77150 Federal Register / Vol. 88, No. 215 / Wednesday, November 8, 2023 / Rules and Regulations 

1 Government Accountability Office. ‘‘Medicare 

Part B Drugs: ‘‘Action Needed to Reduce Financial 

Incentives to Prescribe 340B Drugs at Participating 

Hospitals.’’ June 2015. Available at https://

www.gao.gov/assets/gao-15-442.pdf. 

2Office of Inspector General. ‘‘Part B Payment for 

340B Purchased Drugs. OEI–12–14–00030’’. 

November 2015. Available at: https://oig.hhs.gov/ 

oei/reports/oei-12-14-00030.pdf. 

3Medicare Payment Advisory Commission. 

March 2016 Report to the Congress: Medicare 

Payment Policy. March 2016. Available at Medicare 

Payment Advisory Commission. March 2016 Report 

to the Congress: Medicare Payment Policy. March 

2016. Available at https://www.medpac.gov/ 

document/http-www-medpac-gov-docs-defaultsource-reports-may-2015-report-to-the-congressoverview-of-the-340b-drug-pricing-program-pdf/. 

DEPARTMENT OF HEALTH AND 

HUMAN SERVICES 

Centers for Medicare & Medicaid 

Services 

42 CFR Part 419 

[CMS–1793–F] 

RIN 0938–AV18 

Medicare Program; Hospital Outpatient 

Prospective Payment System: Remedy 

for the 340B-Acquired Drug Payment 

Policy for Calendar Years 2018–2022 

AGENCY: Centers for Medicare & 

Medicaid Services (CMS), Department 

of Health and Human Services (HHS). 

ACTION: Final rule. 

SUMMARY: This final rule describes the 

agency’s actions on remand from the 

United States (U.S.) District Court for 

the District of Columbia to craft a 

remedy in light of the U.S. Supreme 

Court’s decision in American Hospital 

Association v. Becerra, 142 S. Ct. 1896 

(2022), relating to the adjustment of 

Medicare payment rates for drugs 

acquired under the 340B Program from 

calendar year (CY) 2018 through 

September 27th of CY 2022. 

DATES: This rule is effective January 8, 

2024. 

FOR FURTHER INFORMATION CONTACT: Cory 

Duke, Cory.Duke@cms.hhs.gov, or (410) 

786–0631. 

SUPPLEMENTARY INFORMATION: 

I. Background 

A. OPPS Payment Policy for Drugs 

Acquired Through the 340B Program 

1. Overview 

Under the Hospital Outpatient 

Prospective Payment System 

(hereinafter referred to as OPPS), we 

generally set payment rates for 

separately payable drugs and biologicals 

(hereinafter referred to collectively as 

‘‘drugs’’) under section 1833(t)(14)(A) of 

the Social Security Act (hereinafter 

referred to as ‘‘the Act’’) (42 U.S.C. 

1395l(t)(14)(A)). Section 

1833(t)(14)(A)(iii)(II) of the Act (42 

U.S.C. 1395l(t)(14)(A)(iii)(II)) provides 

that, if hospital acquisition cost data are 

not available, the payment amount is 

the average price for the drug in a year 

established under sections 1842(o), 

1847A, or 1847B of the Act (42 U.S.C. 

1395u(o), 42 U.S.C. 1395w–3a, & 42 

U.S.C. 1395w–3b), as the case may be. 

Payment rates for drugs are usually 

established under section 1847A of the 

Act (42 U.S.C. 1395w–3a), which 

generally sets a default rate of the 

average sales price (ASP) plus 6 percent. 

Section 1833(t)(14)(A)(iii)(II) of the Act 

(42 U.S.C. 1395l(t)(14)(A)(iii)(II)) also 

provides that the average price for the 

drug in the year as established under 

section 1847A of the Act (42 U.S.C. 

1395w–3a), is calculated and adjusted 

by the Secretary of the Department of 

Health and Human Services (Secretary) 

as necessary for purposes of paragraph 

(14). 

In the calendar year (CY) 2018 OPPS/ 

ASC final rule with comment period (82 

FR 59353 through 59371), the Centers 

for Medicare & Medicaid Services (CMS) 

reexamined the appropriateness of 

paying the ASP plus 6 percent for drugs 

acquired through the 340B Drug Pricing 

Program (hereinafter referred to as the 

‘‘340B Program’’), a Health Resources 

and Services Administration (HRSA)- 

administered program that allows 

covered entities to purchase certain 

covered outpatient drugs at discounted 

prices from drug manufacturers. Based 

on findings of the Government 

Accountability Office (GAO),1 the HHS 

Office of the Inspector General (OIG),2

and the Medicare Payment Advisory 

Commission (MedPAC) 3 that 340B 

hospitals were acquiring drugs at a 

significant discount under the 340B 

Program, CMS adopted a policy 

beginning in 2018 generally to pay an 

adjusted amount of ASP minus 22.5 

percent for certain separately payable 

drugs or biologicals acquired through 

the 340B Program. This adjustment 

amount was based on our concurrence 

with an analysis by MedPAC that 

concluded that the estimated average 

minimum discount of 22.5 percent of 

ASP adequately represented the average 

minimum discount that a 340B 

participating hospital received for 

separately payable drugs under the 

OPPS (82 FR 59354 through 59371). Our 

intent in implementing this payment 

reduction was to reflect more accurately 

the actual costs incurred by 

participating hospitals in acquiring 

340B drugs. We stated our belief that 

such changes would allow Medicare 

beneficiaries and the Medicare program 

to pay a more appropriate amount when 

hospitals participating in the 340B 

Program furnished drugs to Medicare 

beneficiaries that were purchased under 

the 340B Program (82 FR 59353 through 

59371). 

2. OPPS Payment for 340B Drugs in CY 

2018 Through September 27th of 2022 

From January 1, 2018, through 

September 27, 2022, under the OPPS we 

generally paid for certain separately 

payable drugs acquired through the 

340B Program at ASP minus 22.5 

percent. In the CY 2018 OPPS/ASC final 

rule with comment period (82 FR 59369 

through 59370), we finalized our 

proposal and adjusted the payment rate 

for separately payable drugs (other than 

drugs with pass-through payment status 

and vaccines) acquired under the 340B 

Program from ASP plus 6 percent to 

ASP minus 22.5 percent. We also noted 

that critical access hospitals are not paid 

under the OPPS, and therefore were not 

subject to the OPPS 340B drug payment 

adjustment policy (hereinafter referred 

to as the ‘‘340B Payment Policy’’). We 

also exempted rural sole community 

hospitals, children’s hospitals, and PPSexempt cancer hospitals from the 340B 

payment adjustment primarily due to 

these hospitals receiving special 

payment adjustments under the OPPS. 

In addition, as stated in the CY 2018 

OPPS/ASC final rule with comment 

period, this policy change did not apply 

to drugs with pass-through payment 

status, which are required to be paid 

based on the ASP methodology, or 

vaccines, which are excluded from the 

340B Program. 

Additionally, as discussed in the CY 

2018 OPPS/ASC final rule with 

comment period (82 FR 59369 through 

59370), to effectuate the payment 

adjustment for 340B-acquired drugs, we 

implemented modifiers ‘‘JG’’ and ‘‘TB’’ 

effective January 1, 2018. Hospitals paid 

under the OPPS, other than types of 

hospitals excluded from the OPPS (such 

as critical access hospitals) or exempted 

from the 340B Payment Policy for CY 

2018, were required to report modifier 

‘‘JG’’ on the same claim line as the drug 

Healthcare Common Procedure Coding 

System (HCPCS) code to identify a 

340B-acquired drug. For CY 2018, rural 

sole community hospitals, children’s 

hospitals, and PPS-exempt cancer 

hospitals were exempted from the 340B 

payment adjustment. These hospitals 

were required to report informational 

modifier ‘‘TB’’ for 340B-acquired drugs, 

and continued to be paid the full 

applicable amount, generally ASP plus 

6 percent. 

In the CY 2019 OPPS/ASC final rule 

with comment period (83 FR 58981), we 


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4The 69.46 percent of AWP was calculated by 

first reducing the original 95 percent of AWP price 

by 6 percent to generate a value that is similar to 

ASP or WAC with no percentage markup. Then we 

applied the 22.5 percent reduction to ASP/WACsimilar AWP value to obtain the 69.46 percent of 

AWP, which was similar to either ASP minus 22.5 

percent or WAC minus 22.5 percent. 

5https://ecf.cadc.uscourts.gov/n/beam/servlet/

TransportRoom. 

6https://ecf.dcd.uscourts.gov/doc1/04519382229; 

https://ecf.dcd.uscourts.gov/doc1/04509382365. 

7https://ecf.dcd.uscourts.gov/cgi-bin/show_

public_doc?2018cv2084-79. 

8https://ecf.dcd.uscourts.gov/cgi-bin/show_

public_doc?2018cv2084-86. 

9https://ecf.dcd.uscourts.gov/cgi-bin/

DktRpt.pl?145369228216471-L_1_0-1. 

continued the Medicare 340B payment 

policies that were implemented in CY 

2018 and adopted a policy to pay for 

non-pass-through 340B-acquired 

biosimilars at ASP minus 22.5 percent 

of the biosimilar’s ASP, rather than the 

reference biological product’s ASP. 

Additionally, in the CY 2019 OPPS/ASC 

final rule with comment period (83 FR 

59015 through 59022), we finalized a 

policy to pay ASP minus 22.5 percent 

for 340B-acquired drugs furnished in 

non-exempted off-campus providerbased departments (PBDs) paid under 

the Physician Fee Schedule (PFS). We 

adopted this payment policy for CY 

2019 and subsequent years. Also, during 

the CY 2019 OPPS/ASC rulemaking 

cycle, we clarified that the 340B 

payment adjustment applied to drugs 

priced using either wholesale 

acquisition cost (WAC) or average 

wholesale price (AWP), and since the 

policy was first adopted, we applied the 

340B payment adjustment to 340Bacquired drugs priced using these 

pricing methodologies. The 340B 

payment adjustment for WAC-priced 

drugs was WAC minus 22.5 percent. 

340B-acquired drugs that were priced 

using AWP were paid an adjusted 

amount of 69.46 percent of AWP (83 FR 

37125).4

For more detailed descriptions of our 

OPPS payment policy for drugs 

acquired under the 340B Program 

during this timeframe, we refer readers 

to the CY 2018 OPPS/ASC final rule 

with comment period (82 FR 59353 

through 59371); the CY 2019 OPPS/ASC 

final rule with comment period (83 FR 

59015 through 59022); the CY 2020 

OPPS/ASC final rule with comment 

period (84 FR 61321 through 61327); the 

CY 2021 OPPS/ASC final rule with 

comment period (85 FR 86042 through 

86055); the CY 2022 OPPS/ASC final 

rule with comment period (86 FR 63640 

through 63649); and the CY 2023 OPPS/ 

ASC final rule with comment period (87 

FR 71972 through 71973). 

3. Payment for Non-Drug Items and 

Services in CY 2018 Through CY 2022 

In the CY 2018 OPPS/ASC final rule 

with comment period (82 FR 59216, 

59258), to comply with the statutory 

budget neutrality requirements under 

sections 1833(t)(9)(B) and (t)(14)(H) of 

the Act (42 U.S.C. 1395l(t)(9)(B) and 

(t)(14)(H)), we finalized our proposal to 

redistribute our estimated reduction in 

payments for separately payable drugs 

as a result of the 340B Payment Policy 

by increasing the conversion factor used 

to determine the payment amounts for 

non-drug items and services. As further 

described in the CY 2018 OPPS/ASC 

final rule with comment period, we 

used updated CY 2016 claims data and 

a list of 340B-eligible providers to 

calculate an estimated impact of $1.6 

billion based on the final CY 2018 

policy to pay for OPPS 340B-acquired 

drugs at a payment rate of generally ASP 

minus 22.5 percent. In order to 

effectuate the budget neutrality 

provisions of the OPPS, the estimated 

$1.6 billion in reduced drug payments 

from adoption of the final 340B 

payment methodology was redistributed 

in an equal offsetting amount to all 

hospitals paid under the OPPS by 

increasing the payment rates by 3.19 

percent for nondrug items and services 

furnished by all hospitals paid under 

the OPPS for CY 2018. This same 

conversion factor adjustment applied for 

CYs 2019 through 2022, increasing 

payments for non-drug items and 

services in these CYs as a result of the 

340B Payment Policy. 

For ease of reference, we refer to the 

adjustments we made to payment rates 

for 340B-acquired drugs and the 

corresponding rate adjustment for nondrug services and items as the 340B 

Payment Policy. 

B. Litigation History of the 340B 

Payment Policy 

The 340B Payment Policy has been 

the subject of extensive litigation. See 

the 340B Remedy proposed rule for a 

more comprehensive summary of the 

litigation history (88 FR 44079 through 

44080). 

On June 15, 2022, the Supreme Court 

held that because CMS had not 

conducted a survey of hospitals’ 

acquisition costs, it could not vary the 

payment rates for outpatient 

prescription drugs by hospital group. 

See Am. Hosp. Ass’n v. Becerra, 142 S. 

Ct. 1896, 1906 (2022). 

The Supreme Court declined to opine 

on the appropriate remedy, id. at 1903, 

and remanded the case to the U.S. Court 

of Appeals for the D.C. Circuit, id. at 

1906, which in turn remanded it to the 

U.S. District Court for the District of 

Columbia, see Am. Hosp. Ass’n v. 

Becerra, No. 19–5048, 2022 WL 

3061709, at *1 (D.C. Cir. Aug. 3, 2022).5

On remand to the district court, the 

plaintiffs filed motions seeking orders 

(1) vacating the portion of the CY 2022 

final OPPS rule that set the 

reimbursement rate for 340B drugs at 

ASP minus 22.5 percent, which was still 

in effect for the remainder of 2022, and 

(2) requiring CMS to remedy the 

reduced payment amounts to 340B 

hospitals under the final OPPS rules for 

CY 2018 through CY 2022 by 

reimbursing them the difference 

between what they were paid and ASP 

plus 6 percent. See Am. Hosp. Ass’n v. 

