the implementation of ``a new regime entirely'' that the
Supreme Court has invalidated.
We acknowledge that we are in a somewhat unique situation. We have
generally operated the OPPS system based on a belief that its
prospective payments were insulated from administrative and judicial
review. In light of the Supreme Court's decision, however, we must find
a way to reconcile a primarily prospective budget neutral rate-setting
system with adjudication processes that are generally retrospective in
nature. Here, it is enough for us to find that sections 1833(t)(14) and
(t)(2)(E)--and section 1871(e)(1)(A), to the extent required--authorize
us to correct the legal error identified by courts in our prior
payments under section 1833(t)(14).
Comment: One commenter argued that CMS could not rely on its
retroactive rulemaking authority under section 1871(e)(1)(A) of the Act
(42 U.S.C. 1395hh(e)(1)(A)), in conjunction with sections 1833(t)(2)(E)
and (t)(14) of the Act (42 U.S.C. 1395l(t)(2)(E) & (t)(14)), to make
the remedy payments because section 1871(e)(1)(A) of the Act (42 U.S.C.
1395hh(e)(1)(A)) prohibits retroactive rulemaking except for two
limited exceptions, neither of which apply to the remedy payments. The
first exception cited by the commenter applies to situations in which
``retroactive application is necessary to comply with statutory
requirements'' (see section 1871(e)(1)(A)(i) of the Act) (42 U.S.C.
1395hh(e)(1)(A)(i)) and the second to situations in which ``failure to
apply the change retroactively would be contrary to the public
interest'' (see section 1871(e)(1)(A)(ii) of the Act (42 U.S.C.
1395hh(e)(1)(A)(ii)). Concerning the first exception, the commenter
contends that the proposed rule discusses retroactive rulemaking
authority only with respect to the drug payment methodology for 340B-
acquired drugs and makes no argument that payments for non-drug items
and services may be changed retroactively or that CMS may retroactively
re-estimate its budgetary projections from 2018. The commenter
concludes that because the OPPS is expressly required to be prospective
in nature, ``retroactive adjustments'' to past years' payment rates are
not ``necessary to comply'' with statutory requirements of the OPPS.
Concerning the second exception, the commenter argues that it is not in
the public interest to engage in the retroactive adjustment of
prospective payment rates (particularly when doing so would upset the
reliance interest of all hospitals with respect to payment for non-drug
items and services) when make-whole relief can be implemented without
revisiting 2018 through 2022 OPPS rates.
Response: We disagree with the commenter that the OPPS's generally
prospective nature implicitly overrides CMS's retroactive rulemaking
authority under section 1871(e) of the Act (42 U.S.C. 1395hh(e)). The
Supreme Court held (in 2022) that we lacked authority (in 2018) under
section 1833(t)(14) of the Act (42 U.S.C. 1395l(t)(14)) to set a
payment rate of ASP-22.5 percent for 340B-acquired drugs absent a drug
acquisition cost survey. Thus, to the extent we are acting
retrospectively in this rule, conforming payment rules that are still
on the books and still contain a payment rate contrary to the
requirements of section 1833(t)(14) of the Act (42 U.S.C. 1395l(t)(14))
would be a classic case where retroactive rulemaking would be
``necessary to comply'' with statutory requirements. As noted above,
courts have rejected the argument that because section 1833(t) of the
Act (42 U.S.C. 1395l(t)) establishes a prospective payment system, that
system is not subject to any retrospective review or amendment. And
because the payment increases for non-drug items and services for those
years were inextricably linked to the illegal payment decreases for
340B-acquired drugs, the same reasoning would apply. We are not, as
commenter suggests, re-estimating our budget projections--a point we
also discuss below in section II.B.2. Rather, we are unwinding a
payment rate that courts held was illegal.
We also disagree with the commenter's public interest argument. As
noted above, commenters have not identified any authority through which
we could implement make-whole relief without relying on sections
1833(t)(14) or (t)(2)(E) of the Act (42 U.S.C. 1395l(t)(14) and
(t)(2)(E)). And we disagree that hospitals' reliance interest
undermines our interpretation here. Hospitals were aware that we
believed their increased payments for non-drug items and services
hinged on the payment decreases for 340B-acquired drugs. (No one, for
example, has suggested we could retain the 3.19 percent payment
increase in CY 2023 once we reverted to an ASP plus 6 percent payment
rate for 340B acquired drugs.) Hospitals successfully convinced courts
that those payment decreases are illegal, and it thus follows that the
intertwined payment increases were unwarranted under the statute, as
well. If the payment increases were not removed, the remedy payments
would ultimately come from beneficiaries, taxpayers, or some
combination of the two. The commenter's suggestion would effectively
involve at least a $9 billion transfer from beneficiaries and taxpayers
to hospitals, which would be inappropriate especially in a system where
budget neutrality requirements generally prevent such transfers.
Comment: Many commenters claimed that CMS does not require any
statutory authority to make the remedy payments and that it can make
the payments using an ``acquiescence authority.'' Commenters point to
past instances in which CMS has allegedly exercised the posited
acquiescence authority, including Administrator rulings,\15\ manual
updates,\16\ settlements with hospitals \17\ and the processing and
reprocessing of CY 2022 340B drug claims at the default drug rate for
dates
[[Page 77160]]
of service between January 1, 2022, and September 27, 2022, described
in the proposed rule (``a large portion of the CY 2022 340B drug claims
for dates of service between January 1, 2022, and September 27, 2022,
have already been remedied as a result of being processed or
reprocessed at the default drug payment rate.'').\18\ Commenters argue
that we are ignoring this acquiescence authority in order to justify
the budget neutrality policy we discuss later in section II.B.2 of this
final rule.
---------------------------------------------------------------------------
\15\ See CMS Ruling No. 1498-R.(Apr. 28, 2010). <a href="https://www.cms.gov/regulations-and-guidance/guidance/rulings/downloads/cms1498r.pdf">https://www.cms.gov/regulations-and-guidance/guidance/rulings/downloads/cms1498r.pdf</a>.
See also CMS Ruling No. 1355-R.(Apr. 14, 2011). <a href="https://www.cms.gov/Regulations-and-Guidance/Guidance/Rulings/downloads/cms1355r.pdf">https://www.cms.gov/Regulations-and-Guidance/Guidance/Rulings/downloads/cms1355r.pdf</a>.
\16\ See CMS Pub. 100-20, Transmittal No. 10520 (Dec. 14, 2020).
<a href="https://www.cms.gov/files/document/r10520otn.pdf">https://www.cms.gov/files/document/r10520otn.pdf</a>.
\17\ See HealthAlliance Hospitals, Inc. v. Azar, 346 F. Supp. 3d
43 (D.D.C. 2018); see also Clerk's Orders Granting Extensions To
Accommodate Pending Mediation, dated March 26, 2019, April 18, 2019,
and June 13, 2019, HealthAlliance Hosps., Inc. v. Azar, No. 18-5372
(D.C. Cir.); Joint Stipulation of Dismissal dated August 29, 2019,
HealthAlliance Hosps., No. 18-5372 (D.C. Cir.).
See Cape Cod Hospital v. Sebelius, 630 F.3d 203 (D.C. Cir.
2011); see also 76 FR. 51476, 51799 (Aug. 18, 2011).
\18\ See proposed rule at 88 FR 44088 (Nov. 13, 2017).
---------------------------------------------------------------------------
Response: We have previously explained that acquiescence is a
choice by an agency, when faced with a lower court decision disagreeing
with the agency's legal interpretation, to ``recognize that court's
interpretation and apply the court's interpretation uniformly,
thereafter, within the jurisdictional bounds of the interpreting
court.'' In the Case of: St. Vincent Mercy Medical Center Provider v.
Blue Cross Blue Shield Association/national Government Services--Ohio
Intermediary, 2008 WL 6468508, at *9 (CMS Adm'r) (acquiescing to
circuit court's interpretation of law for providers within the
jurisdictional bounds of the deciding court). That makes the
acquiescence doctrine an awkward fit here because it is most often
applied to rulings from circuit courts, whose precedential authority is
geographically limited and whose legal interpretations are subject to
further review. The Supreme Court is not so limited, and its statutory
interpretations are generally binding on parties with pending claims.
See Harper v. Virginia Dep't of Tax'n, 509 U.S. 86, 97 (1993) (``When
this Court applies a rule of federal law to the parties before it, that
rule is the controlling interpretation of federal law and must be given
full retroactive effect in all cases still open on direct review.'').
Regardless, we do not understand acquiescence to be an independent
source of authority or one that frees us from otherwise applicable
statutory constraints, as commenters believe. Commenters' examples do
not suggest otherwise. The cited Administrator rulings were routine
applications of judicial precedent to pending administrative appeals.
See CMS Ruling No. 1498-R, at 6 (Apr. 28, 2010) (limiting relief to
providers with ``properly pending DSH appeal of the SSI fraction data
matching process issue'' under section 1869 of the Act (42 U.S.C.
1395ff)); CMS Ruling 1355-R, at 8 (limiting relief to providers with
``properly pending appeals'' under section 1878 of the Act (42 U.S.C.
1395oo)). Such actions are contemplated by the agency's authority to
``affirm, modify, or reverse'' in pending adjudications. See section
1869(b)(1) of the Act (42 U.S.C. 1395ff(b)(1)) (incorporating authority
under section 205(b) of the Act (42 U.S.C. 405(b)); 1878(f)(1) of the
Act (42 U.S.C. 1395oo(f)(1) (same)). The decisions cited by commenters
never suggest that we could issue payments that violate statutory
limitations, nor have commenters identified any statutory limitations
those decisions allegedly violated.\19\ Neither payment adjustment in
the two cited rulings, for example, were subject to a budget neutrality
requirement. See, for example, 2014 IPPS Final Rule, 78 FR 50496, 50507
(2013) (noting statutory amendments resulting in reductions to DSH
payments ``are not budget neutral''); Medicare Program; Hospice Wage
Index for Fiscal Year 2010, 74 FR 39384, 39390-91 (2009) (rejecting
notion that ``Medicare insists on budget neutrality in all of its
payment systems''). To the contrary, several of the cited examples show
that CMS enforces payment limits in prospective payment systems, even
when acting retroactively or in response to disagreement by a court.
See CMS Pub. 100-20, Transmittal No. 10520 (Dec. 14, 2020) (instructing
contractors to recalculate graduate medical education payments to
comply with annual payment caps under section 1886(l) of the Act (42
U.S.C. 1395ww(l)); \20\ 76 FR 51476, 51788 (addressing payment issue
relating to application of budget neutrality adjustment after court
decision in Cape Cod Hospital v. Sebelius, 630 F.3d 203 (D.C. Cir.
2011) by ``remodel[ing] the recalibration/wage index budget neutrality
factor for the years at issue''); accord Medicare Program; Changes to
the Inpatient Hospital Prospective Payment System and Fiscal Year 1991
Rates, 55 FR 35990, 36043 (1990) (``Absent a retroactive budget
neutrality adjustment at the beginning of next fiscal year, we believe
that we would be precluded from making mid-year corrections to the wage
index since they could not be accomplished in a budget neutral fashion
as required by law.'').
---------------------------------------------------------------------------
\19\ We understand our approach to remedies to be consistent
with how courts view their own remedy authority. See, for example,
Off. of Pers. Mgmt. v. Richmond, 496 U.S. 414, 426 (1990)
(``[J]udicial use of the equitable doctrine of estoppel cannot grant
respondent a money remedy that Congress has not authorized.''); Am.
Hosp. Ass'n v. Price, 867 F.3d 160, 167 (D.C. Cir. 2017) (``[I]f the
necessary means [to remedy a legal violation by an agency] were
unlawful, the Court could not have mandated them.'').
\20\ We continued to enforce retroactively the payment
limitations in section 1886(l) of the Act (42 U.S.C. 1395ww(l))
until Congress stepped in to relieve us of that requirement. See CAA
2023, sec. 4143.
---------------------------------------------------------------------------
To be sure, the court in H. Lee Moffitt Cancer Center v. Azar, 324
F. Supp. 3d 1 (D.D.C. 2018), noted one prior instance where we had
missed a small number of hospitals in our first year implementing
budget neutral payment adjustments for certain rural hospitals and did
not clearly budget neutralize a retroactive adjustment. Id. at 15
(citing 71 FR 67960, 68010). That court acknowledged that CMS had
previously ``temporarily raised prospective rates in order to make up
for reductions applied in prior years'' and so saw ``no reason why HHS
could not do the converse here if it believed offsets were required:
make a slight reduction in prospective rates for a future year to
accommodate a retroactive adjustment'' for the single plaintiff
hospital. Id. at 17 n.5. In any event, both the rural hospital
adjustment issue and the cancer hospital issue involved relatively
small adjustments to a single year of payments to a very limited number
of providers, and one situation involved resolution through settlements
with individual providers that had properly appealed the issue. When
the additional rural hospitals (rural essential access community
hospitals) were included in the rural hospital adjustment, the entire
adjustments changed the budget neutrality factor by approximately
0.00002, which is so small of a change that it would only change
payment rates by a fraction of a cent, and likely not change payment
rates by a penny. (71 FR 68003). And while all eleven cancer hospitals
impacted the budget neutrality factor by 0.0022 the year they were
added--reflecting a total of $71 million of payment impact (76 FR
76,190)--only a few ultimately sued over the payments and the
government resolved the matters through settlements with individual
providers. See H. Lee Moffitt, 324 F. Supp. 3d at 9 (estimating $7.4
million payment impact for plaintiff hospital). These are the types of
de minimis impacts that CMS has rounded to zero. We do not believe
these two much smaller examples relieve us of our statutory obligations
here, which involve several billion dollars and more than 3,600
hospitals, restructuring Medicare Part B payments for these drugs
payments across 5 years-worth of claims. As we noted in the proposed
rule, we are particularly concerned that adopting providers' position
would allow them to use litigation as a workaround to otherwise
applicable constraints on Medicare payments and
[[Page 77161]]
threaten Congress' control of the Federal budget.
