while nonessential services and elective surgeries are on hold because of the ongoing crisis.
Hospitals that opposed the change argued that they had put money earned through the program — which can run in the millions of dollars for a hospital each year — into services for poor and underserved communities, as Congress intended. While waiting for the DC Circuit to rule, the CMS is exploring ways to move forward with the rate cut even if it loses. Last month, the agency launched a survey to collect data from 340B hospitals that the CMS says would address the issues that led the lower court judge to rule against the government. Hospitals opposed the survey and asked the agency to at least delay it, saying they’d have to divert resources that are already stretched thin during the pandemic to respond.
“The COVID-19 pandemic has created the greatest financial crisis in history for America’s hospitals and health systems, with our field losing over $50 billion each month. While it is too soon to have precise data on the full impact of this pandemic, the unlawful Medicare cuts that we are contesting in federal court have added significantly to the financial pressure all hospitals face,” the group said.
Starting in 2006, Congress gave the CMS two options to set the drug reimbursement rate. It could rely on what hospitals were actually paying to buy drugs if it had “statistically sound survey data” or, if that wasn’t available, the average sales price of the drugs. If the agency used the second, alternative option, Congress set a default rate: the average sales price plus 6%.
The chief financial officer for the Henry Ford Health System, which serves patients in Detroit and Jackson, Michigan, wrote in athat even if the cut meant that reimbursement rates increased for other Medicare services, the hospital network still expected to lose around $8.5 million by the end of 2018 — money that had gone toward services for patients with low incomes, such as free and low-cost medications, a free community clinic, and mobile health units.
“PhRMA is concerned that the 340B program continues to grow rapidly and without patient benefits, thus increasingly departing from its purpose and statutory boundaries,” the group wrote. “This growth in the 340B program creates market-distorting incentives that affect consumer prices for medicines, shift care to more expensive hospital settings, and accelerate provider market consolidation.”
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