Becerra, 1:18–cv–02084–RC, Dkts.67, 69 

(D.D.C. Aug. 3, 2022).6 On September 

28, 2022, the district court ruled on the 

first motion, vacating the 

reimbursement rate for 340B-acquired 

drugs for the remainder of 2022. See 

Am. Hosp. Ass’n v. Becerra, 1:18–cv– 

2084–RC, 2022 WL 4534617, at *5.7

On January 10, 2023, the district court 

ruled on the second motion, issuing a 

remand without vacatur to give the 

agency the opportunity to determine the 

proper remedy for the reduced payment 

amounts to 340B hospitals under the 

payment rates in the final OPPS rules 

for CY 2018 through CY 2022. See Am. 

Hospital Ass’n v. Becerra, 1:18–cv– 

2084–RC, 2023 WL 143337, at *6.8 Both 

courts and the Departmental Appeals 

Board have stayed pending challenges 

to payments made under the 340B 

Payment Policy. See, for example, 

Vanderbilt Univ. Med. Ctr. v. Azar, 

1:20–cv–01582 (D.D.C. May 23, 2023).9

C. Payment for 340B-Acquired Drug 

Claims for September 28, 2022, Through 

December 31, 2022, and for CY 2023 

The agency complied with the District 

Court’s September 28, 2022, decision by 

uploading revised OPPS drug files to 

pay the default rate (generally ASP plus 

6 percent) for all CY 2022 claims for 

340B-acquired drugs paid from 

September 28, 2022, through the end of 

CY 2022. 

In the CY 2023 OPPS/ASC final rule 

with comment period (87 FR 71970), we 

finalized a policy reversing the 340B 

Payment Policy. To do so, we first 

provided that drugs acquired through 

the 340B Program would be paid at the 

default rate (generally ASP plus 6 

percent) for CY 2023. Second, to ensure 

budget neutrality for CY 2023 OPPS 

payment rates as required by statute, we 

finalized a reduction of 3.09 percent to 

the 2023 OPPS conversion factor. This 

3.09 percent reduction for CY 2023 

offsets the prior increase of 3.19 percent 


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10Throughout the duration of the policy, the 

340B payment adjustment did not apply to critical 

access hospitals, rural sole community hospitals, 

children’s hospitals, and PPS exempt cancer 

hospitals. 

11Subparagraph (A) reads: Periodic review.—The 

Secretary shall review not less often than annually 

and revise the groups, the relative payment weights, 

and the wage and other adjustments described in 

paragraph (2) to take into account changes in 

medical practice, changes in technology, the 

addition of new services, new cost data, and other 

relevant information and factors. 

that was applied to the conversion 

factor by the 340B Payment Policy in CY 

2018. This is because a downward 

adjustment involves a smaller 

percentage reduction from a larger 

number to get the same dollar amount 

as the original upward adjustment from 

a smaller number. More specifically, in 

order to achieve the original budget 

neutrality adjustment for CY 2018, we 

had to multiply the conversion factor by 

1.0319. In order to offset this prior 

increase for the CY 2023 rule, we had 

to make a downward adjustment to the 

conversion factor, which involved 

dividing 1 by 1.0319, which equals 

0.9691. And 1 minus 0.9691 equals 

0.0309, which is where we derived the 

3.09 percent reduction to the conversion 

factor for CY 2023. As we explained in 

the CY 2023 OPPS/ASC final rule, we 

decreased the OPPS conversion factor to 

offset the increase in the OPPS 

conversion factor in CY 2018, which 

originally implemented the 340B policy 

in a budget neutral manner. We stated: 

‘‘This adjustment to the conversion 

factor is appropriate in these 

circumstances, including because it 

removes the effect of the 340B policy as 

originally adopted in CY 2018, which 

was recently invalidated by the 

Supreme Court as explained above, from 

the CY 2023 conversion factor and 

ensures it is equivalent to the 

conversion factor that would be in place 

if the 340B Payment Policy had never 

been implemented’’ (87 FR 71975). 

Additionally, we explained that we 

agreed with commenters, including the 

American Hospital Association, that 

under these specific circumstances it 

was appropriate to decrease payments 

for non-drug items and services by a 

percentage that would offset the 

percentage by which they were 

increased by the 340B Payment Policy 

in CY 2018 (87 FR 71975). 

For more detail on the payment rate 

for drugs acquired under the 340B 

Program for CY 2023 and the 

corresponding adjustment to the 

conversion factor to maintain budget 

neutrality as a result of reversing the 

340B adjustment and paying for all 

separately payable drugs at ASP plus 6 

percent (or WAC plus 3 or 6 percent or 

95 percent of AWP), we refer readers to 

the CY 2023 OPPS/ASC final rule with 

comment period (87 FR 71973 through 

71976). 

II. Summary of and Responses to Public 

Comments on Remedy Payment 

Adjustment for 340B-Acquired Drugs 

From CY 2018 Through September 27th 

of CY 2022 

A. Remedy Options Considered By CMS 

In the proposed rule (88 FR 44080), 

we evaluated several options to 

determine which remedy would best 

achieve the objective of unwinding the 

unlawful 340B Payment Policy while 

making certain OPPS providers 

(hereinafter referred to as ‘‘affected 340B 

covered entity hospitals’’ 10) as close to 

whole as is administratively feasible. 

We describe the different proposed 

remedy options and aspects of those 

alternative options that we considered 

in the proposed rule below. 

1. Make Additional Payments to 

Affected 340B Covered Entity Hospitals 

for 340B-Acquired Drugs From CY 2018 

Through September 27th of CY 2022 

Without an Adjustment To Maintain 

Budget Neutrality 

In the proposed rule (88 FR 44080), 

we considered calculating the 

additional amount each affected 340B 

covered entity hospital would have been 

paid for 340B-acquired drugs from CY 

2018 through September 27th of CY 

2022 if not for the 340B Payment Policy, 

and then considered paying that amount 

to each hospital without applying a 

corresponding adjustment to the 

conversion factor for the increased 

payments for non-drug items and 

services that were made from CY 2018 

through CY 2022 due to the 340B 

Payment Policy. As we described, we 

believe that we would have the 

authority to make remedy payments 

under sections 1833(t)(2)(E) and 

1833(t)(14) of the Act (42 U.S.C. 

1395l(t)(2)(E) and (t)(14)), along with 

our retroactive rulemaking authority in 

section 1871(e)(1)(A) of the Act (42 

U.S.C. 1395hh(e)(1)(A)). We noted that 

sections 1833(t)(2)(E) and (t)(14) of the 

Act (42 U.S.C. 1395l(t)(2)(E) and (t)(14)) 

require budget neutrality with respect to 

payment adjustments to the OPPS made 

under those sections and there are no 

exceptions with respect to remedy 

payments. Consequently, we stated that 

we believe the best reading of both of 

those provisions is that these remedy 

payments are subject to budget 

neutrality requirements, at least when 

the budget neutrality adjustment would 

not be de minimis. That was consistent 

with the statute’s general approach of 

budget neutralizing OPPS payment 

adjustments. See, for example, section 

1833(t)(9)(B) of the Act (42 U.S.C. 

1395l(t)(9)(B)). 

We explained that section 

1833(t)(2)(E) of the Act (42 U.S.C. 

1395l(t)(2)(E)) straightforwardly requires 

adjustments made under that provision 

to be made ‘‘in a budget neutral 

manner.’’ (Accord 65 FR 18438 (noting 

(t)(2)(E)’s budget neutrality 

requirement).) And section 

1833(t)(14)(H) of the Act (42 U.S.C. 

1395l(t)(14)(H)), relating to drug APC 

payment rates, states that ‘‘Additional 

expenditures resulting from this 

paragraph shall not be taken into 

account in establishing the conversion, 

weighting, and other adjustment factors 

for 2004 and 2005 under paragraph (9), 

but shall be taken into account for 

subsequent years.’’ (Emphasis added.) In 

addition, section 1833(t)(9)(B) of the Act 

(42 U.S.C. 1395l(t)(9)(B)), referenced in 

section 1833(t)(14)(H) of the Act (42 

U.S.C. 1395l(t)(14)(H)), states in relevant 

part [i]f the Secretary makes 

adjustments under subparagraph (A),11

then the adjustments for a year may not 

cause the estimated amount of 

expenditures under this part for the year 

to increase or decrease from the 

estimated amount of expenditures under 

this part that would have been made if 

the adjustments had not been made. 

We explained that these statutes 

require us to account for budget 

neutrality in these remedy payments. To 

the extent these remedy payments are 

understood as a payment adjustment 

under section 1833(t)(2)(E) of the Act 

(42 U.S.C. 1395l(t)(2)(E)), they are 

subject to that section’s budget 

neutrality constraints. And to the extent 

these payments are understood as a 

payment under section 1833(t)(14) of 

the Act (42 U.S.C. 1395l(t)(14)), we 

explained that they are ‘‘[a]dditional 

expenditures resulting from’’ paragraph 

(t)(14) of the Act for years other than 

2004 or 2005 and thus are subject to 

budget neutrality constraints under 

section 1833(t)(14)(H) of the Act (42 

U.S.C. 1395l(t)(14)(H)). 

We noted that this reading of these 

provisions is consistent with the 

statute’s general approach of budget 

neutralizing OPPS payment 

adjustments, see, for example, section 

1833(t)(9)(B) of the Act (42 U.S.C. 

1395l(t)(9)(B)), except when expressly 


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12https://www.govinfo.gov/content/pkg/CRPT106hrpt436/pdf/CRPT-106hrpt436-pt1.pdf. 

13https://www.cms.gov/oact/tr/2023. 

14 In the CY 2007 OPPS/ASC final rule with 

comment period, using our authority under section 

1833(t)(2)(E) of the Act (42 U.S.C. 1395l(t)(2)(E), we 

implemented a quality improvement program 

which required hospitals eligible to participate in 

the Inpatient Prospective Payment Systems (IPPS) 

Reporting Hospital Quality Data for the Annual 

Payment Update (RHQDAPU) to meet the 

requirements for receiving the full FY 2007 IPPS 

payment in order to qualify for the CY 2007 OPPS 

update. Hospitals failing to meet the requirements 

would receive a reduced OPPS conversion factor 

update in CY 2007, the amount of which would 

then, if not deemed ‘‘negligible,’’ be offset by a 

corresponding increase to the OPPS conversion 

factor to maintain budget neutrality. See 71 FR 

68193 through 68194. 

exempted, see sections 1833(t)(7)(I), 

(t)(14)(H), (t)(16)(D)(iii), (t)(18)(C), 

(t)(19)(A), (t)(20) of the Act (42 U.S.C. 

1395l(t)(7)(I) (t)(14)(H), (t)(16)(D)(iii), 

(t)(18)(C), (t)(19)(A), (t)(20)). Budget 

neutrality in OPPS serves the important 

interest of limiting expenditures under 

Part B and thus protecting the public 

fisc. Cf. H.R. Rep. No. 106–436, at 33– 

34 (1999) (noting the goal of prospective 

payment systems, including the OPPS, 

is to slow growth rate of Medicare 

expenditures).12 The Supplementary 

Medicare Insurance Trust Fund 

(hereinafter referred to as the Part B 

Trust Fund) that makes OPPS payments 

is mostly financed by premiums from 

participants and contributions from the 

general fund of the Treasury. We 

pointed to the Trustees’ of the Part B 

Trust Fund warning that unexpected 

increases in Medicare Part B or D 

expenditures may require increases to 

beneficiary premiums and coinsurance, 

which already represent a growing share 

of beneficiaries’ total income and are 

projected to reflect about three-quarters 

of the average Social Security retiredworker benefit by the end of this 

century. See The 2023 Annual Report of 

the Boards of Trustees of the Federal 

Hospital Insurance and Federal 

Supplementary Medicare Insurance 

Trust Funds at 40–41.13 Additionally, 

unexpected increases in Medicare Part B 

or D expenditures could require tax 

increases or expenditure reductions 

elsewhere in the Federal budget; the 

Trustees already project expenditures to 

consume more than 30 percent of 

Federal income tax revenue in just 50 

years. Id. at 43. 

Accordingly, we summarized that 

when changes to payment policy are 

made, we generally make an adjustment 

to the OPPS conversion factor in order 

to maintain budget neutrality. (See 70 

FR 68542 (noting outpatient drugs are 

included in the budget neutrality 

calculation beginning in 2006).) We do 

not believe the Congress intended the 

statute to permit regulated entities to 

achieve policy outcomes through 

litigation that would be statutorily 

unavailable to them through the regular 

rulemaking process, especially policy 

outcomes that increase total Medicare 

expenditures. 

We acknowledged that, in the past, 

not all OPPS payment policy changes 

based on sections 1833(t)(14) and 

(t)(2)(E) of the Act (42 U.S.C. 

1395l(t)(14) and (t)(2)(E)) have resulted 

in adjustments to the budget neutrality 

factor or actual expenditures from the 

Part B Trust Fund equaling zero in all 

circumstances. We stated that the 

method CMS uses to account for 

changes to the ‘‘estimated number of 

expenditures’’ referenced in section 

1833(t)(9)(B) of the Act (42 U.S.C. 