Adhering to the usual statutory constraints on our rulemaking
authority under section 1833(t) of the Act (42 U.S.C. 1395l(t)) is
particularly appropriate here when we are implementing a remedy through
rulemaking rather than adjudication or resolving a matter through
settlement. Following judicial interpretations does not necessarily
entitle parties without jurisdictionally proper active challenges to
have that interpretation applied to prior years' payments. See 42 CFR
405.986(b) (change in legal interpretation based on judicial decision
not good cause to reopen adjudications); see also Baptist Mem'l Hosp.
v. Sebelius, 603 F.3d 57, 64 (D.C. Cir. 2010) (denying mandamus to
party who sought application of favorable judicial interpretation to
prior payment years without pending appeals). Parties who chose to sit
on the sidelines might benefit prospectively from a change in legal
interpretation based on a court ruling, but nothing requires an agency
affirmatively to reach back and disturb the finality of payment
determinations that providers never properly challenged. See Grant Med.
Ctr. v. Hargan, 875 F.3d 701, 707 (D.C. Cir. 2017) (``[W]e never
require agencies to apply rules retroactively even where it would be
permissible for them to do so.'' (emphasis in original)); see also See
Your Home Visiting Nurse Servs., Inc. v. Shalala, 525 U.S. 449, 455
(1999) (holding that ``agency's refusal to reopen a closed case is
generally `committed to agency discretion by law' and therefore exempt
from judicial review''); 42 CFR 405.986.
Despite these well-established principles, Congress has recognized
that sometimes an agency might decide that finality should yield to
other policy considerations, including by giving the agency the
flexibility to issue retroactive rules in certain circumstances. See
section 1871(e) of the Act (42 U.S.C. 1395hh(e)). As we explained in
the proposed rule, that threshold has been met here, at least to the
extent this rule is retroactive. We add that the same principles that
sometimes justify acquiescing to a circuit court outside of that
court's jurisdictional bounds also supports our choice to apply the
Supreme Court's interpretation of section 1833(t)(14) of the Act (42
U.S.C. 1395l(t)(14)) to parties who lack pending claims for those
payment years and thus are outside the bounds of the Supreme Court's
judgment. Doing so in this case will help to promote uniform treatment
of parties under the law and save the government and regulated parties
from uncertainty and litigation costs. We find particularly compelling
the fact that we repeatedly stated our view that the preclusion
provisions in section 1833(t)(12) of the Act (42 U.S.C. 1395l(t)(12))
foreclosed any administrative or judicial review, a position with which
the Supreme Court ultimately disagreed. Given the unique circumstances
of this case, we believe extending the remedy to the entire industry
through rulemaking properly balances the agencies and parties' interest
in finality and Congress' control of the Federal budget with uniformity
and litigation costs.
Comment. One commenter suggested we view the payment through the
lens of monetary damages to make 340B providers whole, suggesting that
this is an inevitable consequence of losing a court case.
Response. We appreciate this commenter's transparency in
identifying that the make-whole payments that many commenters are
requesting are in fact money damages. But we disagree that money
damages are appropriate here. Providers sued under section 1869 (42
U.S.C. 1395ff) of the Social Security Act, which authorizes both courts
and the agency to ``affirm[], modify[], or revers[e]'' administrative
decisions on individual requests for payment under section 205(b) or
(g) of the Act (42 U.S.C. 405(b) or (g)). Because the Social Security
Act does not authorize money damages, we do not believe that is the
correct framework to understand the remedy here. Cf. Schweiker v.
Chilicky, 487 U.S. 412, 424 (1988) (``[T]he [Social Security] Act,
however, makes no provision for remedies in money damages against
officials responsible for unconstitutional conduct that leads to the
wrongful denial of benefits.''). Indeed, even when money damages are
appropriate, courts have suggested the goal is to place plaintiffs in
the same position as they would have been absent any breach, suggesting
the windfall payments for non-drug items and services would need to be
deducted from any recovery, regardless. See Cmty. Health Choice, Inc.
v. United States, 970 F.3d 1364, 1375-1376 & n.10 (Fed. Cir. 2020)
(``[W]hen the non-breaching party indirectly benefits from the
defendant's breach, `in order to avoid overcompensating the promisee,
any savings realized by the plaintiff as a result of the . . . breach .
. . must be deducted from the recovery.' '').
After consideration of comments received, and for the reasons
stated in our proposed rule and in this final rule, we are finalizing
our proposed policy as proposed. In particular, we are finalizing our
proposal to make lump sum payments, calculated as the difference
between what an affected 340B covered entity hospital received for
340B-acquired drugs during the time period at issue and what they would
have received for 340B-acquired drugs if the 340B adjustment had not
been in place, as detailed further below. We are doing so for the
reasons stated in our proposed rule and in this final rule.
We note that because we are finalizing our proposal to remedy the
340B drug payments through lump sum payments, we must also address the
non-drug item and services payment made from CY 2018 through CY 2022 as
detailed in subsequent sections of this final rule. We note that
because OPPS 340B drug payment is directly and inextricably linked to
the OPPS payment for non-drug items and services, if the 340B drug
payments are invalidated and must be remedied, then the increased
payments for non-drug items and services are invalidated and must be
remedied as well. But for the reductions in the 340B drug payments, the
increased payments for the non-drug items and services would not have
been put into effect.
b. Estimated Reduction in Drug Payments to Affected 340B Covered Entity
Hospitals in CY 2018 Through September 27, 2022
An estimated 1,686 340B covered entity hospitals were paid at the
340B payment rate, which was generally ASP minus 22.5 percent for 340B-
acquired drugs for CY 2018 through September 27th of 2022, rather than
the default rate, which is generally ASP plus 6 percent, due to the
340B Payment Policy. In the proposed rule, CMS estimated that these
hospitals received approximately $10.5 billion less in 340B drug
payments (including money that would have been paid by Medicare and
money that would have come from beneficiaries as copayments) than they
would have for drugs provided in CY 2018 through September 27th of 2022
had the 340B policy not been implemented. In the proposed rule (88 FR
44084), we stated that we would update these estimated figures in the
final rule as we continued to receive updated CY 2022 claims data. In
the proposed rule, we expected to have sufficient CY 2022 340B drug
claims at issue submitted by September 27, 2023; therefore, by the
publication date for the final rule, we estimated we would have
sufficient claims data to state with more specificity the reduction in
drug payments to affected 340B covered entity hospitals in CY 2018
through September 27, 2022. As discussed in the proposed rule, we
estimated that 340B
[[Page 77162]]
providers had already received $1.5 billion in remedy payments through
reprocessed claims for 340B drugs provided from January 1, 2022,
through September 27, 2022. Accordingly, we estimated in the proposed
rule that the remaining remedy amount that affected 340B covered entity
hospitals had not yet received as a result of this policy was $9.0
billion.\21\
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\21\ We noted that the additional amount CMS pays affected 340B
covered entity hospitals through this remedy could decrease if
additional CY 2022 claims are processed at the higher payment rate,
as discussed under section I.C of this final rule. As previously
explained, the agency complied with the District Court's September
28, 2022, decision by paying the default rate (generally ASP plus 6
percent) for all CY 2022 claims for 340B-acquired drugs paid from
September 28, 2022, onward. However, as some affected 340B covered
entity hospitals are still filing, or re-filing, claims for CY 2022,
we are paying those claims at the higher default payment rate for
drugs, which is generally ASP plus 6 percent. Therefore, we advised
that our estimate of the total amount of additional drug payments
that would be made through this remedy could change as more claims
from CY 2022 are processed, or reprocessed, at the default payment
rate of ASP plus 6 percent.
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In the proposed rule, we calculated the estimated aggregate
payments by isolating 340B drugs assigned status indicator ``K'' (non-
pass-through drugs and non-implantable biologicals, including
therapeutic radiopharmaceuticals) and billed with modifier ``JG'' (drug
or biological acquired with 340B Program discount, reported for
informational purposes). We then calculated the difference between
these drugs' CY 2018 through 2022 340B payment rate and the 340B rate
proposed in the proposed rule, which was generally the difference
between ASP minus 22.5 percent and ASP plus 6 percent. We used a
similar process to estimate aggregate payments owed for drugs with
payment amounts based on WAC or AWP. In particular, for drugs priced
using WAC, we calculated the difference between WAC minus 22.5 percent
and WAC plus 3 or 6 percent, as applicable; and for drugs priced using
AWP, we calculated the difference between 69.46 percent of AWP and 95
percent of AWP. We note that the WAC and AWP based payment rates
outlined in this paragraph are the common longstanding default OPPS
drug payment rates if ASP data are not available.
We invited comment on this proposed methodology of estimating the
reduction in drug payments to affected 340B covered entity hospitals in
CY 2018 through September 27, 2022.
We thank commenters for their input on our policy proposals. We
have summarized the comments received and our responses to those
comments in the following section.
Comment: Most commenters generally agreed with our methodology to
calculate what 340B covered entity hospitals would have received.
Commenters generally requested that we update our calculations for the
final rule.
Response: We thank commenters for their support.
As stated in the proposed rule and as requested by commenters, we
updated these calculations using claims data available (CMS Common
Working File (CWF) CWF2023w38, processed by 09/22/2023) as of the
publication of this final rule. Our updated claims data reflects that
these hospitals received an estimated $10.6 billion less in 340B drug
payments (including money that would have been paid by Medicare and
money that would have come from beneficiaries as copayments) than they
would have for drugs provided in CY 2018 through September 27th of 2022
had the 340B policy not been implemented.
Additionally, we now estimate that $1.6 billion of the total $10.6
billion that we calculated affected 340B covered entity hospitals did
not receive as a result of the 340B Payment Policy has already been
remedied through reprocessed claims. Accordingly, we estimate the
remaining remedy amount that affected 340B covered entity hospitals
have not yet received as a result of this policy is $9.004 billion,
which has changed from the estimated $9.003 billion amount that was
included in the proposed rule. This change is due to additional CY 2022
claims that have been reprocessed as well as an adjustment made based
on a comment received as described in section II.B.1.F of this final
rule. For simplicity, we refer to this number as $9.0 billion
throughout this document.
After consideration of comments received, and for the reasons
stated in our proposed rule and in this final rule, we are finalizing
our methodology of estimating the reduction in drug payments to
affected 340B covered entity hospitals in CY 2018 through September 27,
2022, as proposed. Accordingly, as described in more detail later and
in Addendum AAA, we will make total lump sum payments in the amount of
$9.004 billion as a result of this final rule. We continue to round our
lump sum payment to $9.0 billion for purposes of this final rule
discussion for ease of reference, but the exact unrounded amount will
be the total amount paid to hospitals.
c. Methodology for Calculating Remedy Payments Owed to Each Affected
340B Covered Entity Hospital
We proposed the following process for calculating the amount of
payment owed to each affected 340B covered entity hospital and issuing
that payment. For each affected 340B covered entity hospital, we
proposed to calculate the amount the hospital would have been paid
under the OPPS from CY 2018 through September 27th of CY 2022 for drugs
the hospital acquired through the 340B Program had that 340B adjustment
not been in effect. We would then subtract from this amount the amount
each affected 340B covered entity hospital was paid under the OPPS for
340B-acquired drugs during the period of CY 2018 to September 27th of
CY 2022.
When added to the adjusted amount paid under the OPPS from CY 2018
through September 27th of CY 2022 for separately payable drugs acquired
under the 340B Program, this proposed additional lump sum payment
amount would result in the affected 340B covered entity hospital
receiving the default ASP plus 6 percent rate (or WAC plus 3 or 6
percent or 95 percent of AWP, as applicable) for drugs acquired under
the 340B Program for CY 2018 through September 27th of CY 2022.
We illustrated the proposed process for calculating and paying an
affected 340B covered entity hospital's additional lump sum OPPS
payments for 340B drugs furnished from CY 2018 through September 27th
of CY 2022 in the following example. We explained that using claims
data from CY 2018 through September 27th of CY 2022 for which those
claims have been processed and OPPS payments already made, we might
calculate that a particular 340B-covered entity hospital would have
been paid, for example, an estimated $10 million for 340B drugs had the
340B Payment Policy not been in effect during that time period. Then,
based on claims data for the same hospital from the same time period,
we might calculate that the hospital was actually paid $7.31 million
for 340B drugs from CY 2018 through September 27th of CY 2022. In that
circumstance, we explained that the 340B covered entity hospital would
receive as a lump sum payment $2.69 million, i.e., the difference
between these two amounts. We noted that another way to illustrate our
estimate of the total amount an affected 340B covered entity hospital
would have been paid had the 340B Payment Policy not been in effect (X)
is to use the following formula:
X = (Y/0.775)*1.06
[[Page 77163]]
Where Y is the total amount received under the 340B policy from
CY 2018 to September 27th of CY 2022.
We noted that in the example above, the Y would be $7.31 million.
