Knowledge Base Article

Q:

Since the 340B Drug Payment Reduction does not apply to Critical Access Hospitals (CAHs), do CAHs have to report modifier TB for drugs purchased through the 340B program?

A:

No, CAHs do not have to report modifier TB. Critical Access Hospitals (CAHs) are not included in the 340B policy change because they are paid based on 101 percent of reasonable costs as required by section 1834(g) of the Act.

All other hospitals under the OPPS are currently paid the same rate for separately payable drugs (ASP+6 percent), regardless of whether the hospital purchased the drug at a discount through the 340B Program. The new rule decreases the payment for drugs purchased through the 340B program from ASP+6% to ASP-22.5% (for an overall decrease of 28.5%). Hospitals to which the reduction applies must report modifier JG on 340B drugs in order for the drug payment to be paid at the reduced amount.

There were concerns from commenters about the drug payment reduction being especially harmful to certain type of OPPS hospitals:

• Rural hospitals are in a “hospital closure crisis” (since 2010, 80 rural hospitals have closed and one-third of remaining rural hospitals are vulnerable to closure, with 41 percent operating at a financial loss)
• Children’s hospitals furnish services under Medicare to children with end-stage renal disease (ESRD). Pediatric ESRD patients require high levels of care and rely on life-saving pharmaceuticals that often come at a high cost.
• PPS-exempt cancer hospitals treat the most vulnerable and underserved patients and communities. Also, children’s and PPS-exempt cancer hospitals receive transitional outpatient payments which would likely offset any reduction in payment of 340B drugs.

For these reasons, CMS excepted rural sole community hospitals (SCHs), children’s hospitals and PPS-exempt cancer hospitals from the 340B payment adjustment. CMS still wants to collect information on which drugs being billed to Medicare are acquired under the 340B program. Therefore the 2018 OPPS Final Rule states, “Accordingly, these three types of hospitals (rural SCHs, children’s hospitals, and PPS-exempt cancer hospitals) will still be required to report an informational modifier “TB” for tracking and monitoring purposes.” The TB modifier does not trigger a payment reduction and drugs reported with a TB modifier will be paid at ASP+6%.