1395l(t)(9)(B)) and incorporated by 

section 1833(t)(14)(H) of the Act (42 

U.S.C. 1395l(t)(14)(H)) is the OPPS 

conversion factor (for example, 71 FR 

68193 through 68194). We explained 

that in situations that have not had any 

estimated impact on the OPPS 

conversion factor or that would 

otherwise have a de minimis impact, 

such as a 0.0001 change to the 

conversion factor, which would have an 

inconsequential effect on Medicare 

payments, CMS has effectively rounded 

the estimated impact on expenditures to 

zero.14 Thus, in circumstances when 

there would be a de minimis impact on 

estimated OPPS payment to meet the 

budget neutrality requirements as a 

result of a post-annual-rulemaking 

policy change, we have not changed 

OPPS payments to reflect the minimal 

impact of the policy change. When 

considering whether the estimated 

amount of expenditures is de minimis, 

we have taken into account relevant 

context, such as the size of the change 

comparable to the OPPS payments 

overall, the relative number of 

interested parties and any reliance 

interests, as well as the anticipated 

impact on the Part B Trust Fund of the 

change in payment due to the postannual rulemaking policy versus the 

anticipated administrative burden and 

cost of ratesetting disruption. 

We then applied these principles to 

the remedy payments for the 340B 

Payment Policy, concluding that a 

budget neutrality adjustment is 

statutorily required and, even if not 

statutorily required, warranted as a 

matter of sound public policy. The 

estimated impact of our one-time lump 

sum remedy payments is significant and 

reflects a substantial fraction of total 

OPPS spending for any one calendar 

year, one that goes well beyond any 

impact of which we have previously 

rounded to zero. The specifics of the 

lump sum are discussed in greater detail 

in the following section, II.B.1 of this 

final rule. Additionally, we noted that 

reliance interests or administrative 

burdens would not outweigh the impact 

of the remedy payments on the Part B 

Trust Fund sufficiently to justify 

disregarding the principle of budget 

neutrality, even if that were statutorily 

possible. We further explained that the 

potential reliance interests implicated 

by the need to recover unwarranted 

payments made over many years, 

combined with the unique difficulties in 

calculating and collecting these 

payments through retroactive 

rulemaking, should properly affect the 

way the budget neutrality principle 

applies to these unique circumstances. 

We noted that we budget neutralized 

the 340B Payment Policy from CY 2018 

to CY 2022 by increasing the rate for 

non-drug items and services by 3.19 

percent. See also section I.A.3 of this 

final rule. That resulted in $7.8 billion 

in additional spending on non-drug 

items and services during that time 

period. We acknowledged that some 

OPPS providers were still filing, or refiling, claims for CY 2022; therefore, our 

estimate of the total amount of 

additional spending on non-drug items 

and services during that time period 

could change as more claims from CY 

2022 are processed, or reprocessed. As 

of this final rule, that number still 

rounds to $7.8 billion, but is more 

precisely $7,768,568,239. To assist 

readers, we will refer to this number as 

$7.8 billion throughout this document. 

We cited our consistent statements in 

both litigation and OPPS rules in the 

Federal Register that any remedy 

payments could be subject to budget 

neutrality constraints. See, for example, 

Am. Hosp. Ass’n, 142 S. Ct. at 1903 

(acknowledging HHS’s position that ‘‘a 

judicial ruling invalidating the 2018 and 

2019 reimbursement rates for certain 

hospitals would require offsets 

elsewhere in the program’’); 84 FR 

61323 (‘‘Recognizing Medicare’s 

complexity in formulating an 

appropriate remedy, any changes to the 

OPPS must be budget neutral, and 

reversal of the policy change, which 

raised rates for non-drug items and 

services by an estimated $1.6 billion for 

2018 alone, could have a significant 

economic impact on the approximate[ly] 

3,900 facilities that are paid for 

outpatient items and services covered 

under the OPPS.’’). Additionally, 

because the 340B Payment Policy this 

rule proposed to remedy was itself 

budget neutralized, failing to budget 

neutralize the remedy payments would 


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mean that the additional payments for 

non-drug items and services that were 

made from CY 2018 through CY 2022 to 

achieve budget neutrality for the 340B 

Payment Policy as described under 

section I.A.3 of this final rule would be 

a windfall, especially to non-340B 

hospitals that were not subject to 

decreased drug payments from CY 2018 

through CY 2022. The Trust Fund has 

a strong interest in recovering that 

windfall, and those who received it 

have no legitimate reliance interest in 

permanently retaining that windfall. 

We also considered the administrative 

burden specific to maintaining budget 

neutrality noting CMS was already 

obliged on remand to remedy the 340B 

policy. We concluded that the decision 

to include a budget neutrality 

component in this remedy does not 

appreciably change this burden, though 

of course the burden could be greater or 

lesser depending on how the remedy is 

crafted. As set forth more fully below, 

our proposed budget neutrality 

adjustment does not directly recoup 

money already paid to providers; rather, 

it is a proposed adjustment to future 

payment rates, allowing hospitals to 

take such rates into account rather than 

forcing them to open their bank 

accounts and disgorge their windfall 

immediately. On balance, the billions of 

dollars the proposed payments to 

affected 340B covered entity hospitals 

would cost the Part B Trust Fund 

outweigh the potential administrative 

expenses or disruption resulting from a 

broad change in OPPS payment to offset 

these additional costs. 

Finally, even if this remedy rule were 

exempt from budget neutrality 

requirements as a matter of statutory 

interpretation, we noted that we would 

still exercise our authority under section 

1833(t)(2)(E) of the Act (42 U.S.C. 

1395l(t)(2)(E)) to offset the extra 

payments we made for non-drug items 

and services from 2018 through 2022. 

Those payments have proven to be an 

unwarranted windfall, and the Trust 

Fund has a strong interest in recovering 

them. We identified that avoiding a 

windfall to providers would also be 

consistent with the agency’s 

longstanding inherent and common-law 

(and common-sense) recoupment 

authority, through which ‘‘the Secretary 

generally has the duty and power to 

protect against overpayments to 

providers.’’ Chaves Cnty. Home Health 

Serv., Inc. v. Sullivan, 931 F.2d 914, 918 

(D.C. Cir. 1991); see also, for example, 

United States v. Lahey Clinic Hosp., 

Inc., 399 F.3d 1, 16 (1st Cir. 2005) 

(‘‘Although provisions of the Medicare 

Act expressly authorize the Secretary to 

reopen initial payment determinations 

and to recoup overpayments 

administratively in certain 

circumstances, the statute does not 

displace the United States’ long 

standing power to collect monies 

wrongfully paid through an action 

independent of the administrative 

scheme, nor is there any inconsistency.’’ 

(internal citations omitted)); Mount 

Sinai Hosp. of Greater Miami, Inc. v. 

Weinberger, 517 F.2d 329, 345 (5th Cir.), 

modified, 522 F.2d 179 (5th Cir. 1975) 

(similar). For that reason and those 

discussed above, unwinding those 

payments is necessary to ensure 

equitable payments under these 

circumstances. 

Therefore, we concluded that it is 

required by the statute—but even if not 

required, that it would be consistent 

with the statute—and consistent with 

our past practices, and appropriate, to 

offset the additional payments for nondrug items and services that were made 

from CY 2018 through CY 2022 in order 

to maintain budget neutrality or 

equitable payments when remedying 

this policy. But the context of this rule, 

we clarified, remains unique: We are 

adjusting payments prospectively in 

order to provide a remedy for a previous 

unlawful payment decision. Precisely 

because that previous payment decision 

itself followed budget neutrality 

principles, it provided unwarranted 

payments to some at the same time it 

improperly took payments from others. 

In applying budget neutrality principles 

to this remedy, we seek to rectify this 

imbalance and restore matters as closely 

as possible to where they would have 

been absent the policy the Supreme 

Court determined to be unlawful. We 

solicited comments from the public on 

our proposed interpretation of our 

statutory budget neutrality obligations, 

equitable payment authorities, and 

recoupment authority. 

Comment: We received many 

comments on our proposed 

interpretation of our statutory budget 

neutrality obligations, equitable 

payment authorities, and recoupment 

authority. 

Response: These comments are 

addressed in section II.B.2.b of this final 

rule. 

2. Full Claims Reprocessing From CY 

2018 Through September 27th of CY 

2022 

In the proposed rule (88 FR 44082), 

we explained that perhaps the most 

perfect measure of achieving budget 

neutrality in circumstances like this 

would be to turn back the clock to the 

day the unlawful payment decision was 

first made, undo that decision, and start 

over. We identified that CMS would 

have to reprocess all OPPS claims for 

340B-acquired drugs and non-drug 

items and services from CY 2018 

through September 27th of CY 2022 

using the default payment rate under 

section (t)(14) of the Act (42 U.S.C. 

1395l(t)(14)) and our retroactive 

rulemaking authority in section 

1871(e)(1)(A) of the Act (42 U.S.C. 

1395hh(e)(1)(A)). This approach would 

have the benefit of putting providers, 

beneficiaries, and Medicare back in the 

same situation they would have been in 

if CMS had never adopted the ASP 

minus 22.5 percent rate for 340Bacquired drugs in 2018. But remedial 

rulemaking need not provide this type 

of precise make-whole relief. See 

Shands Jacksonville Med. Ctr., Inc. v. 

Azar, 959 F.3d 1113, 1118 (D.C. Cir. 

2020) (agreeing that the agency need not 

restore ‘‘each individual hospital . . . at 

least to the position it would have 

occupied had the rate reduction never 

taken effect’’). 

We acknowledged that reprocessing 

every single claim might be a potential 

approach to remedy this situation if it 

were administratively achievable. But 

we feared that reprocessing such an 

unprecedentedly large volume of claims 

and issuing payment to affected 340B 

covered entity hospitals in a timely 

fashion would impose an immense 

administrative burden on CMS, its 

contractors, and providers. We 

accordingly concluded that this 

approach is not feasible in this case. It 

would require the reprocessing of 

virtually all claims submitted to the 

OPPS system during the affected period 

of time, but that system processes more 

than 100 million claims each year. We 

remarked that reprocessing almost 5 

years’ worth of OPPS claims could take 

several years, resulting in some affected 

340B covered entity hospitals having to 

wait multiple years to receive payment, 

and leading to widespread beneficiary 

cost sharing uncertainty, as beneficiaries 

could be caught by surprise by a 

significant change in cost sharing 

responsibility from a claim they thought 

had been closed many years ago. The 

large quantity of claims and the amount 

of time required to reprocess them while 

continuing normal claims processing 

likewise would not result in timely 

payments or adjustments to hospitals. 

Additionally, we indicated that 

reprocessing these claims would lead to 

the need for significant recoupments of 

payments for non-drug items and 

services that would have already been 

paid at the higher rate based on the 

budget neutrality adjustment applied as 

a result of the original 340B Payment 

Policy. The D.C. Circuit has held that it 


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is not necessary ‘‘to recalculate each 

individual claim paid under the 

reduced rate’’ that was the subject of 

litigation when doing so would cause 

significant administrative burden and 

delayed payments. See Shands, 959 

F.3d at 1120. But we did allow that the 

expected results of such a calculation 

can certainly inform an alternative 

approach to budget neutrality, as we 

discuss below. 

We noted that the vast majority of 

340B drug claims from CY 2022 have 

been reprocessed at the higher 340B 

payment rate, generally ASP plus 6 

percent, which we believe was 

allowable under the District Court’s 

order prospectively vacating the CY 

2022 340B payment rate and the typical 

timely filing requirements described at 

42 CFR 424.44. We confirmed this was 

appropriate for CY 2022 claims given 

that providers were able to follow the 

regular claims processing conventions 

for these claims, and clarified that we 

will ensure CMS does not make 

duplicate payments for these claims 

already remedied by the usual claims 

processing methods. As part of this final 

rule, we estimate that for CY 2022, $1.6 

billion in remedy payments (including 

the Medicare and beneficiary portions) 

have already been made to providers 

through reprocessed claims, or claims 

that had dates of service of January 1, 

2022, through September 27, 2022, but 

were held until, or reprocessed after, the 

340B rule was vacated and the standard 

drug payment rates were in effect for 

340B-acquired drugs. We consider these 

reprocessed claims to be partially 

remedied as 340B providers no longer 

received the lower 340B drug payment 

rate for these 340B-acquired drugs. This 

$1.6 billion is one component of the 

total remedy payments accounted for in 

this final rule. We also note that these 

claims only had the 340B drug portion 

of the claim adjusted, and that for these 

claims to be fully remedied the nondrug item and service components of 

these claims would also need to be 

adjusted as discussed in subsequent 

sections. 

We thank commenters for their input 

on our policy proposals. We have 

summarized the comments received and 

our responses to those comments in the 

following section. 

Comment: Commenters generally 

agreed with CMS’s conclusion that 

reprocessing all claims is not 

administratively feasible. Commenters 

appreciated that CMS considered this 

option but did not formally propose it 

in the proposed rule. 

Response: We appreciate commenters’ 

concurrence with our conclusion. 

Comment: One commenter requested 

that CMS pay providers that elected to 

submit adjusted claims for dates of 

service between January 1, 2022, 

through September 27, 2022, the 

beneficiary copayment amount for those 

claims. The commenter points out that 

providers who elected not to submit 

adjusted claims for those dates of 

service will receive both the Medicare 

portion and the beneficiary copayment 

portion through the remedy payment. 

Failing to pay the beneficiary 

copayment amounts for providers that 

elected to submit adjusted claims, the 

commenter argues, results in different 

remedies for the beneficiary portion for 

providers that submitted adjustment 

claims and those that did not submit 

adjustment claims, which is an 

inequitable outcome. 

Response: We do not agree that CMS 

should pay providers that elected to 

submit adjusted CY 2022 claims 

additional payment for beneficiary cost 

sharing. We are paying amounts equal to 

lost beneficiary cost sharing amounts 

providers are not otherwise legally 

entitled to collect based on a finding 

that, under the unique circumstances of 

this rule, it is necessary to ensure 

equitable payments under section 

1833(t)(2)(E) of the Act (42 U.S.C. 

1395l(t)(2)(E)). (See infra at II.B.1.e.) 

Because CY 2022 adjustments followed 

regular claims processing conventions, 

providers are legally entitled to collect 

cost sharing from beneficiaries on those 

claims. If providers are unable to do so, 

such payments would be subject to our 

usual standards governing payments to 

which providers are legally entitled but 

unable to collect. See, for example, 42 

CFR 413.89. We thus do not believe the 

same rationale applies to reprocessed 

claims. 