Therefore, ($7.31 million/0.775)*1.06 = $10 million. The lump sum
payment would be $10 million minus $7.31 million, which equals $2.69
million. We solicited comment on our proposed calculation methodology
for calculating remedy payments owed to each affected 340B covered
entity hospital.
We thank commenters for their input on our policy proposals. We
have summarized the comments received and our responses to those
comments in the following section.
Comment: All commenters who addressed the issue supported CMS's
proposed methodology for calculating remedy payments. The commenters
agreed that the methodology minimizes the administrative burden and
complexities of reprocessing claims for hospitals and CMS. In addition,
the commenters supported the proposed methodology because the lump sum
payment would be an efficient method that could be completed in a
shorter timeline than alternatives like an adjustment to prospective
payments.
Response: We appreciate commenters' support.
After consideration of comments received, and for the reasons
stated in the proposed rule and this final rule, we are finalizing our
methodology to calculate the remedy payments owed to each affected 340B
covered entity hospital as proposed.
d. Instruction to MACs To Remit Remedy Payments
Consistent with our past practice of remitting payments owed due to
litigation, we proposed to make additional payments to each 340B
covered entity hospital by issuing instructions (such as a Change
Request (CR) or a Technical Direction Letter (TDL)) to the 340B covered
entity hospital's Medicare Administrative Contractor (MAC), instructing
the MAC to issue a one-time lump sum payment to the hospital in the
amount calculated using the above described methodology within a
specified timeframe, which we proposed would be within 60 calendar days
of the MAC's receipt of the instruction. For instance, in the example
above, CMS would issue instructions to the relevant MAC instructing it
to issue a payment to the 340B covered entity hospital in the amount of
$2.69 million within 60 calendar days of the MAC's receipt of the
instructions. (We noted that MACs will continue to follow normal
accounting processes for collecting repayment amounts that are the
result of provider-specific overpayment obligations, as well as other
unique situations such as provider bankruptcy or payment suspension,
any of which may impact the provider's net payment amount.) We
solicited comment from the public on our proposed approach to remitting
remedy payments. We specifically sought comment on the timeframe of 60
calendar days in which we proposed to have the MACs make the proposed
lump sum payments. Given the number of one-time lump-sum payments to
hospitals, the size of the payments, and the overall complexity of this
remedy, we believed 60 calendar days was necessary for the MACs to make
these payments accurately and precisely to individual hospitals. We
sought comment on this timeframe and if another timeframe, such as 30
calendar days, was supported by rationale from commenters.
We thank commenters for their input on our policy proposals. We
have summarized the comments received and our responses to those
comments in the following section.
Comment: Most commenters supported CMS's proposal for MACs to issue
a one-time lump sum payment to affected 340B covered entity hospitals
within 60 calendar days of the MAC's receipt of the instruction from
CMS to make the payment. Many of these commenters emphasized that MACs
should begin processing payments upon receipt of CMS instructions
rather than waiting until the end of 60 days to start doing so. These
commenters also requested that CMS require MACs to submit weekly
updates to CMS on the status of the payments.
Response: We thank these commenters for their support of the 60-
calendar day payment timeframe. We agree with commenters that MACs
should begin processing payments when they receive our instructions,
but no payments may be transmitted before this final rule is effective.
See 5 U.S.C. 801(a)(3). Additionally, CMS will submit instructions to
MACs after the deadline to submit requests for technical corrections
under the process detailed in subsequent sections. We also agree that
MACs should update us about the status of the payments; however, we
will defer to the MACs to make communications to CMS following their
standard communication practices.
Comment: A commenter encouraged CMS to clarify with MACs a process
to ensure hospitals are paid the full amount provided by CMS without
delay, bypassing the normal accounting processes discussed in the
proposed rule. This commenter expressed concern that allowing MACs to
withhold payment would result in disputes between providers and MACs
and unreasonably delay payments due to providers. The commenter
recommended that CMS clarify that MACs must pay the amount specified by
the agency and not permit MACs to withhold payment.
Response: We share the commenter's concern with providing the lump-
sum payments quickly and efficiently. We make these payments under
sections 1833(t)(14), 1833(t)(2)(E), and (as applicable) section
1871(e) of the Act (42 U.S.C. 1395l(t)(14) and (t)(2)(E) and 42 U.S.C.
1395hh(e)(1)(A)); we do not believe they are somehow different in kind
from other Medicare payments made under those authorities in a way that
justifies exempting them from MACs' usual procedures. As such, MACs
will continue to follow normal accounting processes for collecting
repayment amounts that follow from provider-specific overpayment
obligations, as well as other unique situations such as provider
bankruptcy or payment suspension, any of which may impact the
provider's net payment amount.
Comment: Multiple commenters requested that CMS state in the final
rule that hospitals receiving a remedy payment will also receive
information detailing how that payment was calculated and that the
payment notice constitutes a final determination. These commenters
additionally requested that CMS state in the final rule that a hospital
will not waive any claims or give up any legal rights by accepting a
remedy payment. These commenters emphasized that providing this
information is especially important because OPPS payments for drugs
were based on pricing data that can change over time, including AWP,
WAC, and ASP; and these drugs may have an established or decreased ASP
today, which could lead to confusion regarding whether CMS's remedy
payment is based on the historic AWP/WAC/ASP figure or the current ASP
figure.
Response: We refer readers to the previous section titled:
Methodology for Calculating Remedy Payments Owed to Each Affected 340B
Covered Entity Hospital for additional information regarding the
methodology we used to calculate the lump sum payments. We reiterate
that we calculated the payment amounts to approximate what 340B covered
entity hospitals would have received had it not been for the 340B
Payment Policy. This means using the ASP (or WAC or AWP) based payment
rate that would have been paid at that
[[Page 77164]]
time instead of the reduced ASP (or WAC or AWP) based payment as a
result of the 340B Payment Policy. The remedial payments established by
this final rule are being made instead of making case-by-case decisions
through a claim-by-claim process. If the hospital does not submit any
information during the time period for technical corrections, then the
amounts listed in Addendum AAA are the final payment amounts due to the
hospital pursuant to this rule. If, however, a hospital does submit
information during the technical correction period, then the final
payment will only be determined after CMS addresses the hospital's
submission. That determination or decision will be the final payment
amount determined pursuant to the methodology in this final rule.
Comment: Three commenters recommended that CMS require the MACs to
make payment within 30 calendar days of the MAC's receipt of the
instruction to pay. These commenters emphasized that swiftly finalizing
and effectuating the remedy is in the best interests of CMS and the
340B hospitals and argued that CMS already has estimated the repayment
amounts it will issue and could begin laying the groundwork for making
these repayments by coordinating with MACs and providing education to
MACs beforehand.
Response: We agree that swiftly finalizing and effectuating the
remedy is in the best interests of CMS and the affected 340B covered
entity hospitals, and we have engaged in the ``groundwork'' activities
mentioned by the commenters (estimating the repayment amounts,
considering how to operationalize repaying 340B hospitals, and
coordinating with the MACs). However, even having done so, we continue
to believe that we should give MACs up to 60 calendar days to process
payments to minimize the likelihood of payment error. We agree that
MACs should begin processing payments upon receipt of our instructions
instead of waiting the full 60 days if possible. We believe this
timeframe will allow the MACs to make these lump-sum payments
accurately and precisely to individual hospitals. Given the number of
payments, the size of the payments, and the overall complexity of this
remedy, we believe 60 calendar days is a reasonable payment timeframe.
After consideration of comments received, and for the reasons
stated in our proposed rule and in this final rule, we are finalizing
our policy to instruct the MACs to remit remedy payments to affected
340B covered entity hospitals as proposed. We will make additional
payments to each 340B covered entity hospital by issuing instructions
to the 340B covered entity hospital's Medicare Administrative
Contractor (MAC) and instructing the MAC to issue a one-time lump sum
payment to the hospital in the amount calculated using the above-
described methodology within 60 calendar days of the MAC's receipt of
the instruction.
e. Accounting for Beneficiary Cost-Sharing
In the proposed rule, we discussed that in most circumstances,
beneficiaries would pay in the form of coinsurance approximately 20
percent of any additional 340B drug payments that affected 340B covered
entity hospitals would have received, absent the CY 2018 through 2022
340B policy. But, as described above, we proposed to make each remedy
payment as a one-time lump sum payment through MAC instructions using a
combination of statutory authorities, including, if necessary, our
retroactive rulemaking authority under section 1871(e)(1)(A) of the Act
(42 U.S.C. 1395hh(e)(1)(A)) and our equitable adjustment authority
under section 1833(t)(2)(E) of the Act (42 U.S.C. 1395l(t)(2)(E)).
Because these payments are remedy payments issued through MAC
instructions relying in part on our equitable adjustment authority
under section 1833(t)(2)(E) of the Act (42 U.S.C. 1395l(t)(2)(E)), we
explained that these payments would not be 340B drug payments subject
to beneficiary copayments. Rather, we stated that these remedy payments
are analogous to the type of cost report adjustments under section
1833(t)(2)(E) of the Act (42 U.S.C. 1395l(t)(2)(E)) that we have
previously found do not authorize providers to seek additional
beneficiary copayments.\22\
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\22\ For example, section 3138 of the Affordable Care Act added
a new section 1833(t)(18) to the Social Security Act (42 U.S.C.
1395l(t)(18), providing for an adjustment under section
1833(t)(2)(E) of the Social Security Act (42 U.S.C. 1395l(t)(2)(E)
to address higher costs incurred by cancer hospitals. Section
1833(t)(2)(E) of the Act (42 U.S.C. 1395l(t)(2)(E), in turn, directs
the Secretary to establish, ``in a budget neutral manner,'' payment
``adjustments as determined to be necessary to ensure equitable
payments, such as adjustments for certain classes of hospitals.'' In
response to CMS's proposal to implement this adjustment on a per
claim basis through increased APC payments, commenters expressed
concern that doing so would increase beneficiary copayments since
beneficiary copayment is a percentage of the APC payment. These
commenters encouraged CMS to implement the adjustment in a way that
did not increase beneficiary copayments. Consequently, CMS
determined it was appropriate to make the cancer hospital payment
adjustment through the form of an aggregate payment to each cancer
hospital determined at cost report settlement, as opposed to an
adjustment at the APC level, thereby eliminating the higher
copayments for beneficiaries associated with providing the
adjustment on a claims basis through increased APC payments. See CY
2012 OPPS/ASC final rule, 76 FR 74121, 74204 (2011), for our prior
use of our equitable adjustment authority under section
1833(t)(2)(E) of the Act (42 U.S.C. 1395l(t)(2)(E) to adjust cancer
hospital payments.
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We acknowledged that we have previously suggested that any remedy
might affect beneficiary cost-sharing. (See, for example, 84 FR 61323.)
But we noted that we made that statement in 2019, before the litigation
was concluded, and well before we proposed how to structure any remedy
and determine how it should impact beneficiary cost sharing many years
later. With the benefit of a concrete proposed remedy, we clarified
that our proposed lump sum payments for the difference in 340B-acquired
drug payments due to the 340B Payment Policy would not affect
particular beneficiary cost-sharing responsibilities.
We also explained that in these unique circumstances, it is
appropriate to exercise our authority under section 1833(t)(2)(E) of
the Act (42 U.S.C. 1395l(t)(2)(E)) to make adjustments ``as necessary
to ensure equitable payments'' and for Medicare to pay the full $9.0
billion difference between what 340B hospitals were paid for 340B-
acquired drugs from CY 2018 through September 27, 2022, and what they
would have been paid for 340B-acquired drugs absent the 340B Payment
Policy during this time period, so that affected 340B covered entity
hospitals are paid the amount they would have been paid in full without
application of the 340B Payment Policy. While we caveated that
statement--it would not necessarily be appropriate to make this kind of
adjustment under section 1833(t)(2)(E) of the Act (42 U.S.C.
1395l(t)(2)(E)) to ensure hospitals receive what they would have been
paid from Medicare and beneficiaries absent the 340B Payment Policy
every time we make a policy change or lose a lawsuit--we find that such
an adjustment is necessary for equitable payments in these unique
circumstances in part because of the unprecedented scope of the remedy
in terms of the amount of money at issue; the number of services,
beneficiaries, and claims affected; and the number of years that have
passed between the claims and the remedy.
Accordingly, we concluded that here, where we are remedying prior
payments, it would be appropriate to set the remedy payment amount
under section 1833(t)(2)(E) of the Act (42 U.S.C. 1395l(t)(2)(E)) so
that affected 340B covered entity hospitals would be paid amounts that
approximate what they would have been paid for these
[[Page 77165]]
drugs absent the 340B Payment Policy, which includes what affected 340B
covered entity hospitals would otherwise have been paid by the
beneficiary. Therefore, we proposed that the $9.0 billion payment
amount would include $1.8 billion, an amount that is equivalent to what
affected 340B covered entity hospitals would have collected from
beneficiaries for these 340B-acquired drugs if the 340B Payment Policy
had not been in effect.
We emphasized that, if our proposal was finalized, affected 340B
covered entity hospitals could not bill beneficiaries for coinsurance
on remedy payments--regardless of this adjustment--because we would
issue this remedy payment through MAC instructions relying in part on
our equitable adjustment authority under section 1833(t)(2)(E) of the
Act (42 U.S.C. 1395l(t)(2)(E)). We cautioned that CMS would consider
appropriate administrative action for providers who nevertheless bill
beneficiaries for coinsurance. We solicited comments from the public on
our proposed approach to accounting for beneficiary cost sharing.
