Site Neutral Payment Policy and 340B in the CMS Crosshairs

Both policy issues remain on the CMS agenda, even though the agency has lost two court battles.

Centers for Medicare & Medicaid Services (CMS) Administrator Seema Verma was probably well aware of what she was walking into last week at the U.S. House of Representatives Energy and Commerce committee hearing. The hearing, after all, was titled “Sabotage: The Trump Administration’s Attack on Health Care.”

Democratic members challenged Verma, accusing the administration of undermining the Patient Protection and Affordable Care Act (PPACA) and reducing Americans’ access to healthcare. Verma and Republican members responded by saying that the administration’s reforms, including short-term health plans, had enhanced health insurance flexibility and affordability.

But the primary issue that Democratic members kept throwing at Verma was the question of what the administration would put in place of the PPACA, particularly with regard to its protections for those with pre-existing conditions.

The question was timely, given that, any day now, we expect the Fifth Circuit Court of Appeals to rule on the Affordable Care Act, in the court case Texas v. the USA. Most analysts assume the court of appeals will overturn an earlier court’s conclusion that the entire PPACA is unconstitutional. But whatever the appeal court decides, the case will likely proceed to the Supreme Court next year.

At the hearing, while Verma said that the administration had a plan, she refused to give specifics about what exactly it would do if the PPACA went away.

Spurred by a question from the committee, Verma also touched on the 340B Drug Pricing Program, noting that CMS is concerned about double discounts under the program, but said that she couldn’t say much, because the program is currently under litigation.

If you remember the history here, CMS lost a court battle in late 2018 on the 340B payment reductions. In that case, the court did not have an issue with the policy itself, only the process that CMS used to adopt it. The court said, in essence, that a) CMS did not have the authority to adjust payments, and b) CMS had not done enough homework on how the reduction would impact hospitals.

CMS is appealing that ruling, but, in the meantime, it is clear that CMS is going to have another go at adopting reductions in the 340B program. In late September, CMS asked for comments via a proposed survey of hospitals on their acquisition costs, ostensibly to prepare an impact analysis in a future regulation that CMS hopes would pass mustard with the court.

And speaking of court-entrenched accusations of CMS overstepping its bounds in reducing payments, last week a court reaffirmed a decision that ruled that CMS had gone beyond its authority with the site-neutral reduction in hospital payments. Although the court’s judgment was seen as a win for hospitals, observers say that although a battle was won, the war is far from over. As with the 340B issue, CMS will no doubt appeal the court’s decision, and an executive order from Trump earlier this month directed the U.S. Department of Health and Human Services (HHS) to keep pushing the site-neutral policy, arguing that it would encourage competition and greater access for patients.

So, we’re seeing a pattern here: CMS oversteps its authority and cuts payments; the industry puts up the money to bring the administration to court; CMS loses in court – but mostly on process technicalities – but CMS keeps pushing in court and, in the meantime, goes back and fixes the process technicalities.

In her opening statement last week in front of the Energy and Commerce committee, Verma stated that “we are committed to focusing on results instead of process.”

That statement seems to reflect CMS’s approach well, publishing policies it wants and skipping over silly process issues, like having the authority to make particular policies or conducting appropriate rulemaking.

Stay tuned to these two issues – the 340B program and the site-neutral policy – to see whether Verma gets the policy she wants, or if she gets stopped by the process.