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  • Washington Highlights

    MedPAC Issues Recommendation on 340B Program

    Susan Xu, Lead Research Analyst

    The Medicare Payment Advisory Commission (MedPAC) met Jan. 14-15 to discuss and vote on recommendations regarding hospital inpatient, outpatient, and physician payment policies for 2017, as well as to issue recommendations on the 340B Drug Pricing Program.

    Commissioners voted in favor of the Chairman Francis Crosson’s, M.D., hospital inpatient and outpatient payment recommendations, which called for a 1.65 percent payment update as authorized by current law. A majority of commissioners also supported a controversial provision on the 340B program to reduce payment rates for 340B hospitals and redistribute the savings through the Medicare Disproportionate Share Hospital (DSH) Uncompensated Care Payment (UCP).

    The 340B recommendation was almost identical to the draft language that commissioners voted on last month, and included three components [see Washington Highlights, Dec. 11, 2015]:

    • Reduce the payment rates for 340B hospitals’ Part B drugs by 10 percent of the Average Sales Price;

    • Direct the program’s savings from reducing Part B drug payment rates to the Medicare DSH UCP pool; and

    • Distribute UCP using data from the Medicare cost reports schedule S-10. The use of S-10 uncompensated care data should be phased in over three years.

    In addition, commissioners voted for a 0.5 percent payment update for physician and other health professional services, as authorized by current law. MedPAC staff also presented on various factors, including beneficiary access, volume growth, and cost implications.

    Early Friday morning, the commissioners reviewed a model for a unified post-acute care prospective payment system (PPS). The unified PPS would span for the four post-acute settings and base payments on patient characteristics and not level of therapy. MedPAC will be making recommendations on their findings in the June report, as required by the Improving Medicare Post-Acute Care Transformation Act of 2014 (IMPACT Act, P.L. 113-185). 

    The meeting concluded with a final session on developing principles and implementation issues for alternative payment models (APMs) under the Medicare CHIP Reauthorization Act (MACRA, P.L. 114-10). The MedPAC staff discussed defining “nominal financial risk” as actual versus expected spending. Furthermore, they expressed concerns over utilizing attestation methodology over attribution, saying that while attestation provides beneficiary engagement, it is much more difficult to reach the target size.

    Final recommendations will be included in the upcoming reports to Congress on Medicare Payment Policy.