We thank commenters for their input on our policy proposals. We
have summarized the comments received and our responses to those
comments in the following section.
Comment: Commenters overwhelmingly supported our proposed approach
and rationale for accounting for beneficiary cost sharing.
Response: We appreciate commenters' support.
After consideration of comments received, and for the reasons
stated in our proposed rule and in this final rule, we are finalizing
our policy to account for beneficiary cost sharing as proposed. We will
exercise our authority under section 1833(t)(2)(E) of the Act (42
U.S.C. 1395l(t)(2)(E)) to make adjustments ``as necessary to ensure
equitable payments,'' to pay the full $9.0 billion difference,
including $1.8 billion, an amount that is approximately equivalent to
what affected 340B covered entity hospitals would have collected from
beneficiaries for these 340B-acquired drugs if the 340B Payment Policy
had not been in effect from CY 2018 through September 27, 2022, so that
affected 340B covered entity hospitals are paid the approximate amount
they would have been paid in full without application of the 340B
Payment Policy.
f. Remedy Payment Amounts
We published the following data file that contained our
calculations of the amounts owed under the above-described methodology
to each affected 340B covered entity hospital for the proposed rule:
<a href="https://www.cms.gov/medicare/medicare-fee-for-service-payment/hospitaloutpatientpps">https://www.cms.gov/medicare/medicare-fee-for-service-payment/hospitaloutpatientpps</a>. We solicited comment from the public on the
accuracy of the data in Addendum AAA of the proposed rule, particularly
with respect to the estimated amount of remedy payment due to each
hospital. This addendum can be found online through the CMS OPPS
website.\23\
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\23\ <a href="https://www.cms.gov/medicare/medicare-fee-for-service-payment/hospitaloutpatientpps">https://www.cms.gov/medicare/medicare-fee-for-service-payment/hospitaloutpatientpps</a>.
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We thank commenters for their input on our policy proposals. We
have summarized the comments received and our responses to those
comments in the following section.
Comment: A small number of commenters had concerns regarding the
payment amounts, including a request for increased transparency. Some
commenters expressed a general concern that some hospitals would
receive very large lump sum payments relative to their usual OPPS
payments. Similarly, one commenter supported the lump sum calculation
methodology but requested that CMS share with participating 340B
providers more details about the methodology and a list of their 340B
claims on which it was used. Additionally, a couple commenters
requested CMS verify their individual payment amounts. Specifically,
one commenter indicated that the calculation of the amount owed to them
was incorrect. This commenter believes that they were owed more than
calculated for CYs 2020 and 2021. Another commenter stated that they
were owed nearly $640,000 more than calculated due to claims from CY
2019 that were resubmitted and reprocessed after September 27, 2022,
and paid at the ASP minus 22.5 percent rate. This commenter requested
that CMS take into account claims that were processed and paid at the
lower rate through December 31, 2022.
Response: We appreciate these commenters' concerns and have
reviewed the general and specific issues they raised. We also reviewed
the payment data for these commenters who stated our calculations were
incorrect. As a result of our review, we identified several claims
accruing prior to CY 2022 that providers submitted in late CY 2022.
Because those claims accrued prior to CY 2022, the MACs correctly
processed those claims at the ASP minus 22.5 percent rate; and these
claims should be part of the lump-sum payments. We have accordingly
adjusted the remedy payment for affected claims. This means that some
hospitals will receive slightly higher payments than in the proposed
rule, which slightly increases the aggregate lump sum payments we are
making from $9.003 in the proposed rule to $9.004 in this final rule.
We also note it would be impractical to list the millions of claims
used to calculate all of the lump sum payments. For increased
transparency, Addendum AAA has been revised to include additional CY
2022 data (please see comment below on this subject). To resolve any
lingering concerns by individual providers and provide the opportunity
for additional transparency, we are establishing the technical
correction process noted later in the rule.
Comment: An additional commenter requested clarification with
respect to two of its affiliated hospitals, which were identified on
Addendum AAA as eligible for payment but did not participate in the
340B Program during the years in question.
Response: We appreciate the commenter's transparency. Our
calculations are based on the information that hospitals originally
used when submitting claims with the 340B billing modifier, ``JG.''
These two hospitals used the 340B billing modifier ``JG'' for some
claims during the time period in which the 340B Payment Policy was in
effect, and so they received reduced payments under the 340B Payment
Policy. The overall remedy payments for these entities are small
relative to other remedy payments for other hospitals, which suggests
they may have erroneously included the ``JG'' modifier when initially
submitting claims. We will make remedy payments even to providers who
submitted the ``JG'' modifier incorrectly, because they would have
received reduced payments under the 340B Payment Policy.
Comment: One commenter stated that providers are unable to
accurately verify estimates because the paid through date for claims
used by CMS to create the estimates has not been documented and
communicated to providers. The commenter requested that CMS disclose
the paid through date to providers so that they can verify the accuracy
of the calculations. Since the same issue will arise for any final
settlement, the commenter additionally requested that CMS document and
communicate to providers the paid through date used to arrive at a
final settlement and give providers time to accept or refute that
amount.
Response: We processed (or, in some cases, reprocessed) any claims
paid on or after September 28, 2022, using the default rate (generally
ASP plus 6
[[Page 77166]]
percent). In order to ensure we captured all claims appropriately for
this analysis, we included all claims with a Claims Process Date (the
date the fiscal intermediary completes processing and releases the
institutional claim to the CMS common working file) prior to October
12, 2022, or Date of Service on or before September 27, 2022, in our
analysis to determine which claims needed to be remedied while ensuring
we excluded those claims that were processed or reprocessed at the
higher payment rate (generally ASP plus 6 percent).
Comment: Several commenters requested that CMS add an additional
column to Addendum AAA displaying the total amount withheld from each
340B hospital for the period from January 1, 2022, through September
27, 2022, before claims were reprocessed to allow hospitals to
calculate and confirm the CY 2022 reprocessed claims amounts. These
commenters additionally requested that CMS identify the data sets that
it used, as well as the cut-off date for any claims data it used, to
calculate the amount of the reprocessed CY 2022 claims, even if those
data sets were not publicly available.
Response: We concur with the commenters that additional information
regarding the process we used to calculate the remedy payment amounts
for CY 2022 would be helpful for providers to calculate their CY 2022
reprocessed claims amounts. Our calculations used data from the CMS
Common Working File (CWF) OPPS data, CWF2023w38. We also included two
additional columns on Addendum AAA: ``CY 2022 (January 1 to September
27) 340B Drugs Payment Withheld'' and ``CY 2022 (January 1 to December
31) 340B Remedy Payment Already Paid.''
Comment: One commenter, referencing the proposed rule's
acknowledgment that the $1.5 billion estimated amount for CY 2022
claims through September 27 might change by the time the final rule is
issued, requested that CMS include with the final rule an updated
addendum of hospital-specific payments to ensure that all activity
since the proposed rule was issued has been accounted for.
Response: We agree. The final rule Addendum AAA has been updated
with new hospital-specific payment amounts and accounts for all payment
activity that has happened since the proposed rule was issued. Our
updated claims data reflects that these hospitals received
approximately $10.6 billion less in 340B drug payments (including money
that would have been paid by Medicare and money that would have come
from beneficiaries as copayments) than they would have for drugs
provided in CY 2018 through September 27, 2022, had the 340B policy not
been implemented.
Additionally, our updated analysis estimates that $1.6 billion of
the total $10.6 billion that affected 340B covered entity hospitals did
not receive as a result of the 340B Payment Policy has already been
remedied through reprocessed claims. Accordingly, we estimate the
remaining remedy amount that affected 340B covered entity hospitals
have not yet received as a result of this policy is $9.004 billion
(rounded to $9.0 billion for purposes of discussion in this final
rule).
Comment: One commenter requested clarification as to whether the
amounts listed in Addendum AAA would be the actual amounts paid, or if
those amounts would be subject to sequestration. If subject to
sequestration, the commenter requested clarification as to the
percentage of the reduction. Another commenter requested that CMS not
impose sequestration on the repayments since the sequestration
adjustment was suspended during the PHE when most of the payments
occurred.
Response: The calculated amounts in Addendum AAA are based on
original claims that already included any applicable sequestration. We
do not need to apply any additional adjustments for sequestration. The
sequestration percentage, when applicable, that applied to the original
claim will also apply to the remedy payment because the remedy amount
is calculated from the sequestration reduced amount. For instance, if
the original claim did not have any sequestration adjustment because
the claim was paid during the COVID-19 PHE when the sequestration
adjustment was suspended, then remedy payment calculation for that
claim would not reflect any sequestration adjustment. The lump sum
payments were calculated to provide a payment amount as close as
possible to what hospitals would have received if not for the 340B
Payment Policy, including any sequestration adjustment that would have
applied. The amounts included in Addendum AAA are the amounts that
hospitals will receive, except that payment amounts may be affected by
MACs continuing to follow normal accounting processes for collecting
repayment amounts stemming from provider-specific overpayment
obligations, adjustments resulting from errors identified through the
lump-sum technical correction process described below, as well as other
unique situations such as provider bankruptcy or payment suspension,
any of which may impact the provider's net payment amount.
Comment: Many commenters requested a process for affected 340B
covered entity hospitals to challenge CMS's calculation of their remedy
payment. One commenter requested that CMS provide hospitals with
additional time, beyond the 60-day proposed rule comment period, to
review the repayment amounts listed in the data file and submit data to
CMS justifying an alternative repayment amount. Another commenter
suggested that hospitals be provided with 120 days from the date of
payment of the lump sum payment to file a dispute, with supporting
evidence, that CMS underpaid the hospital for 340B claims for
separately payable drugs provided from 2018-2022. One commenter
requested that CMS establish a quick, collaborative method for
addressing any miscalculation of the remedy payments due. Specifically,
the commenter recommended a method with clear, short timelines and a
requirement for MACs to respond and resolve any issues quickly.
Response: We agree with commenters that there should be a prompt
process for affected 340B covered entity hospitals to request the
correction of any errors that hospitals identify in CMS's calculation
of the specific remedial payment. Consequently, we are establishing a
technical correction process. An affected 340B covered entity hospital
can alert CMS to potential errors in the calculation of their lump sum
payment amount in Addendum AAA by emailing CMS at the following
address, <a href="/cdn-cgi/l/email-protection#640b11101405100d010a1014141757505406240709174a0c0c174a030b12"><span class="__cf_email__" data-cfemail="e18e949591809588848f95919192d2d5d183a1828c92cf898992cf868e97">[email protected]</span></a>, no later than 11:59 p.m.
Eastern Standard Time (EST) on November 30, 2023. Submissions must
include (1) a description of the nature of the error; (2) a designated
contact person for the purposes of addressing the error; and (3)
relevant supporting documentation such as claim numbers, total units,
payment amount received, date of payment. We will pay the lump sum to
an affected 340B covered entity hospital using this process after the
alleged calculation error has been reviewed and resolved by CMS. We
will work as diligently as possible to resolve any potential technical
corrections submitted promptly. Depending on the complexity of the
potential technical correction submitted, and the volume of overall
technical corrections submitted, processing technical corrections could
take us substantial additional time, and hospitals submitting technical
[[Page 77167]]
correction requests may be paid after other hospitals.
Comment: Multiple commenters requested that CMS clarify that the
final rule does not affect the procedural stature of any open or stayed
administrative appeals and that it intends the final rule to be subject
to judicial review. These commenters specifically requested that CMS
state that reliance on section 1833(t)(2)(E) of the Act (42 U.S.C.
1395l(t)(2)(E)) as authority for these adjustments is not intended to
create any implication that the adjustments are not subject to judicial
review.
Response: Because this rule fully compensates providers for the
amounts they claimed they are owed on the 340B payment issue, we
believe this action moots any pending appeals on that specific issue.
Accordingly, if a provider were to proceed with a pending appeal that
would, in effect, be seeking double recovery for the same service. A
court's jurisdiction to review all or part of this rule is outside the
scope of this rulemaking.
The following updated data file contains the final amounts owed
under the previously described finalized methodology to each affected
340B covered entity hospital for the final rule: <a href="https://www.cms.gov/medicare/medicare-fee-for-service-payment/hospitaloutpatientpps">https://www.cms.gov/medicare/medicare-fee-for-service-payment/hospitaloutpatientpps</a>.
g. Anticipated Timing of Remedy Payments
In the proposed rule (88 FR 44086), we stated that, if we finalized
the proposal to pay affected 340B covered entity hospitals in the
manner described above, we would propose to make these additional
payments at the end of CY 2023 or beginning of CY 2024, after the rule
had been finalized and the MAC instructions for each affected 340B
covered entity hospital had been issued.
We received the following comments on our proposals.
Comment: Commenters were nearly universally supportive of our
proposal to make the remedy payments at the end of CY 2023 or the
beginning of 2024.
Response: We appreciate commenters' support.
Comment: One commenter, expressing concern about the financial
situation of safety-net and rural hospitals, requested that, prior to
CMS finalizing its rule related to the 340B remedy, CMS authorize the
MACs to make an initial payment to hospitals that request it in the
amount listed in the proposed rule Addendum AAA. Then, in the final
rule, the commenter suggests that CMS would instruct the MACs to make
an incremental payment to any hospitals that elected to receive funds
immediately based on the final rule and any additional claims that were
processed through September 27, 2022. In other words, this commenter
requests that CMS instruct the MACs to pay hospitals that ask for
immediate payment the amount listed in the proposed rule Addendum AAA
prior to the effective date of the final rule and then, in the final
rule, instruct the MACs to pay any additional amount due based on the
final rule Addendum AAA.