Permitting providers to submit 

adjustment claims also allowed for 

prompt payment to providers and 

partially approximated how the claim 

would have been processed and paid 

absent the 340B Payment Policy. 

Indeed, many of these claims have 

already been finalized and the 

beneficiaries have paid their cost 

sharing obligation. Because providers 

can collect cost sharing for reprocessed 

CY 2022 claims from beneficiaries and 

potentially under our bad medical debt 

regulations, we do not believe it would 

be equitable under section 1833(t)(2)(E) 

of the Act (42 U.S.C. 1395l(t)(2)(E)) to 

make additional, potentially duplicative 

payments to reflect lost cost sharing. 

As described in the proposed rule, we 

considered these reprocessed claims to 

be partially remedied as 340B providers 

no longer received the lower 340B drug 

payment rate. These claims will be fully 

remedied when we address the nondrug item and service payment portion 

of these claims. 

Comment: CMS received several 

comments requesting a mass 

reprocessing of all CY 2022 claims and 

instructions to the Medicare 

Administrative Contractors (MACs) to 

make one mass adjustment for claims 

going back to January 1, 2022. 

Response: We do not have an existing 

procedure to make the mass adjustment 

commenters proposed for CY 2022 

claims without reprocessing each 

individual claim, and we believe that 

our proposed lump sum payment 

achieves a very similar result. While 

reprocessing just the remaining CY 2022 

claims would be less burdensome than 

reprocessing all claims back to 2018, it 

would still impose a large 

administrative burden on CMS, our 

contractors, and providers. 

Approximately two hundred million 

dollars worth of payments would have 

to be reprocessed, and, importantly, 

such an undertaking could cause an 

additional delay in making payments 

relative to the proposed lump sum 

payment methodology. Otherwise, the 

main practical difference between 

reprocessing the remaining CY 2022 

claims or including them in the lump 

sum payment is whether providers can 

seek cost sharing payments from 

beneficiaries, as discussed above. But 

because we have increased the lump 

sum payment under section 

1833(t)(2)(E) of the Act (42 U.S.C. 

1395l(t)(2)(E)) to cover lost beneficiary 

cost sharing, we do not view that as a 

material difference between the options. 

Because including remaining CY 2022 

claims in the one-time lump sum 

payment will provide nearly equivalent 

remedy funds to affected 340B covered 

entity hospitals, and will do so more 

quickly and efficiently than a mass 

reprocessing of all CY 2022 claims, we 

decline to treat remaining CY 2022 

claims differently from other claims 

years. 

3. Aggregate Hospital Payments From 

CY 2018 Through September 27th of CY 

2022 

In the proposed rule (88 FR 44083), 

we considered calculating one-time 

aggregate payment adjustments for each 

provider for the CY 2018 through 

September 27th of CY 2022 time-period, 

including both additional payments for 

340B-acquired drugs and reduced 

payments for non-drug items and 

services under sections 1833(t)(2)(E) and 

1833(t)(14) of the Act (42 U.S.C. 

1395l(t)(2)(E) and (t)(14)), along with 

our retroactive rulemaking authority in 

section 1871(e)(1)(A) of the Act (42 


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U.S.C. 1395hh(e)(1)(A)), to the extent 

the policy would be retroactive. This 

option would have involved: (1) 

calculating the total additional 

payments for each hospital that would 

have been paid for separately payable 

non-pass-through 340B-acquired drugs 

from CY 2018 through September 27th 

of 2022 in the absence of the 340B 

Payment Policy; (2) calculating the 

additional amount each hospital was 

paid under the OPPS from CY 2018 

through CY 2022 for non-drug items and 

services as a result of the 340B policy; 

(3) subtracting (2) from (1); and (4) 

issuing a payment to, or requiring a 

recoupment from, each hospital for the 

5-year period in which the 340B 

Payment Policy was in effect. This is 

similar to the approach we ultimately 

adopt in this rule, except that it would 

have effectively implemented budget 

neutrality requirements through an 

immediate lump sum recoupment that 

would mirror the lump sum remedy 

payment. 

While this approach would also have 

satisfied the statutory budget neutrality 

concerns discussed above, we did not 

read the statute to mandate such an 

inflexible approach in these 

circumstances. Cf. Shands Jacksonville 

Med. Ctr., Inc., 959 F.3d at 1120. (For 

further discussion of this point, see 

section II.B.1.a of this final rule.) Such 

an approach would require immediate, 

and in many cases large, retroactive 

recoupments from the majority of OPPS 

hospitals and would impose a 

substantial, immediate burden on these 

hospitals as well as an uncertain impact 

on beneficiaries. After accounting for 

these burdens, the financial strain many 

hospitals experienced during the recent 

COVID–19 public health emergency 

(hereinafter referred to as the ‘‘PHE’’), 

and the amount of time that has 

transpired since the original payments 

for these drugs, items, and services were 

made, we decided not to propose this 

option as our suggested approach. 

Comment: Several commenters 

expressed general support for our 

decision not to propose a one-time 

aggregate payment adjustment for each 

provider. 

Response: We thank commenters for 

their support. 

B. Remedy 

1. Methodology for Calculating and 

Process for Remitting Remedy Payments 

to Affected 340B Covered Entity 

Hospitals for 340B-Acquired Drugs 

Furnished and Paid Adjusted Amounts 

Under the OPPS in CY 2018 Through 

September 27th of CY 2022 

a. Statutory Authority 

In the proposed rule (88 FR 44083), 

we stated that CMS believes that the 

best way to remedy our 340B Payment 

Policy for the period from CY 2018 

through September 27th of CY 2022, 

which the Supreme Court found 

unlawful, would be to make one-time 

lump sum payments to affected 340B 

covered entity hospitals calculated as 

the difference between what they were 

paid for 340B drugs (ASP minus 22.5 

percent or an adjusted WAC or AWP 

amount) during the relevant time period 

(from CY 2018 through September 27th 

of CY 2022) and what they would have 

been paid had the 340B Payment Policy 

not applied. We explained that this 

approach comes as close to providing 

340B-covered entities with make-whole 

relief as CMS can reasonably 

accomplish, without the burden that 

would be associated with manually 

reprocessing all claims. Assuming 

hospitals properly assigned the billing 

codes discussed below when submitting 

their CY 2018 through 2022 claims, as 

they were required to do, CMS noted 

that it expects the remedy payment to 

each 340B covered entity for 340Bacquired drugs to be approximately the 

same as if CMS manually reprocessed 

those claims. Calculating the 

approximate repayment amount based 

on claims data is relatively 

straightforward administratively as it 

involves only an aggregated analysis of 

the claims in question, whereas 

reprocessing all claims requires 

significantly more administrative effort 

as the claims actually have to be 

individually reprocessed through the 

claims processing system. This is 

practically infeasible for the reasons 

discussed earlier in this rule. Please see 

the previous section titled ‘‘Full Claims 

Reprocessing from CY 2018 through 

September 27th of CY 2022’’ for 

additional detail. 

We proposed to make the remedy 

payments relying principally on (1) our 

rate-setting authority under section 

1833(t)(14) of the Act (42 U.S.C. 

1395l(t)(14)); and (2) our equitable 

adjustment authority under section 

1833(t)(2)(E) of the Act (42 U.S.C. 

1395l(t)(2)(E)). To the extent this rule is 

retroactive (in whole or in part), we 

explained that we would rely on our 

retroactive rulemaking authority in 

section 1871(e)(1)(A) of the Act (42 

U.S.C. 1395hh(e)(1)(A)). 

First, we evaluated our authority 

under section 1833(t)(14) of the Act (42 

U.S.C. 1395l(t)(14)). We pointed to the 

Supreme Court’s holding that if CMS 

has not conducted a survey of hospitals’ 

acquisition costs, the agency may not 

vary the payment rates for outpatient 

prescription drugs by hospital group. 

We acknowledged that because we did 

not use any survey of hospitals’ 

acquisition costs when setting rates for 

340B-acquired drugs between CY 2018 

and September 27, 2022, it is necessary 

for the remedy to apply the default rate 

(generally ASP plus 6 percent) to 

comply with paragraph (14)(A)(iii) of 

section 1833(t) of the Act (42 U.S.C. 

1395l(t)(14)(A)(iii)) for those years, as 

interpreted by the Supreme Court. 

We then considered our authority to 

adjust the prior payment rate. We 

explained that section 1871(e)(1)(A) of 

the Act (42 U.S.C. 1395hh(e)(1)(A)) 

prohibits a substantive change in 

regulations to items and services 

furnished before the effective date of the 

substantive change unless ‘‘such 

retroactive application is necessary to 

comply with statutory requirements’’ or 

the ‘‘failure to apply the change 

retroactively would be contrary to the 

public interest.’’ We explained that, 

assuming this remedy is viewed as a 

retroactive remedy (in whole or in part), 

it would also be necessary to use this 

retroactive rulemaking authority to 

implement the remedy by revising 340B 

payment rates for this prior period to 

comply with the Supreme Court’s 

interpretation of the requirements of 

section 1833(t)(14) of the Act (42 U.S.C. 

1395l(t)(14)). 

But even if a retroactive rule were not 

necessary specifically to comply with 

section 1833(t)(14) of the Act (42 U.S.C. 

1395l(t)(14)), we found that failing to 

apply the default rate retroactively 

would be contrary to the public interest 

in this specific situation in part because 

it would leave the plaintiff 340B 

hospitals paid at a substantially lower 

rate, due to the magnitude of payment, 

than we now understand to be proper 

under the statute. We found that the 

equities weigh in favor of a partially 

retroactive remedy here, because a 

significant number of plaintiff hospitals 

have been advocating for this current 

policy in court since we first announced 

our 340B Payment Policy for CY 2018 

despite our view that there was no 

administrative or judicial review for 

such claims. The equities further align 

with a partially retroactive remedy, to 

the extent required, because the impact 

on the Part B Trust Fund will be 


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lessened as we are applying budget 

neutrality principles. We noted that the 

position of those plaintiff hospitals was 

ultimately vindicated by the Supreme 

Court. 

We proceeded to consider our 

authority under section 1833(t)(2)(E) of 

the Act (42 U.S.C. 1395l(t)(2)(E)), which 

requires the Secretary to, ‘‘establish, in 

a budget neutral manner, outlier 

adjustments . . . transitional passthrough payments . . . and other 

adjustments as determined to be 

necessary to ensure equitable payments, 

such as adjustments for certain classes 

of hospitals.’’ In this case, we proposed 

that the lump sum payment, calculated 

as the difference between what an 

affected 340B covered entity hospital 

received for 340B-acquired drugs during 

the time period at issue and what they 

would have received for 340B-acquired 

drugs if the 340B adjustment had not 

been in place, would be an equitable 

adjustment. We found that such an 

adjustment is necessary to ensure 

equitable payments to affected 340B 

covered entity hospitals by making them 

whole for the decreased payments for 

340B-acquired drugs they received from 

CY 2018 through September 27th of CY 

2022 that are no longer proper in light 

of the Supreme Court’s decision. To the 

extent necessary, we explained we 

would apply the adjustment 

retrospectively in accordance with the 

Court’s ruling and for the reasons 

discussed in the above paragraph. 

We therefore proposed to use our 

authority under section 1833(t)(14) of 

the Act (42 U.S.C. 1395l(t)(14)) in 

conjunction with our equitable 

adjustment authority under section 

1833(t)(2)(E) of the Act (42 U.S.C. 

1395l(t)(2)(E)), to accomplish an 

equitable outcome as we remedy past 

payments made under the 340B 

Payment Policy. To the extent 

necessary, we also proposed to use our 

retroactive rulemaking authority under 

section 1871(e)(1)(A) of the Act (42 

U.S.C. 1395hh(e)(1)(A)). 

We solicited comment from the public 

on our proposed use of these authorities 

in the remedy policies discussed in the 

proposed rule. We also solicited 

comment on other possible authorities 

(including inherent authority or 

common law authority) that might also 

be applicable to the remedy policies 

discussed in the proposed rule or on 

which we could rely to make remedy 

payments. 

We thank commenters for their input 

on our policy proposals. We have 

summarized the comments received and 

our responses to those comments in the 

following section. 

Comment: Nearly all commenters 

supported our proposal to pay via a onetime lump sum payment. 

Response: We appreciate commenters’ 

support. 

Comment: Several commenters 

encouraged CMS and MACs to agree on 

documentation and treatment of these 

funds on cost reports, cost report audits, 

and subsequent Medicare payment 

adjustments and reviews. 

Response: We agree that it is 

important to coordinate with MACs to 

ensure consistent documentation and 

treatment of the one-time lump sum 

payments. These payments will not be 

made on cost reports. To ensure timely 

payment for all impacted providers, 

CMS shall issue guidance to all MACs 

to allow consistent documentation and 

tracking of the 340B payments. 

Comment: Two commenters opposed 

our proposal to pay via a one-time lump 

sum payment due to concerns that a 

massive influx of funds to 340B 

hospitals would enable those hospitals 

to further dominate local markets by 

purchasing independent community 

clinics and other hospitals. One of these 

commenters requested that repayments 

be spread out over time, suggesting 5 

years for this time-period or, 

alternatively, 16 years to align it with 

the budget neutrality adjustment 

schedule discussed later in this rule. 

The other commenter suggested that 

CMS provide remedy funds for 2018 to 

2020 and use a 340B drug acquisition 

cost survey to determine the remedy 

payments for subsequent years. 

