(Aug. 1, 2025) - As part of the 2026 Outpatient Prospective Payment System Proposed Rule, the Centers for Medicare & Medicaid Services proposes to accelerate the timeline for clawing back hospital funds resulting from the agency's previous unlawful 340B drug payment policy between calendar years 2018 and 2022, as well as to conduct a drug acquisition cost survey.
The Kansas Hospital Association, alongside national partners, believes these proposals are misguided and should not be finalized.
It is essential to recognize that the broader implications of this accelerated repayment timeline would not only result in a faster and more significant financial clawback, but it would also set the stage for additional rate reductions in the future that affect all hospitals regardless of 340B or Prospective Payment System status.
KHA is sharing a template comment letter from the American Hospital Association to provide you with ample time to personalize your feedback and submit comments to CMS by Sept. 15. Comments may be submitted electronically.
Background:
From calendar year 2018 to CY 2022, CMS expanded its policy to reduce payments for 340B-acquired drugs from Average Sales Price + six percent to ASP -22.5 percent to redistribute savings to increase payments for non-drug items and services under the OPPS. The Supreme Court ruled in American Hospital Association v. Becerra, the payment reductions for 340B drugs were unlawful because CMS had not conducted a survey of hospital drug acquisition costs.
As a result, CMS revised the payment policy to pay for 340B drugs at ASP + six percent in a single-lump sum payment. To recoup the $7.8 billion increase that was made for non-drug items and services from CY 2018 to CY 2022, CMS adopted an annual prospective payment reduction of 0.5 percent to the OPPS conversion factor in the 340B Final Remedy Rule that was to start in CY 2026. Recoupment was initially estimated to take approximately 16 years; however, CMS has since determined that a shorter timeframe would be more appropriate, given the potential that not all overpaid providers may remain by 2041.
Therefore, CMS is proposing to revise the annual reduction percentage for non-drug items and services from 0.5 percent to 2.0 percent effective for CY 2026 and estimated to end in CY 2031. This policy excludes hospitals that enrolled in Medicare after Jan. 1, 2018.