Response: While we appreciate the commenter's concerns, we are
unable to authorize any payments until this rule and policy is
finalized and effective. As stated above, payments will not be made
until this rule is effective, which will occur 60 days after the rule
is displayed at the Office of the Federal Register. As additionally
noted above, to ensure payments are made accurately, there may be an
additional delay for hospitals requesting a technical correction.
After consideration of comments received, for the reasons stated in
the proposed rule and this final rule, subject to our clarification
above and the technical corrections procedure discussed earlier, we are
finalizing our proposal to make these additional payments at the end of
CY 2023 or beginning of CY 2024. In summary, we intend to issue
instructions for hospitals who do not request any correction to MACs as
soon as possible after the technical corrections submission deadline
has passed. MACs will be instructed to pay providers as soon as
possible after the rule is effective, and payments will be made no
later than 60 days after the MAC's receipt of the instructions. We will
issue instructions to pay hospitals who submit technical correction
requests after those requests are resolved.
h. Eligibility of Remedy Payments for Interest
In the proposed rule (88 FR 44086), CMS also considered its
authority to pay interest on the remedy payments but concluded that we
did not believe we had the authority to do so.
We received the following comments on our proposals.
Comment: Many commenters disagreed that CMS lacks the authority to
pay interest on the remedy payments, pointing to various statutes
discussed in the following paragraphs. The majority of these commenters
relied on section 1833(j) of the Act (42 U.S.C. 1395l(j)), which
provides that whenever a final determination is made that the amount of
payment made under this part either to a provider of services or to
another person pursuant to an assignment under section
1842(b)(3)(B)(ii) of the Act was in excess of or less than the amount
of payment that is due, and payment of such excess or deficit is not
made (or effected by offset) within 30 days of the date of the
determination, interest shall accrue on the balance of such excess or
deficit not paid or offset (to the extent that the balance is owed by
or owing to the provider) at a rate determined in accordance with the
regulations of the Secretary of the Treasury applicable to charges for
late payments. Instead, these commenters ask us to construe the Supreme
Court's decision in American Hospital Association as a ``final
determination.''
Response: As described here and in the following several responses,
we do not agree that any provision identified by commenters provides
CMS with authority to pay interest. Commenters do not identify any
administrative ``final determination'' that would trigger the interest
provision in section 1833(j) of the Act (42 U.S.C. 1395l(j)). And our
regulations foreclose commenters' suggestion to treat the Supreme
Court's decision as a ``final determination.'' Our regulations define
``final determination'' in section 1833(j) of the Act (42 U.S.C.
1395l(j)) to mean ``[a] written determination of an underpayment.'' 42
CFR405.378(c)(1)(i)(B). We have previously explained that this
definition refers to ``administrative, not judicial, determinations;
therefore, there is no interest obligation under these regulations for
judicial determinations.'' Medicare Program; Changes Concerning
Interest Rates Charged on Overpayments and Underpayments, 56 FR 31332,
31335 (1991).
That interpretation is reinforced by the specific litigation
interest provisions in the Medicare statute. Congress provided that
cost reports appealed to the Provider Reimbursement Review Board are
generally subject to interest beginning 180 days after an
intermediary's or the Secretary's final determination. See section
1878(f)(2) of the Act (42 U.S.C. 1395oo(f)(2)). And in the Medicare
Prescription Drug, Improvement and Modernization Act of 2003, Congress
amended the judicial review process for individual appeals and
authorized litigation interest only in cases granted expedited judicial
review under section 1869(b)(2) of the Act (42 U.S.C. 1395ff(b)(2). See
Medicare Prescription Drug, Improvement and Modernization Act of 2003,
Public Law 108-173, section 931(a), 117 Stat. 2066, 2399 (2003). By
providing interest provisions that apply specifically to judicial
determinations, Congress confirmed our reading that section 1833(j) of
the Act (42 U.S.C. 1395l(j))
[[Page 77168]]
applies only to administrative determinations.
Additionally, changing our interpretation of administrative
determination may cause the various interest statutes to conflict. For
example, if a cost report appeal is denied by an intermediary and a
court ultimately finds that payment should have been made, would
interest run from 180 days after the intermediary's decision under
section 1878(f)(2) of the Act (42 U.S.C. 1395oo(f)(2)), or from 30 days
after the court's decision, under commenter's interpretation of section
1833(j)? We decline to construe section 1833(j) of the Act (42 U.S.C.
1395l(j)) in a way that could conflict with other provisions of the
Act.
We also disagree that the Supreme Court's decision would be a
qualifying ``final determination'' under section 1833(j) of the Act (42
U.S.C. 1395l(j)), even assuming judicial decisions could sometimes
qualify. Interest under this statute runs from a ``final
determination'' that the payment made ``was in excess of or less than
the amount of payment that is due.'' But the Supreme Court never
calculated how much less the plaintiff hospitals were paid than due,
declining to consider remedies in the first instance and instead
focusing on the purely legal issue of whether the payment rates in the
CY 2018 and 2019 OPPS rules exceeded CMS's authority under section
1833(t)(14) of the Act (42 U.S.C. 1395l(t)(14)). Am. Hosp. Ass'n, 142
S. Ct. at 1903, 1906. On remand, the district court similarly rejected
the plaintiff hospitals' invitation to calculate the amount owed,
whether to the parties before the court or to the entire industry. See
Am. Hosp. Ass'n, 2023 WL 143337, at *3 (declining to issue ``order
commanding HHS to repay each underpaid claim to the penny, [because]
that cannot possibly be the only rational choice available to the
agency''). Because the Supreme Court never determined the amount of
underpayment on which interest would run, its decision is not a ``final
determination'' of the ``amount'' of underpayment under section 1833(j)
of the Act (42 U.S.C. 1395l(j)).
Because commenters have not identified a final administrative
determination of an underpayment, we do not believe that section
1833(j) of the Act (42 U.S.C. 1395l(j)), as construed by 42 CFR
405.378(c)(1), would authorize CMS to pay interest on the proposed
remedy payments.
Comment: Two commenters argued that even if CMS is correct that
interest is not due on the amount owed to all hospitals that will
receive lump sum payments, interest is due to plaintiffs in several
cases pending before the United States District Court for the District
of Columbia that were stayed pending the outcome of CMS's remedy
discussed in the proposed rule. These plaintiffs, the commenters
contend, are entitled to prevailing party interest under 42 CFR
405.990(j)(2). These commenters argue that, in appealing CMS's initial
determination to pay 340B drug claims at the unlawful rate, these
plaintiffs clearly communicated to CMS that the rate of ASP minus 22.5
percent exceeded the Secretary's authority and should instead have been
paid at ASP plus 6 percent as required by law. When CMS refused to
remit payment of ASP plus 6 percent through these administrative
proceedings, the plaintiffs thus sufficiently exhausted the
administrative appeals process, giving them standing for judicial
review under 42 U.S.C. 405(g), and entitling them to the usual interest
awarded to prevailing parties that seek an expedited path to judicial
review.
Response: 42 CFR 405.990(j)(2) implements section 1869(b)(2)(C)(iv)
of the Act (42 U.S.C. 1395ff(b)(2)(C)(iv)). That provision allows a
reviewing court to award interest to a prevailing party in litigation
where a provider of services or supplier was granted expedited judicial
review pursuant to section 1869(b)(2) of the Act (42 U.S.C.
1395ff(b)(2)). We are not aware of any providers who received expedited
judicial review pursuant to subparagraph (b)(2), and so, even assuming
that provision authorizes CMS to pay interest under section 1869(b)(2)
of the Act (42 U.S.C. 1395ff(b)(2)) without a court order, it would not
authorize interest payments on the remedy payments here.
To the extent that commenters mean to suggest that section
1869(b)(2)(C)(iv) of the Act (42 U.S.C. 1395ff(b)(2)(C)(iv)) also
applies when a court excuses the usual exhaustion requirements
contained in section 1869(b)(1) of the Act (42 U.S.C. 1395ff(b)(1)), we
disagree. Litigation interest is the exception to cases filed under
section 1869, not the rule. No statute authorizes interest for
litigants who follow the usual administrative appeal procedures
contained in subsection (b)(1). And courts have held that it is
subsection (b)(1)'s reference to section 205(g) that authorizes courts
to excuse subsection (b)(1)'s exhaustion requirement. See Tataranowicz
v. Sullivan, 959 F.2d 268, 272 (D.C. Cir. 1992). Subsection (b)(2)
contains no such reference to section 205(g), and so we doubt the same
reasoning would apply. Cf. 1869(b)(2) of the Act (42 U.S.C.
1395ff(b)(2)) (limiting review to the ``civil action described in this
subparagraph''). If Congress wanted to extend litigation interest to
cases where courts had waived exhaustion under subsection (b)(1), it
could have done so when amending that statute to add subsection (b)(2).
Because Congress did not, we decline any invitation to extend section
1869(b)(2)(C)(iv) (42 U.S.C. 1395ff(b)(2)(C)(iv) beyond its plain text,
especially considering implications litigation interest has on the
United States' sovereign immunity and Congress's control of the public
fisc. See, for example, Libr. of Cong. v. Shaw, 478 U.S. 310, 316
(1986) (``For well over a century, this Court, executive agencies, and
Congress itself consistently have recognized that federal statutes
cannot be read to permit interest to run on a recovery against the
United States unless Congress affirmatively mandates that result.'').
Comment: One commenter stated that the Federal Tort Claims Act
provides for post-judgment interest (28 U.S.C. 2674) and requested
post-judgment interest from June 15, 2022, the date of the Supreme
Court's decision, to the date of final payment. Another commenter
argued that the remedy payments are subject to the Prompt Payment Act,
as amended, and its rules, which state that ``the temporary
unavailability of funds does not relieve an agency from the obligation
to pay these interest penalties or the additional penalties required
under Sec. 1315.11.'' See 5 CFR 1315.10(b)(4). This commenter
additionally notes that the failure of CMS to make interest payments
could result in additional litigation. Similarly, another commenter
stated that section 1815(d) of the Act (42 U.S.C. 1395g(d)) and common
law provide for the payment of interest on underpayments to Medicare
providers.
Response: We do not agree with commenters that the authorities
cited would provide CMS the ability to include interest as part of
these lump sum remedy payments. No lawsuit has been filed under the
Federal Tort Claims Act, and so its interest provisions are irrelevant.
See 28 U.S.C. 2674 (limiting section to ``the provisions of this title
relating to tort claims''). Nor do we believe Medicare providers are
subject to the Prompt Payment Act's terms. Cf. 5 CFR 1315.1 (limiting
applicability to procurement contracts and vendors). Even if they were,
that statute does not apply to instances where, as here, ``payment that
is not made because of a dispute between the head of an agency and a
business concern over the amount of payment.'' 31 U.S.C. 3907(c).
Section 1815 of the Act (42 U.S.C. 1395g(d)) governs Part A payments,
not Part B, and so is similarly irrelevant. See SSA
[[Page 77169]]
section 1815(d) (42 U.S.C. 1395g(d)) (limiting applicability to
payments ``under this part'').
Comment: A couple commenters directed CMS to the Medicare Claims
Processing Manual (100-04, Chapter 1, Section 80.2.2) for instructions
for assessing and calculating interest due on non-periodic interim
(PIP) claims not paid in a timely manner by fiscal intermediaries and
carriers. Another commenter referenced MLN Matters No. MM3557 and
argued that the 340B claims were clean and unpaid, therefore, based on
CMS regulations, interest should be paid from the date of receipt of
the claim. These commenters assert that these claims were not processed
in a timely manner, rendering them eligible for interest accrual.
Response: We appreciate commenters highlighting these instructions.
Our clean claims regulations are found at 42 CFR 405.922 and implement
section 1842(c)(2)(C) of the Act (42 U.S.C. 1395u(c)(2)(C)). Section
1842(c)(2)(B)(i) of the Act (42 U.S.C. 1395u(c)(2)(B)(i)) defines a
clean claim as a claim that has no defect or impropriety (including any
lack of any required substantiating documentation) or particular
circumstance requiring special treatment that prevents timely payment
from being made on the claim under this part. Section 1842(c)(2)(C) of
the Act (42 U.S.C. 1395u(c)(2)(C)) provides that if payment is not
issued, mailed, or otherwise transmitted within an applicable number of
calendar days after a clean claim is received, interest shall be paid
at the rate used for purposes of section 3902(a) of title 31, United
States Code for the period beginning on the day after the required
payment date and ending on the date on which payment is made. Our
longstanding position has been that section 1842(c)(2)(C) of the Act
(42 U.S.C. 1395u(c)(2)(C)) does not apply in situations like this one
where a payment regulation was properly applied by the contractor to
deny a claim that is ultimately held unlawful by a court. No contractor
has the authority to ignore CMS's binding regulations and make a
payment at odds with the regulations within 30 days or otherwise, and
so we believe this is a ``particular circumstance requiring special
treatment.'' Accord Medicare Program: Changes to the Medicare Claims
Appeal Procedures, 74 FR 65296, 65302 (2009) (``Claims initially denied
and subsequently paid following a favorable appeal decision, or revised
following a reopening action are, by their nature, claims that require
special treatment.''). As noted above, the Act speaks expressly to the
issue of litigation interest. And reading section 1842(c)(2)(C) of the
Act (42 U.S.C. 1395u(c)(2)(C)) to apply to litigation interest raises a
similar conflict as reading section 1833(j) of the Act (42 U.S.C.