Response: We appreciate commenters’ 

concerns. As previously discussed, the 

aim of this rule is to situate all OPPS 

providers as closely as possible to the 

financial situation they would have 

been in if the 340B OPPS Payment 

Policy had never existed. Had we never 

implemented the 340B Payment Policy, 

hospitals would already have these 

payments. We thus believe the fairest 

policy is to pay hospitals as promptly as 

administratively feasible. We 

acknowledge that this means that until 

the budget neutrality adjustment is fully 

implemented, hospitals will temporarily 

have additional funds from our 

payments for non-drug services and 

items they would not otherwise have 

had. But commenters have not 

identified authority requiring us to 

withhold payments based on 

competition concerns once we have 

determined the amount due from 

Medicare. As such, we believe the 

payment timeline described in this rule 

is appropriate. 

We acknowledge that we previously 

suggested that we might use our survey 

of CY 2018 and 2019 cost data to inform 

the remedy as discussed in the CY 2020 

OPPS/ASC final rule with comment 

period (84 FR 61322). But as we 

subsequently noted, we received many 

comments on the survey data, and using 

that data, which surveyed only 340B 

hospitals, might not comport with the 

Supreme Court’s decision. Using it 

would introduce new complexities into 

the rate calculation, for instance, by 

requiring consideration of adjustments 

to the data and other factors as 

discussed in the CY 2021 OPPS/ASC 

final rule with comment period (85 FR 

86052). We do not believe it is worth 

delaying the remedy payments to allow 

for such considerations or for us to 

conduct a new survey many years after 

the fact. 

Comment: We received many 

comments on the statutory authority we 

proposed to rely upon to make lump 

sum payments. While nearly all 

commenters supported our proposal to 

implement this remedy via a one-time 

lump sum payment, industry 

commenters disagreed with our 

proposal to rely on sections 1833(t)(14) 

and (t)(2)(E) of the Act (42 U.S.C. 

1395l(t)(14) and (t)(2)(E)) to do so. Many 

of these commenters argued that these 

statutory provisions do not apply to the 

remedy payments. These commenters 

stated that CMS is attempting to rely on 

statutes designed for, and limited to, 

making prospective adjustments to 

spending estimates, or discretionary 

adjustments based on equity to make 

remedy payments required by the 

Supreme Court’s decision. 

With respect to section 1833(t)(14) of 

the Act (42 U.S.C. 1395l(t)(14)), these 

commenters maintained that the 

expenditures to which the statute 

applies do not contemplate courtordered remedy payments. Referencing 

the text of section 1833(t)(14) of the Act 

(42 U.S.C. 1395l(t)(14)), ‘‘[a]dditional 

expenditures resulting from this 

paragraph shall not be taken into 

account in establishing the conversion, 

weighting, and other adjustment factors 

for 2004 and 2005 under paragraph (9), 

but shall be taken into account for 

subsequent years,’’ these commenters 

argue that the proposed lump-sum 

payment is neither an ‘‘additional’’ 

expenditure nor an expenditure 

‘‘resulting from this paragraph.’’ In their 

view, there is nothing additional about 

the lump sum payment, it is what 340B 

hospitals should have been paid in the 

first place and the payment is not being 

made as a result of this paragraph but 

rather the agency’s loss of a court case. 

One commenter argued that the 

additional expenditures are those that 

could result from CMS electing to refine 

its payment methodology as permitted 


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77158 Federal Register / Vol. 88, No. 215 / Wednesday, November 8, 2023 / Rules and Regulations 

under section 1833(t)(14) of the Act (42 

U.S.C. 1395l(t)(14)). The commenter 

shared that this means performing a 

survey and changing the drug payment 

methodology or refining the overhead 

cost payment. In this case, they stated 

that the additional expenditures are 

neither of these and are instead ‘‘a loss 

at the Supreme Court, not a payment 

methodology refinement.’’ 

With respect to section 1833(t)(2)(E) 

of the Act (42 U.S.C. 1395l(t)(2)(E)), 

which provides the Secretary with the 

authority to establish, ‘‘in a budget 

neutral manner, outlier adjustments 

. . . and transitional pass-through 

payments . . . and other adjustments as 

determined to be necessary to ensure 

equitable payments,’’ commenters 

argued that this provision is not 

applicable to the remedy payments 

because, in their view, CMS is not 

exercising any payment discretion (but 

is required to make the payments) and 

the payments are not being made for 

equitable reasons (but to comply with a 

court judgment) and, like section 

1833(t)(14) of the Act (42 U.S.C. 

1395l(t)(14)), the provision is purely 

prospective in nature. Commenters 

suggested that in the introductory text of 

subsection section 1833(t)(2)(E) of the 

Act (42 U.S.C. 1395l(t)(2)(E)), ‘‘under 

the payment system’’ refers to the 

prospective payment system addressed 

in section (t) as a whole: ‘‘Prospective 

Payment System for Hospital Outpatient 

Department Services’’ and section 

1833(t)(2)(E) of the Act’s inclusion 

within that system prohibits its use for 

recoupments. One commenter argued 

that CMS construes ‘‘adjustment’’ too 

broadly and that its meaning under 

section 1833(t)(2)(E) of the Act (42 

U.S.C. 1395l(t)(2)(E)) refers to outliers 

and transitional pass-through payments, 

which the commenter characterizes as 

‘‘cornerstone features’’ of the outpatient 

prospective payment system. 

Many commenters argued that if 

section 1833(t)(2)(E) of the Act (42 

U.S.C. 1395l(t)(2)(E)) did apply to the 

proposed lump sum payments, that the 

amount of the payments is too large to 

qualify as an adjustment under the 

statute. In support of this position, these 

commenters referenced Biden v. 

Nebraska, 143 S. Ct. 2355, 2368 (2023), 

which interpreted the term ‘‘modify’’ in 

a different statute to mean ‘‘to change 

moderately and in minor fashion.’’ 

According to the commenters, the D.C. 

Circuit has interpreted HHS’s 

adjustment authority to have the same 

limits that the Supreme Court found in 

the word ‘‘modify’’ in other contexts, 

and the remedy payment here is too 

large to qualify. See Amgen, Inc v. 

Smith., 357 F.3d 103, 117 (D.C. Cir. 

2004). These commenters agreed that 

CMS may use section 1833(t)(2)(E) of 

the Act (42 U.S.C. 1395l(t)(2)(E)) to 

increase the remedy payments by $1.8 

billion (the amount of beneficiary cost 

sharing). 

Response: We continue to believe that 

we should rely on sections 1833(t)(14) 

and (t)(2)(E) of the Act (42 U.S.C. 

1395l(t)(14) and (t)(2)(E)) to make these 

remedy payments. No commenter 

identified any alternate statutory 

authority on which we could rely, and 

we disagree with commenters’ 

arguments that these provisions are 

inapplicable. While we agree that 

section 1833(t) creates a prospective 

payment system, see section 

1833(t)(1)(A) of the Act (42 U.S.C. 

1395l(t)(1)(A)), the Supreme Court 

declined to find this fact foreclosed all 

retrospective review. Cf. Am. Hosp. 

Ass’n v. Becerra, Br. for Respondents at 

21–22 (government brief arguing the 

statute foreclosed ‘‘’administrative or 

judicial review of the prospective 

payment system,’ ’’ and noting 

invalidation of an OPPS component 

‘‘ ‘could result in the retroactive 

ordering of payment adjustments’ ’’ 

(quoting H.R. Rep. No. 149, 105th Cong., 

1st Sess. 724 (1997) (House Report) and 

Amgen, Inc., 357 F.3d at 112)). Indeed, 

at least one court has rejected an 

argument that CMS lacks the authority 

to make retroactive adjustments when 

required to comply with other 

provisions in section 1833(t) of the Act 

(42 U.S.C. 1395l(t)). See H. Lee Moffitt 

Cancer Ctr. & Rsch. Inst. Hosp., Inc. v. 

Azar, 324 F. Supp. 3d 1, 16 (D.D.C. 

2018) (‘‘HHS has not shown that such a 

retroactive adjustment would be 

incompatible with the generally 

prospective nature of OPPS.’’). 

We disagree with commenters that 

stated that a court has ‘‘ordered’’ 

payments, or that court-ordered 

payments necessarily fall outside of 

section 1833(t)(14) of the Act (42 U.S.C. 

1395l(t)(14)). No court has yet weighed 

in on the appropriate remedy, much less 

ordered any particular payment. See, for 

example, Am. Hosp. Ass’n, 2023 WL 

143337, at *3 (rejecting argument that 

court should order agency to ‘‘repay[] 

those hospitals that were unlawfully 

underpaid, from 2018 to the present, the 

difference between what they were paid 

and ASP plus 6%’’). 

We also disagree that our remedy 

payment is not ‘‘equitable’’ within the 

meaning of section (t)(2)(E) of the Act 

(42 U.S.C. 1395l(t)(2)(E)) simply because 

it remedies legal error. Ensuring that 

providers are paid according to 

Congress’ policy judgments is a 

legitimate way to ensure fairness, in the 

most common meaning of the term 

‘‘equitable.’’ Indeed, to the extent the 

term ‘‘equitable’’ under section (t)(2)(E) 

of the Act (42 U.S.C. 1395l(t)(2)(E)) 

might be informed by courts’ historic 

equitable authority, the fact that we are 

seeking to restore parties to as close a 

state as they would have been without 

the now-invalidated 340B Payment 

Policy makes the rule analogous to 

historic equitable remedy of recession 

and restitution. See Restatement (Third) 

of Restitution and Unjust Enrichment 

section 54 (2011) (‘‘[T]he expression 

‘‘rescission and restitution’’ aptly 

describes cases in which the claimant 

may be restored to the status quo ante 

by obtaining the fungible equivalent of 

personal property previously transferred 

to the other party.’’). 

Nor do we agree with commenters 

that this rule exceeds our statutory 

authority to make ‘‘adjustments’’ to the 

payment system ‘‘as determined to be 

necessary to ensure equitable 

payments’’ under section 1833(t)(2)(E) 

of the Act (42 U.S.C. 1395l(t)(2)(E)). 

Both the Supreme Court and the D.C. 

Circuit have declined to define the outer 

bounds of that term. See Am. Hosp. 

Assoc’n, 142 S. Ct. at 1904 (‘‘[W]e need 

not determine the scope of HHS’s 

authority to adjust the price up or 

down.’’); Amgen, Inc., 357 F.3d at 117 

(‘‘[T]he court has no occasion to engage 

in line drawing to determine when 

‘adjustments’ cease being 

‘adjustments.’ ’’). While we acknowledge 

that the Supreme Court has held that in 

certain contexts the statutory authority 

to ‘‘modify’’ a program limits the 

amount by which an agency can change 

the program, we believe the statutory 

term ‘‘adjustment’’ has a different focus 

here. For example, in Nebraska, when 

construing the term ‘‘modify,’’ the 

Supreme Court relied in part on Black’s 

Law Dictionary’s definition of modify 

which built in ‘‘a connotation of 

increment or limitation.’’ 143 S. Ct. at 

2368 (citing MODIFY, Black’s Law 

Dictionary (11th ed. 2019) (‘‘To make 

somewhat different; to make small 

changes to (something) by way of 

improvement, suitability, or 

effectiveness’’).) But that same 

dictionary defines ‘‘adjustment’’ to 

focus on adapting something to better 

apply in a particular circumstance. 

ADJUSTMENT, Black’s Law Dictionary 

(11th ed. 2019) (‘‘That which adapts one 

thing to another or to a particular use’’). 

We therefore believe our adjustment 

authority under section 1833(t)(2)(E) of 

the Act (42 U.S.C. 1395l(2)(E)) fairly 

encompasses adapting generally 

prospective payments to remedy legal 

errors made in those payments. And 

even if adjustment carries a connotation 


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Federal Register / Vol. 88, No. 215 / Wednesday, November 8, 2023 / Rules and Regulations 77159 

15See CMS Ruling No. 1498–R.(Apr. 28, 2010). 

https://www.cms.gov/regulations-and-guidance/ 

guidance/rulings/downloads/cms1498r.pdf. 

See also CMS Ruling No. 1355–R.(Apr. 14, 2011). 

https://www.cms.gov/Regulations-and-Guidance/ 

Guidance/Rulings/downloads/cms1355r.pdf. 

16See CMS Pub. 100–20, Transmittal No. 10520 

(Dec. 14, 2020). https://www.cms.gov/files/ 

document/r10520otn.pdf. 

17See HealthAlliance Hospitals, Inc. v. Azar, 346 

F. Supp. 3d 43 (D.D.C. 2018); see also Clerk’s 

Orders Granting Extensions To Accommodate 

Pending Mediation, dated March 26, 2019, April 18, 

2019, and June 13, 2019, HealthAlliance Hosps., 

Inc. v. Azar, No. 18–5372 (D.C. Cir.); Joint 

Stipulation of Dismissal dated August 29, 2019, 

HealthAlliance Hosps., No. 18–5372 (D.C. Cir.). 

See Cape Cod Hospital v. Sebelius, 630 F.3d 203 

(D.C. Cir. 2011); see also 76 FR. 51476, 51799 (Aug. 

18, 2011). 

of increment or limitation, the 28.5 

percent adjustment this final rule makes 

to the payments made to hospitals for 

340B-acquired drugs would not exceed 

it. The cases in which the Supreme 

Court has found that agencies exceeded 

their modification authority are those 

where the Court found that there was a 

change in kind to the affected program, 

not simply a change in degree. See 

Nebraska, 143 S. Ct. at 2369 (changes 

exceeded modification authority when 

agency ‘‘created a novel and 

fundamentally different loan forgiveness 

program’’); MCI Telecommunications 

Corp. v. Am. Tel. & Tel. Co., 512 U.S. 

218, 230 (1994) (changing statute ‘‘from 

a scheme of rate regulation in longdistance common-carrier 

communications to a scheme of rate 

regulation only where effective 

competition does not exist’’ exceeded 

modification authority); cf. also Amgen, 

Inc., 357 F.3d at 117 (adjustment does 

not include a ‘‘total elimination or 

severe restructuring of the statutory 

scheme’’). Here, CMS is adjusting 

payment rates back to their default 

under the statute. Restoring a default 

payment provision is the opposite of the 

implementation of ‘‘a new regime 

entirely’’ that the Supreme Court has 

invalidated. 

