Moody's: Proposed cuts to Medicare 340B payments would hurt nonprofit hospital margins

CMS' proposed changes to 340B Drug Pricing Program payments would harm nonprofit hospital margins, according to Moody's Investors Service. 

In July, CMS released its 2018 Medicare Outpatient Prospective Payment System proposed rule. CMS proposed paying hospitals 22.5 percent less than the average sales price for drugs purchased through the 340B program. That's compared to the current payment rate of average sales price plus 6 percent. Moody's says this proposed payment cut — almost 30 percent in the aggregate — would "represent another headwind for hospitals already facing pressure."

"Hospitals and health systems of varying size and across the rating spectrum have noted anecdotally that they have benefited from cost savings from this discount drug program," said Diana Lee, Moody's vice president. "In some instances, the savings and income gained from this program can be meaningful relative to total operating cash flow. While about half of hospitals in the nation are 340B providers, those that have limited financial flexibility would be most exposed to possible changes to the 340B program."

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