1395l(j) to apply to litigation interest. For example, if a claim
denied by a contractor under CMS's regulations was later certified for
expedited judicial review under section 1869(b)(2) of the Act (42
U.S.C. 1395ff(b)(2)), would interest run from 30 days after receipt by
the contractor under section 1842(c)(2)(C) of the Act (42 U.S.C.
1395u(c)(2)(C)), or from 60 days after certification under section
1869(b)(2)(C)(iv) of the Act (42 U.S.C. 1395ff(b)(2)(C)(iv))? We
decline to construe section 1842(c)(2)(C) of the Act (42 U.S.C.
1395u(c)(2)(C)) in a way that could conflict with other provisions of
the Act.
Comment: One commenter requested that CMS share the citations for
the authority prohibiting the payment of interest.
Response: As noted above, the Supreme Court has clarified that
``[f]or well over a century, this Court, executive agencies, and
Congress itself consistently have recognized that Federal statutes
cannot be read to permit interest to run on a recovery against the
United States unless Congress affirmatively mandates that result.''
Libr. of Cong. v. Shaw, 478 U.S. 310, 316 (1986). The proper analysis
is thus whether there is legal authority affirmatively mandating the
payment of interest here. CMS's inability to pay interest is a
consequence of a lack of authority authorizing it to pay interest, not
any authority prohibiting it from paying interest.
Comment: One commenter recommended that CMS work with Congress to
allow the remedy to include interest.
Response: We appreciate the commenter's recommendation. As noted, a
legislative change would require Congressional action.
Comment: One commenter asked if CMS has considered adjusting future
budget neutrality provisions to account for the amount of interest
reasonably owed 340B providers.
Response: Since we are not adopting a policy to pay interest in
this rule, we have not examined whether doing so would require changes
to the budget neutrality adjustments discussed below. We agree with the
commenter that if we were to pay interest, we would need to evaluate
what, if any, impact such interest would have on budget neutrality
requirements.
After a consideration of comments received, and for the reasons
discussed above, we continue to believe that we do not have the
authority to include interest as part of the lump sum payments. We
therefore are finalizing our proposal that the lump sum remedy payments
would not include interest as proposed.
2. OPPS Non-Drug Item and Service Payments From CY 2018 Through CY 2022
a. Background
As described in the proposed rule, the 340B Payment Policy was
implemented in a budget neutral manner under sections 1833(t)(9)(B) and
1833(t)(14)(H) of the Act (42 U.S.C. 1395l(t)(9)(B) & (t)(14)(H)) by
increasing non-drug item and service payments to all OPPS providers for
CY 2018 through CY 2022. As we explained in the proposed rule, to
comply with the statutory budget neutrality requirements in sections
1833(t)(9)(B) and 1833(t)(14)(H) of the Act (42 U.S.C. 1395l(t)(9)(B)
and (t)(14)(H)), as well as section 1833(t)(2)(E) of the Act (42 U.S.C.
1395l(t)(2)(E)), CMS must account for these additional payments, which
were made solely due to the 340B Payment Policy that was in effect from
CY 2018 through CY 2022, in determining a remedy for the 340B policy.
As described in the proposed rule, after the Supreme Court's decision
in American Hospital Association, those additional payments became a
windfall--payments the hospitals should not have received but did
anyway. We noted that to comply with budget neutrality and restore the
situation as closely as reasonably possible to the state that would
exist if we simply re-ran all the claims from 2018 to 2022 under the
correct payment rules, we must recover this windfall.
As summarized in the proposed rule, the reduction in 340B drug
payments made to affected 340B covered entity hospitals from CY 2018
through CY 2022 was offset by an increase in non-drug item and service
payments made to all hospitals paid under the OPPS during the same time
period to comply with statutory budget neutrality requirements. In
other words, all hospitals were paid more under the OPPS for non-drug
items and services for CY 2018 through CY 2022 than they would have
been paid absent the 340B Payment Policy. As we explained, starting in
CY 2018, CMS applied an approximate 3.19 percent increase to the OPPS
conversion factor to offset the decreased OPPS 340B drug payments. And,
as we also explained, because we proposed to make additional payments
to affected 340B covered entity hospitals
[[Page 77170]]
to pay them what they would have been paid had the 340B policy never
been implemented, we were required to correspondingly propose to make
an offset to maintain budget neutrality as if the 340B Payment Policy
had not been in effect during CY 2018 through CY 2022. As detailed in
the proposed rule, this is consistent with the policy finalized in the
CY 2023 OPPS/ASC final rule with comment period (87 FR 71976) where CMS
finalized a minus 3.09 percent adjustment to the conversion factor as
this adjustment removes the effect of the 340B policy as originally
adopted in CY 2018, again, as described in more detail in section I.C.
of the proposed rule. The CY 2023 adjustment to the conversion factor
ensures it is equivalent to the conversion factor that would be in
place if the 340B Payment Policy had never been implemented.
As we described in the proposed rule, to calculate the additional
amount CMS paid for non-drug items and services, we proposed to include
those assigned the following status indicators, SI = J1, J2, P, Q1, Q2,
Q3, R, S, T, U, V. These status indicators generally capture the non-
drug items and services impacted by a change in the OPPS conversion
factor. For additional details on these status indicators, we refer
readers to Addenda D1 of the CY 2023 OPPS/ASC final rule with comment
period for the most recent OPPS status indicators and their
definitions. This file is available on the CMS website.\24\ As we noted
in the proposed rule, we calculated the adjusted payment (the payment
that would have been made for the non-drug item or service absent the
budget neutrality adjustment to the conversion factor due to the 340B
Payment Policy) by taking the amount paid for the non-drug item or
service and dividing it by 1.0319 (the amount by which the conversion
factor was increased during CYs 2018 through 2022 to budget neutralize
the effect of the 340B Payment Policy). We proposed that the amount
that would need to be offset to maintain budget neutrality in crafting
this remedy would be based on the payments to providers that would have
been made for non-drug items and services absent the 340B Payment
Policy during CY 2018 through CY 2022, and the Medicare payment to 340B
providers for the amount equivalent to the additional drug payments
that would have otherwise been paid as beneficiary cost-sharing. Based
on these factors, we proposed prospectively to offset $7.8 billion in
order to maintain budget neutrality. This figure was calculated based
on past claims data with 80 percent of this amount based on the
Medicare share and 20 percent based on the beneficiary share. As we
explained, our budget -neutrality adjustment in the 2018 through 2022
OPPS rules reflected a prediction regarding how much we would spend on
340B drugs--a prediction that turned out to be too low. As it turned
out, 340B hospitals spent more on 340B drugs than we expected, so our
policy ended up saving the Trust Fund (and beneficiaries) more money
from cutting the rates paid for 340B drugs than the Trust Fund (and
beneficiaries) paid for non-drug services in our budget-neutrality
adjustment to offset the savings. We explained that our proposed remedy
would achieve budget neutrality by reversing that imbalance. We
proposed that in aggregate, the total additional payment that providers
would receive as a result of this remedy, $10.5 billion, would be
larger than the amount of payment that would be prospectively offset,
$7.8 billion. As we explain below and stated in the proposed rule, we
believe that our proposed remedy, which would effectively reverse the
imbalance that arose under the policy the Supreme Court deemed unlawful
and would reasonably approximate the results that would occur if we
simply re-ran the claims after eliminating the 340B adjustment,
reflects the best approach to budget neutrality in these unique
circumstances. We solicited comments from the public on our proposed
approach to implementing budget neutrality.
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\24\ <a href="https://www.cms.gov/medicaremedicare-fee-service-paymenthospitaloutpatientppshospital-outpatient-regulations-and-notices/cms-1772-fc">https://www.cms.gov/medicaremedicare-fee-service-paymenthospitaloutpatientppshospital-outpatient-regulations-and-notices/cms-1772-fc</a>.
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Comment: We received many comments on our proposed approach to
implementing budget neutrality.
Response: These comments are addressed in Section II.B.2.b of this
final rule.
b. Prospective Adjustment to Payments for Non-Drug Items and Services
To Offset the Increased Payments for Non-Drug Items and Services Made
in CY 2018 Through CY 2022
As described in the proposed rule (88 FR 44087), we believe that
sections 1833(t)(2)(E) and (t)(14) of the Act (42 U.S.C. 1395l(t)(2)(E)
and (t)(14)) are properly read to require budget neutrality. As we
explained in the proposed rule, section 1833(t)(2)(E) of the Act (42
U.S.C. 1395l(t)(2)(E)) provides that adjustments under that provision
must be made in a budget neutral manner. Section 1833(t)(14)(H) of the
Act (42 U.S.C. 1395l(t)(14)(H)) states that additional expenditures
resulting from this paragraph shall not be taken into account in
establishing the conversion, weighting, and other adjustment factors
for 2004 and 2005 under paragraph (9), but shall be taken into account
for subsequent years, while section 1833(t)(9)(B) of the Act (42 U.S.C.
1395l(t)(9)(B)) states that the adjustments for a year may not cause
the estimated amount of expenditures under this part for the year to
increase or decrease from the estimated amount of expenditures under
this part that would have been made if the adjustments had not been
made. To implement these requirements, we proposed to unwind the
additional payments that were made for non-drug items and services to
all providers from CY 2018 through CY 2022. In other words, along with
reversing the rate change we discussed in the proposed rule, we
proposed to reverse the accompanying increase in the conversion factor
for CYs 2018 through 2022 that was solely attributable to the adoption
of the 340B Payment Policy.
As described in the proposed rule, to reduce the burden on
providers of offsetting the $7.8 billion offset required to maintain
budget neutrality, we proposed to implement the adjustment
prospectively. We proposed to, beginning in CY 2025, reduce all
payments for non-drug items and services to all OPPS providers--except
any hospital that enrolled in Medicare after January 1, 2018--by 0.5
percent each year until the total offset was reached (which we
estimated to be approximately 16 years). As stated in the proposed
rule, starting this reduction in CY 2025 would allow CMS time to
finalize its methodology, and then apply its methodology to calculate
and publish the payment rates in the CY 2025 OPPS/ASC proposed rule. We
stated it would also allow adequate time for impacted parties to assess
and prepare for the new payment rates that would be calculated using a
reduced conversion factor. Additionally, as we remarked in the proposed
rule, we believed a 0.5 percent annual reduction in the conversion
factor would be appropriate because it would balance the need to
address the past payments for non-drug items and services to ensure
budget neutrality while also ensuring that the offset was not
immediately, in the short-term, overly financially burdensome on
impacted entities, especially those in rural communities, which we
believed would be the case if we were to apply an adjustment for the
full offset amount in a single year.
In the proposed rule, we acknowledged that, in litigation, we at
[[Page 77171]]
one point questioned the American Hospital Association's suggestion
that we could achieve budget neutrality by decreasing Medicare payments
in future years, noting that section 1833(t)(9) of the Act (42 U.S.C.
1395l(t)(9)) requires budget neutrality for a particular ``year.'' See
Am. Hosp. Ass'n v. Becerra, Br. for the Respondents, at 30 (U.S. No.
20-1114).\25\ At the same time, however, the government's briefing
pointed to the District Court's conclusion that if the Secretary was to
retroactively increase the 2018 and 2019 payments for 340B hospitals,
``budget neutrality would require him to retroactively lower the 2018
and 2019 rates for other Medicare Part B products and services.'' Ibid.
In the proposed rule, we indicated that we had further considered
section 1833(t)(9) of the Act (42 U.S.C. 1395l(t)(9)) in light of the
Supreme Court's decision holding that judicial review was available and
also recognizing the statutory requirement of budget neutrality, and
that consequently different ways of approaching the remedy had come
into focus.
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\25\ <a href="https://www.supremecourt.gov/DocketPDF/20/20-1114/197027/20211020212647625_20-1114bsUnitedStates.pdf">https://www.supremecourt.gov/DocketPDF/20/20-1114/197027/20211020212647625_20-1114bsUnitedStates.pdf</a>.
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As we explained in the proposed rule, our proposal was consistent
with section 1833(t)(9) of the Act: It would offset the amounts of
money that constitute excess payments in past years--which are
effectively overpayments for those years (that is, 2018 to 2022) in
light of the Supreme Court's decision. In other words, while we
proposed reducing the conversion factor in future years, we would be
doing so not by seeking to budget neutralize payments across a period
of years rather than in a particular ``year,'' but instead by adjusting
payment rates for each year from 2018 to 2022 to account for the
Supreme Court's decision. We proposed that we would then make the
requisite additional payments to 340B hospitals for those years and
collect the excess payments from other hospitals in future years. We
also explained that because the estimated amount of expenditures for
each of 2018 to 2022 would still be budget neutralized--indeed, we
stated that it was our best effort to implement the policy that would
have been in effect had the 340B policy never been implemented in the
first place--we believed it would be consistent with the provision that
adjustments may not ``cause the estimated amount of expenditures under
this part for the year to increase or decrease.'' See section
1833(t)(9)(B) of the Act (42 U.S.C. 1395l(t)(9)(B)). As noted in the
proposed rule, we believed that this interpretation would account for
reliance interests hospitals may have in payments already made while
staying consistent with the budget neutrality requirements repeated
throughout the OPPS statute in sections 1833(t)(2)(E), (t)(9), and
(t)(14)(H) (42 U.S.C. 1395l(t)(2)(E), (t)(9) and (t)(14)(H)). And, as
discussed in the proposed rule, we concluded that avoiding a windfall
to providers was consistent with the agency's recoupment authority. We
invited comments on these aspects of our proposal.