We acknowledge that we are in a 

somewhat unique situation. We have 

generally operated the OPPS system 

based on a belief that its prospective 

payments were insulated from 

administrative and judicial review. In 

light of the Supreme Court’s decision, 

however, we must find a way to 

reconcile a primarily prospective budget 

neutral rate-setting system with 

adjudication processes that are generally 

retrospective in nature. Here, it is 

enough for us to find that sections 

1833(t)(14) and (t)(2)(E)—and section 

1871(e)(1)(A), to the extent required— 

authorize us to correct the legal error 

identified by courts in our prior 

payments under section 1833(t)(14). 

Comment: One commenter argued 

that CMS could not rely on its 

retroactive rulemaking authority under 

section 1871(e)(1)(A) of the Act (42 

U.S.C. 1395hh(e)(1)(A)), in conjunction 

with sections 1833(t)(2)(E) and (t)(14) of 

the Act (42 U.S.C. 1395l(t)(2)(E) & 

(t)(14)), to make the remedy payments 

because section 1871(e)(1)(A) of the Act 

(42 U.S.C. 1395hh(e)(1)(A)) prohibits 

retroactive rulemaking except for two 

limited exceptions, neither of which 

apply to the remedy payments. The first 

exception cited by the commenter 

applies to situations in which 

‘‘retroactive application is necessary to 

comply with statutory requirements’’ 

(see section 1871(e)(1)(A)(i) of the Act) 

(42 U.S.C. 1395hh(e)(1)(A)(i)) and the 

second to situations in which ‘‘failure to 

apply the change retroactively would be 

contrary to the public interest’’ (see 

section 1871(e)(1)(A)(ii) of the Act (42 

U.S.C. 1395hh(e)(1)(A)(ii)). Concerning 

the first exception, the commenter 

contends that the proposed rule 

discusses retroactive rulemaking 

authority only with respect to the drug 

payment methodology for 340Bacquired drugs and makes no argument 

that payments for non-drug items and 

services may be changed retroactively or 

that CMS may retroactively re-estimate 

its budgetary projections from 2018. The 

commenter concludes that because the 

OPPS is expressly required to be 

prospective in nature, ‘‘retroactive 

adjustments’’ to past years’ payment 

rates are not ‘‘necessary to comply’’ 

with statutory requirements of the 

OPPS. Concerning the second 

exception, the commenter argues that it 

is not in the public interest to engage in 

the retroactive adjustment of 

prospective payment rates (particularly 

when doing so would upset the reliance 

interest of all hospitals with respect to 

payment for non-drug items and 

services) when make-whole relief can be 

implemented without revisiting 2018 

through 2022 OPPS rates. 

Response: We disagree with the 

commenter that the OPPS’s generally 

prospective nature implicitly overrides 

CMS’s retroactive rulemaking authority 

under section 1871(e) of the Act (42 

U.S.C. 1395hh(e)). The Supreme Court 

held (in 2022) that we lacked authority 

(in 2018) under section 1833(t)(14) of 

the Act (42 U.S.C. 1395l(t)(14)) to set a 

payment rate of ASP–22.5 percent for 

340B-acquired drugs absent a drug 

acquisition cost survey. Thus, to the 

extent we are acting retrospectively in 

this rule, conforming payment rules that 

are still on the books and still contain 

a payment rate contrary to the 

requirements of section 1833(t)(14) of 

the Act (42 U.S.C. 1395l(t)(14)) would 

be a classic case where retroactive 

rulemaking would be ‘‘necessary to 

comply’’ with statutory requirements. 

As noted above, courts have rejected the 

argument that because section 1833(t) of 

the Act (42 U.S.C. 1395l(t)) establishes 

a prospective payment system, that 

system is not subject to any 

retrospective review or amendment. 

And because the payment increases for 

non-drug items and services for those 

years were inextricably linked to the 

illegal payment decreases for 340Bacquired drugs, the same reasoning 

would apply. We are not, as commenter 

suggests, re-estimating our budget 

projections—a point we also discuss 

below in section II.B.2. Rather, we are 

unwinding a payment rate that courts 

held was illegal. 

We also disagree with the 

commenter’s public interest argument. 

As noted above, commenters have not 

identified any authority through which 

we could implement make-whole relief 

without relying on sections 1833(t)(14) 

or (t)(2)(E) of the Act (42 U.S.C. 

1395l(t)(14) and (t)(2)(E)). And we 

disagree that hospitals’ reliance interest 

undermines our interpretation here. 

Hospitals were aware that we believed 

their increased payments for non-drug 

items and services hinged on the 

payment decreases for 340B-acquired 

drugs. (No one, for example, has 

suggested we could retain the 3.19 

percent payment increase in CY 2023 

once we reverted to an ASP plus 6 

percent payment rate for 340B acquired 

drugs.) Hospitals successfully 

convinced courts that those payment 

decreases are illegal, and it thus follows 

that the intertwined payment increases 

were unwarranted under the statute, as 

well. If the payment increases were not 

removed, the remedy payments would 

ultimately come from beneficiaries, 

taxpayers, or some combination of the 

two. The commenter’s suggestion would 

effectively involve at least a $9 billion 

transfer from beneficiaries and 

taxpayers to hospitals, which would be 

inappropriate especially in a system 

where budget neutrality requirements 

generally prevent such transfers. 

Comment: Many commenters claimed 

that CMS does not require any statutory 

authority to make the remedy payments 

and that it can make the payments using 

an ‘‘acquiescence authority.’’ 

Commenters point to past instances in 

which CMS has allegedly exercised the 

posited acquiescence authority, 

including Administrator rulings,15

manual updates,16 settlements with 

hospitals 17 and the processing and 

reprocessing of CY 2022 340B drug 

claims at the default drug rate for dates 


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18See proposed rule at 88 FR 44088 (Nov. 13, 

2017). 

19We understand our approach to remedies to be 

consistent with how courts view their own remedy 

authority. See, for example, Off. of Pers. Mgmt. v. 

Richmond, 496 U.S. 414, 426 (1990) (‘‘[J]udicial use 

of the equitable doctrine of estoppel cannot grant 

respondent a money remedy that Congress has not 

authorized.’’); Am. Hosp. Ass’n v. Price, 867 F.3d 

160, 167 (D.C. Cir. 2017) (‘‘[I]f the necessary means 

[to remedy a legal violation by an agency] were 

unlawful, the Court could not have mandated 

them.’’). 

20We continued to enforce retroactively the 

payment limitations in section 1886(l) of the Act (42 

U.S.C. 1395ww(l)) until Congress stepped in to 

relieve us of that requirement. See CAA 2023, sec. 

4143. 

of service between January 1, 2022, and 

September 27, 2022, described in the 

proposed rule (‘‘a large portion of the 

CY 2022 340B drug claims for dates of 

service between January 1, 2022, and 

September 27, 2022, have already been 

remedied as a result of being processed 

or reprocessed at the default drug 

payment rate.’’).18 Commenters argue 

that we are ignoring this acquiescence 

authority in order to justify the budget 

neutrality policy we discuss later in 

section II.B.2 of this final rule. 

Response: We have previously 

explained that acquiescence is a choice 

by an agency, when faced with a lower 

court decision disagreeing with the 

agency’s legal interpretation, to 

‘‘recognize that court’s interpretation 

and apply the court’s interpretation 

uniformly, thereafter, within the 

jurisdictional bounds of the interpreting 

court.’’ In the Case of: St. Vincent Mercy 

Medical Center Provider v. Blue Cross 

Blue Shield Association/national 

Government Services—Ohio 

Intermediary, 2008 WL 6468508, at *9 

(CMS Adm’r) (acquiescing to circuit 

court’s interpretation of law for 

providers within the jurisdictional 

bounds of the deciding court). That 

makes the acquiescence doctrine an 

awkward fit here because it is most 

often applied to rulings from circuit 

courts, whose precedential authority is 

geographically limited and whose legal 

interpretations are subject to further 

review. The Supreme Court is not so 

limited, and its statutory interpretations 

are generally binding on parties with 

pending claims. See Harper v. Virginia 

Dep’t of Tax’n, 509 U.S. 86, 97 (1993) 

(‘‘When this Court applies a rule of 

federal law to the parties before it, that 

rule is the controlling interpretation of 

federal law and must be given full 

retroactive effect in all cases still open 

on direct review.’’). 

Regardless, we do not understand 

acquiescence to be an independent 

source of authority or one that frees us 

from otherwise applicable statutory 

constraints, as commenters believe. 

Commenters’ examples do not suggest 

otherwise. The cited Administrator 

rulings were routine applications of 

judicial precedent to pending 

administrative appeals. See CMS Ruling 

No. 1498–R, at 6 (Apr. 28, 2010) 

(limiting relief to providers with 

‘‘properly pending DSH appeal of the 

SSI fraction data matching process 

issue’’ under section 1869 of the Act (42 

U.S.C. 1395ff)); CMS Ruling 1355–R, at 

8 (limiting relief to providers with 

‘‘properly pending appeals’’ under 

section 1878 of the Act (42 U.S.C. 

1395oo)). Such actions are contemplated 

by the agency’s authority to ‘‘affirm, 

modify, or reverse’’ in pending 

adjudications. See section 1869(b)(1) of 

the Act (42 U.S.C. 1395ff(b)(1)) 

(incorporating authority under section 

205(b) of the Act (42 U.S.C. 405(b)); 

1878(f)(1) of the Act (42 U.S.C. 

1395oo(f)(1) (same)). The decisions cited 

by commenters never suggest that we 

could issue payments that violate 

statutory limitations, nor have 

commenters identified any statutory 

limitations those decisions allegedly 

violated.19 Neither payment adjustment 

in the two cited rulings, for example, 

were subject to a budget neutrality 

requirement. See, for example, 2014 

IPPS Final Rule, 78 FR 50496, 50507 

(2013) (noting statutory amendments 

resulting in reductions to DSH 

payments ‘‘are not budget neutral’’); 

Medicare Program; Hospice Wage Index 

for Fiscal Year 2010, 74 FR 39384, 

39390–91 (2009) (rejecting notion that 

‘‘Medicare insists on budget neutrality 

in all of its payment systems’’). To the 

contrary, several of the cited examples 

show that CMS enforces payment limits 

in prospective payment systems, even 

when acting retroactively or in response 

to disagreement by a court. See CMS 

Pub. 100–20, Transmittal No. 10520 

(Dec. 14, 2020) (instructing contractors 

to recalculate graduate medical 

education payments to comply with 

annual payment caps under section 

1886(l) of the Act (42 U.S.C. 

1395ww(l)); 20 76 FR 51476, 51788 

(addressing payment issue relating to 

application of budget neutrality 

adjustment after court decision in Cape 

Cod Hospital v. Sebelius, 630 F.3d 203 

(D.C. Cir. 2011) by ‘‘remodel[ing] the 

recalibration/wage index budget 

neutrality factor for the years at issue’’); 

accord Medicare Program; Changes to 

the Inpatient Hospital Prospective 

Payment System and Fiscal Year 1991 

Rates, 55 FR 35990, 36043 (1990) 

(‘‘Absent a retroactive budget neutrality 

adjustment at the beginning of next 

fiscal year, we believe that we would be 

precluded from making mid-year 

corrections to the wage index since they 

could not be accomplished in a budget 

neutral fashion as required by law.’’). 

To be sure, the court in H. Lee Moffitt 

Cancer Center v. Azar, 324 F. Supp. 3d 

1 (D.D.C. 2018), noted one prior 

instance where we had missed a small 

number of hospitals in our first year 

implementing budget neutral payment 

adjustments for certain rural hospitals 

and did not clearly budget neutralize a 

retroactive adjustment. Id. at 15 (citing 

71 FR 67960, 68010). That court 

acknowledged that CMS had previously 

‘‘temporarily raised prospective rates in 

order to make up for reductions applied 

in prior years’’ and so saw ‘‘no reason 

why HHS could not do the converse 

here if it believed offsets were required: 

make a slight reduction in prospective 

rates for a future year to accommodate 

a retroactive adjustment’’ for the single 

plaintiff hospital. Id. at 17 n.5. In any 

event, both the rural hospital 

adjustment issue and the cancer 

hospital issue involved relatively small 

adjustments to a single year of payments 

to a very limited number of providers, 

and one situation involved resolution 

through settlements with individual 

providers that had properly appealed 

the issue. When the additional rural 

hospitals (rural essential access 

community hospitals) were included in 

the rural hospital adjustment, the entire 

adjustments changed the budget 

neutrality factor by approximately 

0.00002, which is so small of a change 

that it would only change payment rates 

by a fraction of a cent, and likely not 

change payment rates by a penny. (71 

FR 68003). And while all eleven cancer 

hospitals impacted the budget neutrality 

factor by 0.0022 the year they were 

added—reflecting a total of $71 million 

of payment impact (76 FR 76,190)—only 

a few ultimately sued over the payments 

and the government resolved the 

matters through settlements with 

individual providers. See H. Lee Moffitt, 

324 F. Supp. 3d at 9 (estimating $7.4 

million payment impact for plaintiff 

hospital). These are the types of de 

minimis impacts that CMS has rounded 

to zero. We do not believe these two 

much smaller examples relieve us of our 

statutory obligations here, which 

involve several billion dollars and more 

than 3,600 hospitals, restructuring 

Medicare Part B payments for these 

drugs payments across 5 years-worth of 

claims. As we noted in the proposed 

rule, we are particularly concerned that 

adopting providers’ position would 

allow them to use litigation as a 

workaround to otherwise applicable 

constraints on Medicare payments and 


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threaten Congress’ control of the Federal 

budget. 

