CMS proposed in July to expedite its payment reduction for some 340B items and services until it recoups $7.8 billion. Hospital systems are pushing back.
To compensate for underpayments in the 340B program between 2018 and 2022, CMS policy codified a 0.5% reduction in the Medicare Hospital Outpatient Prospective Payment System (OPPS) conversion factor applicable to non-drug items and service.
At the time, 340B Health and the American Society of Health-System Pharmacists decried the decision to cut future 340B reimbursement for non-drug items and services.
In its July proposal for 2026, CMS said, “This prospective offset aimed to balance the goal of restoring hospitals to their financial position had the original 340B policy never existed, while avoiding burdening them with an immediate single year recovery.”
In 2018, the agency estimated the Remedy for the 340B-Acquired Drug Payment Policy would reach its $7.8 billion goal by 2041. CMS has proposed shortening this timeline by 10 years.
“After subsequent reconsideration of balancing these two goals, we have determined a shorter timeframe to be more appropriate. This proposed 2% reduction would remain in effect for certain hospitals until the estimated payment reduction reaches $7.8 billion, which we estimate will occur in [calendar year] 2031,” the proposal said.
Several health systems and hospitals that are part of the 340B program opposed these changes. Here are their comments on the proposal. (Note: Responses have been lightly edited for length and clarity):
Corewell Health (Grand Rapids and Southfield, Mich.): Corewell Health strongly opposes CMS’ proposed accelerated clawback for at least three reasons. First, the legality of this provision is suspect. Applying budget neutrality to a CMS accounting error for which the courts have already ruled in hospitals’ favor is not appropriate and works against the judiciary’s decision. Corewell Health has already lost tens of millions of dollars due to CMS’ error. Second, hospitals have already made multi-year financial plans based on the 2% offset percentage. CMS would create undue and unnecessary further disruptions to hospital operations with this accelerated clawback proposal. Third, Medicare Advantage plans have not paid back settlement money and have been underpaying for many years. This proposed accelerated clawback compounds the initial error and further harms hospitals.
Novant Health (Winston-Salem, N.C.): While the net financial impact of increasing the annual OPPS conversion factor reduction from 0.5% through 2041 to 2% through 2031 remains unchanged, this proposal significantly compresses the repayment period and creates unsustainable financial pressures for hospitals — including those not participating in the 340B program — which operate on narrow margins.
Trinity Health (Livonia, Mich.): Like all hospitals and health systems, Trinity Health makes planning decisions about budgets based on what we expect to occur in future years. We therefore began planning for this clawback as soon as CMS announced it in 2023. And as part of those medium- and long-term planning decisions, we factored in a 0.5% clawback.
It therefore makes no difference that those rate reductions have not yet gone into effect. If the agency finalizes this unexpected increase from 0.5% to 2% just two months before 2026, the budgets we have produced based on that 0.5% figure will be negatively impacted, upsetting settled expectations with little time to readjust and creating serious cash flow problems. That is the paradigmatic reliance interest CMS is wrong to state that those interests are “minimal.”
University of Iowa Health Care (Iowa City): Over the last two years, our hospitals’ budgets have incorporated the 0.5% reduction and have not accounted for higher reductions. … Our hospital is already facing significant financial pressures. Expediting the recoupment of the non-drug payments would put additional strain on our hospital and would reduce our already limited resources available to subsidize healthcare services for low-income patients. For these reasons, our hospital urges CMS to abandon this proposal in its entirety.