We also acknowledged that under our proposal the Part B Trust Fund
would pay out more for remedial payments than it would recover over
time based on the reduction in payments for non-drug items and
services. As we explained, that is a consequence of many factors. The
most significant factor is our estimate in the CY 2018 OPPS/ASC final
rule of the amount that expenditures for 340B-acquired drugs would
decrease under the 340B Payment Policy. As part of the 340B Payment
Policy, we budget neutralized the decreased payments for 340B-acquired
drugs by applying a 3.19 percent adjustment to the conversion factor to
increase expenditures for non-drug items and services. In the proposed
rule, we acknowledged that Medicare could not perfectly have calculated
a precise estimate when it first made the budget neutrality adjustment
in the CY 2018 final rule with comment period. In the CY 2018 final
rule with comment period, we discussed that, because data on drugs that
are purchased with a 340B discount are not publicly available, it was
not possible to estimate more accurately the amount of the aggregate
payment reduction. That imprecision impacted the budget neutrality
adjustment we calculated. We discussed that other potential offsetting
factors included possible changes in provider behavior and overall
market changes that may have lowered the impact of the payment
reduction in the CY 2018 OPPS/ASC final rule with comment period (82 FR
52623).
We now know that CMS underestimated the growth in expenditures for
340B drugs in CYs 2018 through 2022. Therefore, as we stated in the
proposed rule, our budget neutrality calculations for those years ended
up increasing payments for non-drug services by less than we decreased
payments for 340B drugs. As we explained, we followed our standard
approach not to propose to re-calculate what the budget neutrality
offset would have been beginning in 2018 if we had used more accurate
assumptions. Rather, we proposed simply to unwind the 3.19 percent
budget neutrality adjustment we set beginning in 2018. Because of our
flawed assumptions in 2018, however, the total amount of our proposed
remedy payments to 340B hospitals for 340B drugs would thus be greater
than the future reduction to payments.
As we explained in the proposed rule, there were other reasons for
the difference between the lump-sum payment and our future reductions
to non-drug spending. Some of these reasons increase that gap; others
do the opposite. First, a large portion of the CY 2022 340B drug claims
for dates of service between January 1, 2022, and September 27, 2022,
have already been remedied as a result of being processed or
reprocessed at the default drug payment rate. However, none of the non-
drug item and service claims from CY 2022 have been offset yet to
account for our proposed method of budget neutralization. Second,
during CY 2022 CMS began making payment for 340B drugs at the default
drug payment rate, generally ASP plus 6 percent, for claims processed
on or after September 28, 2022; however, no adjustment was made for the
increased payment of the non-drug item and service claims that were
processed during this time. Therefore, as we explained, there was over
an entire quarter of claims for non-drug items and services that were
paid a higher rate due to the 340B Payment Policy that still needed to
be offset, while the 340B drug claims for that quarter had already been
paid correctly.
Additionally, as we remarked in the proposed rule, our proposal
included in the remedy payments the amount that affected 340B covered
entity hospitals would otherwise have been paid by beneficiaries. This,
we explained, would approximate what the hospitals would have been paid
for these drugs absent the 340B Payment Policy. Because the statute
requires that this adjustment be budget neutral, we proposed to include
in the prospective offset calculation an amount to offset this increase
in Medicare payments.
In sum, we proposed in the proposed rule a total prospective offset
of $7.8 billion to maintain budget neutrality as if the 340B Payment
Policy had never been in effect and therefore had never adjusted the
OPPS conversion factor. That offset encompasses both the windfall
providers received from the Medicare Trust Fund for non-drug services
between 2018 and 2022, as well as the additional copayments they
received from beneficiaries on those services. And we proposed to use
it to offset both the payments we are making
[[Page 77172]]
to compensate 340B hospitals for the lower amounts Medicare paid them
and the equitable adjustment we are making to compensate for the
additional beneficiary copayments they would have received.
To avoid potentially overburdening providers with an immediate
downward adjustment to the OPPS conversion factor, we proposed to
decrease future payments for every non-drug item and service for every
hospital. As we explained, this approach was similar to the original
budget neutrality adjustment in the 340B Payment Policy that increased
the payment for every non-drug item and service for CY 2018 through CY
2022 to offset the downward adjustment in the payment rate for drugs
acquired under the 340B Program. We acknowledged in the proposed rule
that, depending on how a hospital's future mix of drug and non-drug
services compared to its past mix of drug and non-drug services, as
well as any absolute growth in a hospital's non-drug services, some
hospitals might ultimately receive slightly more (or less) of a payment
reduction than the payment increase they received in CY 2018 through CY
2022. We additionally acknowledged that there is often some imprecision
inherent in budget neutrality calculations, and being more precise
would require that we recalculate the additional amount that each
hospital received under the prior policy and then apply a specific
reduction to that hospital's future non-drug service payment rates to
offset that amount. As we explained, that alternative was very similar
to the claims reprocessing alternative that we discussed in section
II.A.2 of the proposed rule, which would impose significant burdens and
payment delays for 340B providers. We also explained that because it
would be administratively unworkable to tailor individual payment
reductions for each of the thousands of impacted hospitals for over a
decade and a half, meaning we would likely need to collect a lump sum
budget neutrality recoupment. We noted that it would impose all the
burdens of an up-front budget neutrality recoupment that we decided
against proposing, as explained in section II.A.3 of the proposed rule.
We indicated that, except in the case of truly new hospitals, which we
proposed to exclude from the prospective offset described under section
II.B.2.c of the proposed rule, we did not believe our proposed approach
would so significantly undercompensate hospitals to require that kind
of precision, despite these potential distributional consequences. See
Shands Jacksonville Med. Ctr., Inc. v. Azar, 959 F.3d 1113, 1120 (D.C.
Cir. 2020) (rejecting challenge to remedy rule even when it left some
hospitals ``slightly better off and others slightly worse off than they
would have been had the rate reduction never taken effect''). Rather,
we explained that we believed that our remedy would come as close as
reasonably possible to turning back the clock to restore us to the
place in which we would have been absent the policy the Supreme Court
held unlawful. As we emphasized in the proposed rule, this remedy
applies in truly unique circumstances: we must apply budget neutrality
in a way that may not be purely prospective, but may be partially
retroactive to rectify an adjudicated past violation of law. As
discussed in the proposed rule, re-running all the relevant claims as
if the 340B Payment Policy did not occur would be close to impossible
administratively. Consequently, given these unique circumstances, we
explained that we believed our proposed approach properly applied the
budget neutrality principle, even if it resulted in some effectively
unavoidable imprecision.
Accordingly, as described in the proposed rule, beginning in CY
2025, we proposed to reduce OPPS payments for non-drug items and
services annually by decreasing the OPPS conversion factor by 0.5
percent each year until the total offset, estimated to be $7.8 billion
in the proposed rule, was reached. We explained that we recognized that
the proposed rule was unique and therefore required a unique
prospective offset period. We also explained that we believed an annual
reduction of 0.5 percent would offset this amount in a reasonable
amount of time while not imposing too significant of a reduction on
hospitals in any particular year. At the time of the proposed rule, we
estimated that this process would take approximately 16 years (Table
1). As detailed in the proposed rule, this estimate was based on
current OPPS payments that were made through the OPPS conversion factor
and typical year-over-year increases in OPPS payments over the past ten
years. We noted that, similar to the original 340B budget neutrality
adjustment to the conversion factor, both Medicare payments under the
OPPS and beneficiary cost-sharing would be impacted by the change in
the conversion factor. As described in the proposed rule, in this
instance, beneficiaries would generally have lower co-insurance
payments for non-drug items and services as a result of the proposed
0.5 percent annual reduction to the OPPS conversion factor for the
duration of the required budget neutrality offset.
We invited comment on our estimated budget neutrality offset
calculations described in the proposed rule, including the discussion
of our method of budget neutralization not fully aligning with the
money we predicted the Part B Trust Fund would pay out in lump sum
payments for 340B-acquired drugs. In the proposed rule, we stated that
we would adjust this estimate in future CY annual OPPS rules after CY
2025, based on updated data, such as claims and aggregate OPPS spending
estimates, to account for how much of the total additional non-drug
item and service payment amount had been offset by the time of each
annual rule. In the proposed rule, we stated that in the final CY
rulemaking for this process, when we estimated the remaining amount of
Medicare payment that would needed to be offset fully within the
prospective year, the 0.5 percent reduction amount would be reduced in
the final year in which the adjustment applied, if needed, to the
percentage estimated to be sufficient to offset the remaining amount by
the end of that calendar year. After this final prospective adjustment
was made, we proposed that we would not make any additional adjustments
to the OPPS conversion factor for purposes of offsetting the additional
Medicare payments made to remedy the OPPS 340B Payment Policy, nor
would we make any additional future adjustments if the amount of the
offset in the final year of this adjustment was more or less than we
had estimated in rulemaking for that CY. We proposed to codify the 0.5
percent reduction in the OPPS conversion factor effective for CY 2025
in the regulations by adding new paragraph (b)(1)(iv)(B)(12) to Sec.
419.32.
BILLING CODE 4120-01-P
[[Page 77173]]
[GRAPHIC] [TIFF OMITTED] TR08NO23.000
BILLING CODE 4120-01-C
We sought comments on the annual percent reduction method described
in the proposed rule and whether an alternative option--including those
discussed in section II.A of the proposed rule--would be appropriate.
We suggested that an additional possible alternative timeline for
maintaining budget neutrality could be to offset a fixed dollar amount
each year over a fixed period of time such as 5, 10, or 15 years. By
way of an example, we suggested that we could divide the $7.8 billion
number by 10 in order to offset $780 million per year from CY 2025
through CY 2034 by making an adjustment to the conversion factor to
reflect an estimated $780 million reduction in non-drug item and
service spending for each year.
As described in the proposed rule, we also considered whether
hospitals needed additional time to prepare following any finalized
policy, and, as
[[Page 77174]]
such, sought comment on whether delaying the proposed reduction in the
conversation factor from CY 2025 to CY 2026 would provide hospitals
with additional time to make necessary arrangements.
We received the following comments on our proposals.
Comment: Many commenters argued that since, in their view, sections
1833(t)(14) and (t)(2)(E) of the Act (42 U.S.C. 1395l(t)(14) and
(t)(2)(E)) do not apply to the remedy payments (for the reasons
described under section II.B.1), the budget neutrality requirements of
those statutes also do not apply to the remedy payments.
Response: We explain at length above why sections 1833(t)(14) and
(t)(2)(E) of the Act (42 U.S.C. 1395l(t)(14) and (t)(2)(E)) are the
proper authorities to make these remedy payments. We therefore disagree
with commenters that budget neutrality requirements in those provisions
would not also apply. And even if a budget neutrality adjustment is not
statutorily required, it is an appropriate exercise of the agency's
statutory and common-law or inherent recoupment authorities as a policy
matter, as we explain further later in this section.
Comment: Some commenters argued that section 1833(t)(14)(H) of the
Act (42 U.S.C. 1395l(t)(14)(H)) cannot authorize our unwinding of the
non-drug item and service payments from the 340B Payment Policy. That
provision reads, as relevant: ``Additional expenditures resulting from
this paragraph shall not be taken into account in establishing the
conversion, weighting, and other adjustment factors for 2004 and 2005
under paragraph (9), but shall be taken into account for subsequent
years.'' In their view, there is nothing ``additional'' about the lump
sum payment, because it is what 340B hospitals should have been paid in
the first place. And the payment is not being made ``as a result of
this paragraph'' but rather the agency's loss of a court case. These
commenters further disagreed with our reading of section 1833(t)(14)'s
reference to paragraph (9), which directs CMS to adjust the groups,
relative payment weights, and wage indices in the OPPS ``for a year.''
These commenters argued that this provision is prospective in nature
and therefore cannot be relied upon to require or authorize what they
characterize as a corresponding retrospective recoupment from
hospitals. One commenter interpreted ``additional expenditures'' in
section 1833(t)(14)(H) of the Act (42 U.S.C. 1395l(t)(14)(H)) to refer
only to expenditures from CMS electing to refine its drug payment
methodology as permitted under section 1833(t)(14) of the Act (42
U.S.C. 1395l(t)(14)). The commenter asserted that this means performing
a survey and changing the drug payment methodology or refining the
overhead cost payment, and that, in this case, the additional
expenditures are neither of these and are instead ``a loss at the
Supreme Court, not a payment methodology refinement.''
Response: We disagree with commenters' interpretation of sections
1833(t)(14)(H) and (t)(9)(B) of the Act (42 U.S.C. 1395l(t)(14)(H) &
(t)(9)(B)). As an initial matter, commenters overlook that we are not
adjusting future payments by the $9 billion lump sum payment or by the
$10.5 billion total cost of this remedy rule. Rather, we are unwinding
the payment increases for non-drug services and items in the 340B
Payment Policy (82 FR 59482) in order to place providers in as close to
a situation as they would have been if the 340B Payment Policy never
existed.
Additionally, the Supreme Court stated it would ``not address
potential remedies.'' Am. Hosp. Ass'n, 142 S. Ct. at 1903. We are using
section 1833(t)(14) of the Act (and sections 1871(e) and 1833(t)(2)(E)
of the Act, as relevant) to unwind the 340B Payment Policy. Any
increased expenditures are therefore a result of paragraph (14).