Adhering to the usual statutory 

constraints on our rulemaking authority 

under section 1833(t) of the Act (42 

U.S.C. 1395l(t)) is particularly 

appropriate here when we are 

implementing a remedy through 

rulemaking rather than adjudication or 

resolving a matter through settlement. 

Following judicial interpretations does 

not necessarily entitle parties without 

jurisdictionally proper active challenges 

to have that interpretation applied to 

prior years’ payments. See 42 CFR 

405.986(b) (change in legal 

interpretation based on judicial decision 

not good cause to reopen adjudications); 

see also Baptist Mem’l Hosp. v. 

Sebelius, 603 F.3d 57, 64 (D.C. Cir. 

2010) (denying mandamus to party who 

sought application of favorable judicial 

interpretation to prior payment years 

without pending appeals). Parties who 

chose to sit on the sidelines might 

benefit prospectively from a change in 

legal interpretation based on a court 

ruling, but nothing requires an agency 

affirmatively to reach back and disturb 

the finality of payment determinations 

that providers never properly 

challenged. See Grant Med. Ctr. v. 

Hargan, 875 F.3d 701, 707 (D.C. Cir. 

2017) (‘‘[W]e never require agencies to 

apply rules retroactively even where it 

would be permissible for them to do 

so.’’ (emphasis in original)); see also See 

Your Home Visiting Nurse Servs., Inc. v. 

Shalala, 525 U.S. 449, 455 (1999) 

(holding that ‘‘agency’s refusal to reopen 

a closed case is generally ‘committed to 

agency discretion by law’ and therefore 

exempt from judicial review’’); 42 CFR 

405.986. 

Despite these well-established 

principles, Congress has recognized that 

sometimes an agency might decide that 

finality should yield to other policy 

considerations, including by giving the 

agency the flexibility to issue retroactive 

rules in certain circumstances. See 

section 1871(e) of the Act (42 U.S.C. 

1395hh(e)). As we explained in the 

proposed rule, that threshold has been 

met here, at least to the extent this rule 

is retroactive. We add that the same 

principles that sometimes justify 

acquiescing to a circuit court outside of 

that court’s jurisdictional bounds also 

supports our choice to apply the 

Supreme Court’s interpretation of 

section 1833(t)(14) of the Act (42 U.S.C. 

1395l(t)(14)) to parties who lack 

pending claims for those payment years 

and thus are outside the bounds of the 

Supreme Court’s judgment. Doing so in 

this case will help to promote uniform 

treatment of parties under the law and 

save the government and regulated 

parties from uncertainty and litigation 

costs. We find particularly compelling 

the fact that we repeatedly stated our 

view that the preclusion provisions in 

section 1833(t)(12) of the Act (42 U.S.C. 

1395l(t)(12)) foreclosed any 

administrative or judicial review, a 

position with which the Supreme Court 

ultimately disagreed. Given the unique 

circumstances of this case, we believe 

extending the remedy to the entire 

industry through rulemaking properly 

balances the agencies and parties’ 

interest in finality and Congress’ control 

of the Federal budget with uniformity 

and litigation costs. 

Comment. One commenter suggested 

we view the payment through the lens 

of monetary damages to make 340B 

providers whole, suggesting that this is 

an inevitable consequence of losing a 

court case. 

Response. We appreciate this 

commenter’s transparency in identifying 

that the make-whole payments that 

many commenters are requesting are in 

fact money damages. But we disagree 

that money damages are appropriate 

here. Providers sued under section 1869 

(42 U.S.C. 1395ff) of the Social Security 

Act, which authorizes both courts and 

the agency to ‘‘affirm[], modify[], or 

revers[e]’’ administrative decisions on 

individual requests for payment under 

section 205(b) or (g) of the Act (42 

U.S.C. 405(b) or (g)). Because the Social 

Security Act does not authorize money 

damages, we do not believe that is the 

correct framework to understand the 

remedy here. Cf. Schweiker v. Chilicky, 

487 U.S. 412, 424 (1988) (‘‘[T]he [Social 

Security] Act, however, makes no 

provision for remedies in money 

damages against officials responsible for 

unconstitutional conduct that leads to 

the wrongful denial of benefits.’’). 

Indeed, even when money damages are 

appropriate, courts have suggested the 

goal is to place plaintiffs in the same 

position as they would have been absent 

any breach, suggesting the windfall 

payments for non-drug items and 

services would need to be deducted 

from any recovery, regardless. See Cmty. 

Health Choice, Inc. v. United States, 970 

F.3d 1364, 1375–1376 & n.10 (Fed. Cir. 

2020) (‘‘[W]hen the non-breaching party 

indirectly benefits from the defendant’s 

breach, ‘in order to avoid 

overcompensating the promisee, any 

savings realized by the plaintiff as a 

result of the . . . breach . . . must be 

deducted from the recovery.’ ’’). 

After consideration of comments 

received, and for the reasons stated in 

our proposed rule and in this final rule, 

we are finalizing our proposed policy as 

proposed. In particular, we are 

finalizing our proposal to make lump 

sum payments, calculated as the 

difference between what an affected 

340B covered entity hospital received 

for 340B-acquired drugs during the time 

period at issue and what they would 

have received for 340B-acquired drugs if 

the 340B adjustment had not been in 

place, as detailed further below. We are 

doing so for the reasons stated in our 

proposed rule and in this final rule. 

We note that because we are finalizing 

our proposal to remedy the 340B drug 

payments through lump sum payments, 

we must also address the non-drug item 

and services payment made from CY 

2018 through CY 2022 as detailed in 

subsequent sections of this final rule. 

We note that because OPPS 340B drug 

payment is directly and inextricably 

linked to the OPPS payment for nondrug items and services, if the 340B 

drug payments are invalidated and must 

be remedied, then the increased 

payments for non-drug items and 

services are invalidated and must be 

remedied as well. But for the reductions 

in the 340B drug payments, the 

increased payments for the non-drug 

items and services would not have been 

put into effect. 

b. Estimated Reduction in Drug 

Payments to Affected 340B Covered 

Entity Hospitals in CY 2018 Through 

September 27, 2022 

An estimated 1,686 340B covered 

entity hospitals were paid at the 340B 

payment rate, which was generally ASP 

minus 22.5 percent for 340B-acquired 

drugs for CY 2018 through September 

27th of 2022, rather than the default 

rate, which is generally ASP plus 6 

percent, due to the 340B Payment 

Policy. In the proposed rule, CMS 

estimated that these hospitals received 

approximately $10.5 billion less in 340B 

drug payments (including money that 

would have been paid by Medicare and 

money that would have come from 

beneficiaries as copayments) than they 

would have for drugs provided in CY 

2018 through September 27th of 2022 

had the 340B policy not been 

implemented. In the proposed rule (88 

FR 44084), we stated that we would 

update these estimated figures in the 

final rule as we continued to receive 

updated CY 2022 claims data. In the 

proposed rule, we expected to have 

sufficient CY 2022 340B drug claims at 

issue submitted by September 27, 2023; 

therefore, by the publication date for the 

final rule, we estimated we would have 

sufficient claims data to state with more 

specificity the reduction in drug 

payments to affected 340B covered 

entity hospitals in CY 2018 through 

September 27, 2022. As discussed in the 

proposed rule, we estimated that 340B 


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21We noted that the additional amount CMS pays 

affected 340B covered entity hospitals through this 

remedy could decrease if additional CY 2022 claims 

are processed at the higher payment rate, as 

discussed under section I.C of this final rule. As 

previously explained, the agency complied with the 

District Court’s September 28, 2022, decision by 

paying the default rate (generally ASP plus 6 

percent) for all CY 2022 claims for 340B-acquired 

drugs paid from September 28, 2022, onward. 

However, as some affected 340B covered entity 

hospitals are still filing, or re-filing, claims for CY 

2022, we are paying those claims at the higher 

default payment rate for drugs, which is generally 

ASP plus 6 percent. Therefore, we advised that our 

estimate of the total amount of additional drug 

payments that would be made through this remedy 

could change as more claims from CY 2022 are 

processed, or reprocessed, at the default payment 

rate of ASP plus 6 percent. 

providers had already received $1.5 

billion in remedy payments through 

reprocessed claims for 340B drugs 

provided from January 1, 2022, through 

September 27, 2022. Accordingly, we 

estimated in the proposed rule that the 

remaining remedy amount that affected 

340B covered entity hospitals had not 

yet received as a result of this policy 

was $9.0 billion.21

In the proposed rule, we calculated 

the estimated aggregate payments by 

isolating 340B drugs assigned status 

indicator ‘‘K’’ (non-pass-through drugs 

and non-implantable biologicals, 

including therapeutic 

radiopharmaceuticals) and billed with 

modifier ‘‘JG’’ (drug or biological 

acquired with 340B Program discount, 

reported for informational purposes). 

We then calculated the difference 

between these drugs’ CY 2018 through 

2022 340B payment rate and the 340B 

rate proposed in the proposed rule, 

which was generally the difference 

between ASP minus 22.5 percent and 

ASP plus 6 percent. We used a similar 

process to estimate aggregate payments 

owed for drugs with payment amounts 

based on WAC or AWP. In particular, 

for drugs priced using WAC, we 

calculated the difference between WAC 

minus 22.5 percent and WAC plus 3 or 

6 percent, as applicable; and for drugs 

priced using AWP, we calculated the 

difference between 69.46 percent of 

AWP and 95 percent of AWP. We note 

that the WAC and AWP based payment 

rates outlined in this paragraph are the 

common longstanding default OPPS 

drug payment rates if ASP data are not 

available. 

We invited comment on this proposed 

methodology of estimating the reduction 

in drug payments to affected 340B 

covered entity hospitals in CY 2018 

through September 27, 2022. 

We thank commenters for their input 

on our policy proposals. We have 

summarized the comments received and 

our responses to those comments in the 

following section. 

Comment: Most commenters generally 

agreed with our methodology to 

calculate what 340B covered entity 

hospitals would have received. 

Commenters generally requested that we 

update our calculations for the final 

rule. 

Response: We thank commenters for 

their support. 

As stated in the proposed rule and as 

requested by commenters, we updated 

these calculations using claims data 

available (CMS Common Working File 

(CWF) CWF2023w38, processed by 09/ 

22/2023) as of the publication of this 

final rule. Our updated claims data 

reflects that these hospitals received an 

estimated $10.6 billion less in 340B 

drug payments (including money that 

would have been paid by Medicare and 

money that would have come from 

beneficiaries as copayments) than they 

would have for drugs provided in CY 

2018 through September 27th of 2022 

had the 340B policy not been 

implemented. 

Additionally, we now estimate that 

$1.6 billion of the total $10.6 billion that 

we calculated affected 340B covered 

entity hospitals did not receive as a 

result of the 340B Payment Policy has 

already been remedied through 

reprocessed claims. Accordingly, we 

estimate the remaining remedy amount 

that affected 340B covered entity 

hospitals have not yet received as a 

result of this policy is $9.004 billion, 

which has changed from the estimated 

$9.003 billion amount that was included 

in the proposed rule. This change is due 

to additional CY 2022 claims that have 

been reprocessed as well as an 

adjustment made based on a comment 

received as described in section II.B.1.F 

of this final rule. For simplicity, we 

refer to this number as $9.0 billion 

throughout this document. 

After consideration of comments 

received, and for the reasons stated in 

our proposed rule and in this final rule, 

we are finalizing our methodology of 

estimating the reduction in drug 

payments to affected 340B covered 

entity hospitals in CY 2018 through 

September 27, 2022, as proposed. 

Accordingly, as described in more detail 

later and in Addendum AAA, we will 

make total lump sum payments in the 

amount of $9.004 billion as a result of 

this final rule. We continue to round our 

lump sum payment to $9.0 billion for 

purposes of this final rule discussion for 

ease of reference, but the exact 

unrounded amount will be the total 

amount paid to hospitals. 

c. Methodology for Calculating Remedy 

Payments Owed to Each Affected 340B 

Covered Entity Hospital 

We proposed the following process 

for calculating the amount of payment 

owed to each affected 340B covered 

entity hospital and issuing that 

payment. For each affected 340B 

covered entity hospital, we proposed to 

calculate the amount the hospital would 

have been paid under the OPPS from CY 

2018 through September 27th of CY 

2022 for drugs the hospital acquired 

through the 340B Program had that 

340B adjustment not been in effect. We 

would then subtract from this amount 

the amount each affected 340B covered 

entity hospital was paid under the OPPS 

for 340B-acquired drugs during the 

period of CY 2018 to September 27th of 

CY 2022. 

When added to the adjusted amount 

paid under the OPPS from CY 2018 

through September 27th of CY 2022 for 

separately payable drugs acquired under 

the 340B Program, this proposed 

additional lump sum payment amount 

would result in the affected 340B 

covered entity hospital receiving the 

default ASP plus 6 percent rate (or WAC 

plus 3 or 6 percent or 95 percent of 

AWP, as applicable) for drugs acquired 

under the 340B Program for CY 2018 

through September 27th of CY 2022. 

We illustrated the proposed process 

for calculating and paying an affected 

340B covered entity hospital’s 

additional lump sum OPPS payments 

for 340B drugs furnished from CY 2018 

through September 27th of CY 2022 in 

the following example. We explained 

that using claims data from CY 2018 

through September 27th of CY 2022 for 

which those claims have been processed 

and OPPS payments already made, we 

might calculate that a particular 340Bcovered entity hospital would have been 

paid, for example, an estimated $10 

million for 340B drugs had the 340B 

Payment Policy not been in effect 

during that time period. Then, based on 

claims data for the same hospital from 

the same time period, we might 

calculate that the hospital was actually 

paid $7.31 million for 340B drugs from 

CY 2018 through September 27th of CY 

2022. In that circumstance, we 

explained that the 340B covered entity 

hospital would receive as a lump sum 

payment $2.69 million, i.e., the 

difference between these two amounts. 