Section 1833(t)(14) of the Act (42 U.S.C. 1395l(t)(14)) does not
contain an exception to the budget neutrality requirement when
unwinding the agency's past interpretations. Ultimately, we are
responding to the Supreme Court's decision for CY 2018 through CY 2022
the same way as we responded to the Supreme Court's decision in the CY
2023 OPPS final rule: unwinding both the payment decrease for 340B-
acquired drugs and the payment increase for non-drug items and
services. No one objected to the 3.09 percent decrease to payments for
non-drug items and services, despite it responding to the same Supreme
Court decision and restoring payments for 340B-acquired drugs to what
they should have been all along. We believe our approach here is
analogous.
We also disagree that the reference in section 1833(t)(9)(B) of the
Act (42 U.S.C. 1395l(t)(9)(B)) to adjustments ``for a year'' diminishes
our ability to return providers to the situation they would have been
absent the 340B Remedy Policy. We previously explained that the OPPS's
generally prospective nature does not prevent us from remedying legal
errors identified by courts. We believe we should apply section
1833(t)(9)(B) consistent with that instruction; if a court decision
invalidates a policy that impacts payments ``for a'' particular past
``year,'' we can account under section 1833(t)(9) for the impact the
legally correct policy would have had for that same year. That is
especially true when, as here, the cut to 340B-acquired drugs was so
inextricably intertwined with the 3.19 percent increase to payments for
non-drug items and services budget neutralized. Because we are making
adjustments to payments for CY 2018 through CY 2022, section
1833(t)(9)(B) of the Act (42 U.S.C. 1395l(t)(9)(B)) requires us to make
corresponding budget neutralizing adjustments to the ``estimated amount
of expenditures'' for each of those years. To the extent necessary,
this final rule can be viewed as a retroactive adjustment to the
payment rates for each of 2018 through 2022, as authorized by section
1871(e)(1)(A) of the Act ((42 U.S.C. 1395hh(e)(1)(A)). We could have,
for example, increased the payment rate for 340B-acquired drugs for CY
2018, and decreased the payment rate for non-drug items and services by
3.09 percent for CY 2018 and reprocessed all affected claims. While
that solution was not generally supported by the commenters for
different reasons, all payment adjustments would have been made in the
same year. The fact that we are accomplishing nearly the same result
(that is, unwinding the payment decreases and increases for 2018-2022)
through the reconciliation process described above and implementing the
proper payment or offset amounts does not, in our view, relieve us of
the budget neutrality requirements in the statute nor does it render
our proposed remedy unreasonable or unsupported by the statutory scheme
as a whole.
Comment: One commenter posited that the proposed offsets are not
budget neutral because there is no ``budget'' for the period spanning
from 2018 to 2041.
Response: The term ``budget neutrality'' is a term of art and does
not reference a particular ``budget.'' And even if the term ``budget''
should be construed separately from the rest of the term, a budget does
not necessarily have to apply to a defined time frame. See BUDGET,
Black's Law Dictionary (11th Ed. 2019) (``A sum of money allocated to a
particular purpose or project.''). Here, we understand budget
neutrality in section 1833(t)(2)(E) (and, to the extent relevant, the
title of section 1833(t)(9)(B)) generally to refer to the impact of our
policies on OPPS and the Part B Trust Fund--not to any particular
written document.
Comment: Some commenters argue that section 1833(t)(2)(E) of the
Act (42 U.S.C. 1395l(t)(2)(E) similarly cannot be used to unwind the
payment increases
[[Page 77175]]
for non-drug payments and services, both because the provision is
prospective in nature and because its reference to ``equitable
payments'' refers to ``payments,'' not recoupments or reductions. They
argue the surrounding statutory language supports this payment-only
reading, as ``outlier adjustments under paragraph (5) and transitional
pass-through payments under paragraph (6)'' should be read to refer to
``additional payment[s],'' not funding that CMS seeks to recoup from
hospitals.
Response: We addressed above why we believe OPPS's prospective
nature does not make it inapplicable to this remedy rule. Just as
section 1833(t)(2)(E) of the Act (42 U.S.C. 1395l(t)(2)(E)) is broad
enough to encompass individual payments for cancer hospitals (76 FR
74204), it is broad enough to encompass the adjustments to future
payments for non-drug items and services we finalize here. Indeed,
adjusting future payment years to ensure providers are paid fairly
falls comfortably inside the plain text of section 1833(t)(2)(E) of the
Act (42 U.S.C. 1395l(t)(2)(E)). We disagree with commenters that the
term ``equitable payments'' can never include reductions. The statute
authorizes ``adjustments to ensure equitable payments''--not just
upward adjustments to ensure equitable payments. Similarly, we disagree
with the assertion that ``equitable payments'' excludes adjustments to
recoup money that should not have been paid; as explained above,
restoring parties to the situation they should have been is equitable
in every sense of the term.
Comment: A few commenters argued that the retroactive rulemaking
authority in section 1871(e)(1)(A) of the Act (42 U.S.C.
1395hh(e)(1)(A)) (or anywhere else) does not authorize budget
neutrality. One commenter argued that CMS only discussed its
retroactive rulemaking authority in the proposed rule with respect to
the authority to make the remedy payments, not to budget neutralize the
remedy payments. The commenter argues that this is for good reason
because CMS cannot rely upon any general retroactive rulemaking
statutes to implement an offset because it would rely upon paragraph
(9) which is prospective only.\26\ Another commenter referenced ``. . .
the risk that HHS may lack authority to recoup these funds at all
because of the presumption against retroactive rulemaking,'' quoting
the district court's remand decision. See Am. Hosp. Ass'n, 2023 WL
143337, at *5.
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\26\ See Reply In Support Of Plaintiffs' Motion to Hold Unlawful
And Remedy Defendants' Past Underpayment of 340b Drugs, Am. Hospital
Ass'n v. Becerra, Case No. 1:18-cv-2084, Dkt. 78 at 14-17 (Sep. 21,
2022).
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Response: We disagree that our retroactive rulemaking authority
would not encompass budget neutrality adjustments. To the extent our
proposed rule could be construed to disclaim reliance on section
1871(e)'s retroactive rulemaking authority to our budget neutrality
adjustment, we clarify here that we intend to rely on that authority to
the extent our budget neutrality adjustment is retroactive.
We read the quoted statement from the district court in American
Hospital Association simply to acknowledge that the plaintiffs argued
that CMS lacked retroactive rulemaking authority. That court did not
resolve the question one way or another. By contrast, when Congress
passed section 1871(e) of the Act (42 U.S.C. 1395hh(e)), it expressly
acknowledged the general presumption against retroactive rulemaking,
suggesting it intended to depart from that general rule. See H.R. Rep.
108-391 at 756.\27\ And when it did so, Congress had already instructed
CMS to set up many prospective payment systems, including OPPS. We
believe we should harmonize section 1833(t)(9) of the Act (42 U.S.C.
1395l(t)(9)) and the other prospective payment statutes with section
1871(e) of the Act (42 U.S.C. 1395hh(e)), not read them to conflict.
Such a reading would also be inconsistent with courts' holding that the
fact that section 1833(t) of Act (42 U.S.C. 1395l(t)) sets up a general
prospective system does not mean it implicitly precludes retrospective
review.
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\27\ <a href="https://www.congress.gov/108/crpt/hrpt391/CRPT-108hrpt391.pdf">https://www.congress.gov/108/crpt/hrpt391/CRPT-108hrpt391.pdf</a>.
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Comment: Two commenters argued that budget neutrality does not
apply to the payments made to plaintiffs in several cases pending
before the U.S. District Court for the District of Columbia that were
stayed pending the outcome of CMS's remedy discussed in the proposed
rule. According to these commenters, these plaintiffs' entitlement to
remedial payments is based on judicial review of their individual 340B
drug claims under section 205(g) of the Act (42 U.S.C. 405(g)), and
therefore the plaintiffs do not rely on associational standing or seek
relief that would apply to a broad class of members, which CMS argues
implicates budget neutrality. These commenters argue that the
plaintiffs' challenge to CMS's 340B Payment Policy under section 205(g)
of the Act (42 U.S.C. 405(g)) in no way implicates the budget
neutrality provisions referenced by CMS in the proposed rule and that
CMS must recognize that the plaintiffs have preserved their rights to
seek relief under section 205(g). In their view, section 205(g)
provides a process for all hospitals to pursue relief of their own
underpaid claims and does not impose or require a single ``one size
fits all'' remedy or require budget neutrality recoupment on favorable
payment decisions under that process. For this narrow class of
hospitals, the commenters maintain, the appropriate remedy is to make
the hospitals whole in the same manner that would otherwise occur when
the claims are decided favorably through the administrative claims
appeals process--that is, without a budget neutrality recoupment.
Response: We agree with commenters to the extent they question
whether the associational standing doctrine on which some plaintiffs
relied can override the presentment requirements in section 205(g) of
the Act (42 U.S.C. 405(g)), authorize the type of individualized
payment recalculations addressed in this rulemaking, or otherwise allow
industry groups to serve as a class representative for their members
without complying with the applicable Federal Rules of Civil Procedure.
See Warth v. Seldin, 422 U.S. 490, 515-16 (1975) (noting associational
standing most appropriate for prospective relief and not available for
individualized monetary calculations). But we do not believe that
difference requires us to treat hospitals with pending cases
differently from those without pending cases for the budget neutrality
adjustment finalized in this rulemaking.
``One of the earliest principles developed in American
administrative law was the idea that `the choice made between
proceeding by general rule or by individual, ad hoc litigation is one
that lies primarily in the informed discretion of the administrative
agency.' '' Almy v. Sebelius, 679 F.3d 297, 303 (4th Cir. 2012)
(quoting Sec. & Exch. Comm'n v. Chenery Corp., 332 U.S. 194, 203
(1947)). We do not believe that by prescribing an adjudication process
in sections 205(b) and (g) of the Act (as incorporated by section
1869), the statute impliedly prohibits us from also addressing through
rulemaking interpretative concerns identified by courts or insulates
those with pending adjudications from the effects of such rulemaking.
Nor do those provisions necessarily exempt pending adjudications from
other statutory requirements, such as budget neutrality.
Comment: Many commenters disagreed that, even if budget neutrality
was not statutorily required, CMS could
[[Page 77176]]
still exercise its authority under section 1833(t)(2)(E) of the Act (42
U.S.C. 1395l(t)(2)(E)) and its longstanding inherent and common-law
recoupment authority to offset the extra payments. These commenters
reiterated that section 1833(t)(2)(E) of the Act (42 U.S.C.
1395l(t)(2)(e)) does not authorize CMS to make the lump sum payments
and, therefore, the budget neutrality requirements of (t)(2)(E) do not
apply to the lump sum payments. These commenters also assert that CMS
does not have a common-law duty to seek recoupment, so any reliance on
common-law would be voluntary, and no common law power of recoupment
authorizes the type of recoupment proposed by CMS. They assert that any
common-law authority that the government may have to recoup funds can
only be exercised by suing in court.
Response: We respectfully disagree with these commenters. As we
have explained, we believe a budget neutrality adjustment is
statutorily required and, even if not statutorily required, an
appropriate exercise of the agency's statutory and common-law or
inherent recoupment authorities as a policy matter. As we explain
elsewhere in the rule, we believe it falls within our authority to make
adjustments ``necessary to ensure equitable payments'' under section
1833(t)(2)(E) of the Act (42 U.S.C. 1395l(t)(2)(E)) to account for and
place hospitals in nearly the same position as they would have been
absent the 340B Payment Policy. With respect to commenters' assertion
that CMS lacks a common-law duty to seek recoupment, we clarify that we
would pursue recoupment even if we were not strictly required to do so
by common law; the common law reflects the judgment that the government
should avoid funding windfalls to private parties. We agree with that
judgment. Finally, courts have not limited the government's authority
to recoup funds only to lawsuits; courts have acknowledged that
agencies may recoup funds through use of a setoff. See, for example,
Mount Sinai Hosp. of Gr. Miami, v. Weinberger, 517 F.2d 329, 337 (5th
Cir. 1975) (``In some circumstances when government funds are
improperly paid out the government has a claim enforceable either by
direct suit or by setoff against money owed by the government to the
recipient of the illegally dispensed funds.'' (footnotes omitted)).
Comment: Many of these same commenters disagreed with CMS's
reasoning that applying budget neutrality was justified as sound public
policy because the payments constitute an unwarranted windfall to
hospitals that the Trust Fund has a strong interest in recovering and
that hospitals have no legitimate reliance interest in retaining. These
commenters argued that it was inappropriate for CMS to characterize the
receipt of these funds as a ``windfall'' since hospitals had no choice
but to accept the funds. Commenters additionally objected to CMS's use
of the term because it implies that CMS is taking no responsibility for
its own role in creating the situation resulting in the payment of the
funds that it is now proposing to recoup. These commenters also argued
that the proposed rule's reference to any interest that the Trust Fund
may have in recoupment is overstated because, based on the most recent
Annual Report of the Boards of Trustees of the Federal Hospital
Insurance and Federal Supplementary Medicare Insurance Trust Funds,
there is no risk that the SMI Trust Fund will become insolvent in the
foreseeable future. These commenters disagreed with CMS's
[…truncated; see source link]Indexed from Federal Register on November 8, 2023.
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