We noted that another way to illustrate 

our estimate of the total amount an 

affected 340B covered entity hospital 

would have been paid had the 340B 

Payment Policy not been in effect (X) is 

to use the following formula: 

X = (Y/0.775)*1.06 


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Where Y is the total amount received 

under the 340B policy from CY 2018 to 

September 27th of CY 2022. 

We noted that in the example above, 

the Y would be $7.31 million. 

Therefore, ($7.31 million/0.775)*1.06 = 

$10 million. The lump sum payment 

would be $10 million minus $7.31 

million, which equals $2.69 million. We 

solicited comment on our proposed 

calculation methodology for calculating 

remedy payments owed to each affected 

340B covered entity hospital. 

We thank commenters for their input 

on our policy proposals. We have 

summarized the comments received and 

our responses to those comments in the 

following section. 

Comment: All commenters who 

addressed the issue supported CMS’s 

proposed methodology for calculating 

remedy payments. The commenters 

agreed that the methodology minimizes 

the administrative burden and 

complexities of reprocessing claims for 

hospitals and CMS. In addition, the 

commenters supported the proposed 

methodology because the lump sum 

payment would be an efficient method 

that could be completed in a shorter 

timeline than alternatives like an 

adjustment to prospective payments. 

Response: We appreciate commenters’ 

support. 

After consideration of comments 

received, and for the reasons stated in 

the proposed rule and this final rule, we 

are finalizing our methodology to 

calculate the remedy payments owed to 

each affected 340B covered entity 

hospital as proposed. 

d. Instruction to MACs To Remit 

Remedy Payments 

Consistent with our past practice of 

remitting payments owed due to 

litigation, we proposed to make 

additional payments to each 340B 

covered entity hospital by issuing 

instructions (such as a Change Request 

(CR) or a Technical Direction Letter 

(TDL)) to the 340B covered entity 

hospital’s Medicare Administrative 

Contractor (MAC), instructing the MAC 

to issue a one-time lump sum payment 

to the hospital in the amount calculated 

using the above described methodology 

within a specified timeframe, which we 

proposed would be within 60 calendar 

days of the MAC’s receipt of the 

instruction. For instance, in the example 

above, CMS would issue instructions to 

the relevant MAC instructing it to issue 

a payment to the 340B covered entity 

hospital in the amount of $2.69 million 

within 60 calendar days of the MAC’s 

receipt of the instructions. (We noted 

that MACs will continue to follow 

normal accounting processes for 

collecting repayment amounts that are 

the result of provider-specific 

overpayment obligations, as well as 

other unique situations such as provider 

bankruptcy or payment suspension, any 

of which may impact the provider’s net 

payment amount.) We solicited 

comment from the public on our 

proposed approach to remitting remedy 

payments. We specifically sought 

comment on the timeframe of 60 

calendar days in which we proposed to 

have the MACs make the proposed 

lump sum payments. Given the number 

of one-time lump-sum payments to 

hospitals, the size of the payments, and 

the overall complexity of this remedy, 

we believed 60 calendar days was 

necessary for the MACs to make these 

payments accurately and precisely to 

individual hospitals. We sought 

comment on this timeframe and if 

another timeframe, such as 30 calendar 

days, was supported by rationale from 

commenters. 

We thank commenters for their input 

on our policy proposals. We have 

summarized the comments received and 

our responses to those comments in the 

following section. 

Comment: Most commenters 

supported CMS’s proposal for MACs to 

issue a one-time lump sum payment to 

affected 340B covered entity hospitals 

within 60 calendar days of the MAC’s 

receipt of the instruction from CMS to 

make the payment. Many of these 

commenters emphasized that MACs 

should begin processing payments upon 

receipt of CMS instructions rather than 

waiting until the end of 60 days to start 

doing so. These commenters also 

requested that CMS require MACs to 

submit weekly updates to CMS on the 

status of the payments. 

Response: We thank these 

commenters for their support of the 60- 

calendar day payment timeframe. We 

agree with commenters that MACs 

should begin processing payments when 

they receive our instructions, but no 

payments may be transmitted before this 

final rule is effective. See 5 U.S.C. 

801(a)(3). Additionally, CMS will 

submit instructions to MACs after the 

deadline to submit requests for 

technical corrections under the process 

detailed in subsequent sections. We also 

agree that MACs should update us about 

the status of the payments; however, we 

will defer to the MACs to make 

communications to CMS following their 

standard communication practices. 

Comment: A commenter encouraged 

CMS to clarify with MACs a process to 

ensure hospitals are paid the full 

amount provided by CMS without 

delay, bypassing the normal accounting 

processes discussed in the proposed 

rule. This commenter expressed concern 

that allowing MACs to withhold 

payment would result in disputes 

between providers and MACs and 

unreasonably delay payments due to 

providers. The commenter 

recommended that CMS clarify that 

MACs must pay the amount specified by 

the agency and not permit MACs to 

withhold payment. 

Response: We share the commenter’s 

concern with providing the lump-sum 

payments quickly and efficiently. We 

make these payments under sections 

1833(t)(14), 1833(t)(2)(E), and (as 

applicable) section 1871(e) of the Act 

(42 U.S.C. 1395l(t)(14) and (t)(2)(E) and 

42 U.S.C. 1395hh(e)(1)(A)); we do not 

believe they are somehow different in 

kind from other Medicare payments 

made under those authorities in a way 

that justifies exempting them from 

MACs’ usual procedures. As such, 

MACs will continue to follow normal 

accounting processes for collecting 

repayment amounts that follow from 

provider-specific overpayment 

obligations, as well as other unique 

situations such as provider bankruptcy 

or payment suspension, any of which 

may impact the provider’s net payment 

amount. 

Comment: Multiple commenters 

requested that CMS state in the final 

rule that hospitals receiving a remedy 

payment will also receive information 

detailing how that payment was 

calculated and that the payment notice 

constitutes a final determination. These 

commenters additionally requested that 

CMS state in the final rule that a 

hospital will not waive any claims or 

give up any legal rights by accepting a 

remedy payment. These commenters 

emphasized that providing this 

information is especially important 

because OPPS payments for drugs were 

based on pricing data that can change 

over time, including AWP, WAC, and 

ASP; and these drugs may have an 

established or decreased ASP today, 

which could lead to confusion regarding 

whether CMS’s remedy payment is 

based on the historic AWP/WAC/ASP 

figure or the current ASP figure. 

Response: We refer readers to the 

previous section titled: Methodology for 

Calculating Remedy Payments Owed to 

Each Affected 340B Covered Entity 

Hospital for additional information 

regarding the methodology we used to 

calculate the lump sum payments. We 

reiterate that we calculated the payment 

amounts to approximate what 340B 

covered entity hospitals would have 

received had it not been for the 340B 

Payment Policy. This means using the 

ASP (or WAC or AWP) based payment 

rate that would have been paid at that 


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22For example, section 3138 of the Affordable 

Care Act added a new section 1833(t)(18) to the 

Social Security Act (42 U.S.C. 1395l(t)(18), 

providing for an adjustment under section 

1833(t)(2)(E) of the Social Security Act (42 U.S.C. 

1395l(t)(2)(E) to address higher costs incurred by 

cancer hospitals. Section 1833(t)(2)(E) of the Act (42 

U.S.C. 1395l(t)(2)(E), in turn, directs the Secretary 

to establish, ‘‘in a budget neutral manner,’’ payment 

‘‘adjustments as determined to be necessary to 

ensure equitable payments, such as adjustments for 

certain classes of hospitals.’’ In response to CMS’s 

proposal to implement this adjustment on a per 

claim basis through increased APC payments, 

commenters expressed concern that doing so would 

increase beneficiary copayments since beneficiary 

copayment is a percentage of the APC payment. 

These commenters encouraged CMS to implement 

the adjustment in a way that did not increase 

beneficiary copayments. Consequently, CMS 

determined it was appropriate to make the cancer 

hospital payment adjustment through the form of an 

aggregate payment to each cancer hospital 

determined at cost report settlement, as opposed to 

an adjustment at the APC level, thereby eliminating 

the higher copayments for beneficiaries associated 

with providing the adjustment on a claims basis 

through increased APC payments. See CY 2012 

OPPS/ASC final rule, 76 FR 74121, 74204 (2011), 

for our prior use of our equitable adjustment 

authority under section 1833(t)(2)(E) of the Act (42 

U.S.C. 1395l(t)(2)(E) to adjust cancer hospital 

payments. 

time instead of the reduced ASP (or 

WAC or AWP) based payment as a 

result of the 340B Payment Policy. The 

remedial payments established by this 

final rule are being made instead of 

making case-by-case decisions through a 

claim-by-claim process. If the hospital 

does not submit any information during 

the time period for technical 

corrections, then the amounts listed in 

Addendum AAA are the final payment 

amounts due to the hospital pursuant to 

this rule. If, however, a hospital does 

submit information during the technical 

correction period, then the final 

payment will only be determined after 

CMS addresses the hospital’s 

submission. That determination or 

decision will be the final payment 

amount determined pursuant to the 

methodology in this final rule. 

Comment: Three commenters 

recommended that CMS require the 

MACs to make payment within 30 

calendar days of the MAC’s receipt of 

the instruction to pay. These 

commenters emphasized that swiftly 

finalizing and effectuating the remedy is 

in the best interests of CMS and the 

340B hospitals and argued that CMS 

already has estimated the repayment 

amounts it will issue and could begin 

laying the groundwork for making these 

repayments by coordinating with MACs 

and providing education to MACs 

beforehand. 

Response: We agree that swiftly 

finalizing and effectuating the remedy is 

in the best interests of CMS and the 

affected 340B covered entity hospitals, 

and we have engaged in the 

‘‘groundwork’’ activities mentioned by 

the commenters (estimating the 

repayment amounts, considering how to 

operationalize repaying 340B hospitals, 

and coordinating with the MACs). 

However, even having done so, we 

continue to believe that we should give 

MACs up to 60 calendar days to process 

payments to minimize the likelihood of 

payment error. We agree that MACs 

should begin processing payments upon 

receipt of our instructions instead of 

waiting the full 60 days if possible. We 

believe this timeframe will allow the 

MACs to make these lump-sum 

payments accurately and precisely to 

individual hospitals. Given the number 

of payments, the size of the payments, 

and the overall complexity of this 

remedy, we believe 60 calendar days is 

a reasonable payment timeframe. 

After consideration of comments 

received, and for the reasons stated in 

our proposed rule and in this final rule, 

we are finalizing our policy to instruct 

the MACs to remit remedy payments to 

affected 340B covered entity hospitals 

as proposed. We will make additional 

payments to each 340B covered entity 

hospital by issuing instructions to the 

340B covered entity hospital’s Medicare 

Administrative Contractor (MAC) and 

instructing the MAC to issue a one-time 

lump sum payment to the hospital in 

the amount calculated using the abovedescribed methodology within 60 

calendar days of the MAC’s receipt of 

the instruction. 

e. Accounting for Beneficiary CostSharing 

In the proposed rule, we discussed 

that in most circumstances, 

beneficiaries would pay in the form of 

coinsurance approximately 20 percent 

of any additional 340B drug payments 

that affected 340B covered entity 

hospitals would have received, absent 

the CY 2018 through 2022 340B policy. 

But, as described above, we proposed to 

make each remedy payment as a onetime lump sum payment through MAC 

instructions using a combination of 

statutory authorities, including, if 

necessary, our retroactive rulemaking 

authority under section 1871(e)(1)(A) of 

the Act (42 U.S.C. 1395hh(e)(1)(A)) and 

our equitable adjustment authority 

under section 1833(t)(2)(E) of the Act 

(42 U.S.C. 1395l(t)(2)(E)). Because these 

payments are remedy payments issued 

through MAC instructions relying in 

part on our equitable adjustment 

authority under section 1833(t)(2)(E) of 

the Act (42 U.S.C. 1395l(t)(2)(E)), we 

explained that these payments would 

not be 340B drug payments subject to 

beneficiary copayments. Rather, we 

stated that these remedy payments are 

analogous to the type of cost report 

adjustments under section 1833(t)(2)(E) 

of the Act (42 U.S.C. 1395l(t)(2)(E)) that 

we have previously found do not 

authorize providers to seek additional 

beneficiary copayments.22

We acknowledged that we have 

previously suggested that any remedy 

might affect beneficiary cost-sharing. 

(See, for example, 84 FR 61323.) But we 

noted that we made that statement in 

2019, before the litigation was 

concluded, and well before we proposed 

how to structure any remedy and 

determine how it should impact 

beneficiary cost sharing many years 

later. With the benefit of a concrete 

proposed remedy, we clarified that our 

proposed lump sum payments for the 

difference in 340B-acquired drug 

payments due to the 340B Payment 

Policy would not affect particular 

beneficiary cost-sharing responsibilities. 

We also explained that in these 

unique circumstances, it is appropriate 

to exercise our authority under section 

1833(t)(2)(E) of the Act (42 U.S.C. 

1395l(t)(2)(E)) to make adjustments ‘‘as 

necessary to ensure equitable 

payments’’ and for Medicare to pay the 

full $9.0 billion difference between 

what 340B hospitals were paid for 340Bacquired drugs from CY 2018 through 

September 27, 2022, and what they 

would have been paid for 340B-acquired 

drugs absent the 340B Payment Policy 

during this time period, so that affected 

340B covered entity hospitals are paid 

the amount they would have been paid 

in full without application of the 340B 

Payment Policy. While we caveated that 

statement—it would not necessarily be 

appropriate to make this kind of 

adjustment under section 1833(t)(2)(E) 

of the Act (42 U.S.C. 1395l(t)(2)(E)) to 

ensure hospitals receive what they 

would have been paid from Medicare 

and beneficiaries absent the 340B 

Payment Policy every time we make a 

policy change or lose a lawsuit—we find 

that such an adjustment is necessary for 

equitable payments in these unique 

circumstances in part because of the 

unprecedented scope of the remedy in 

terms of the amount of money at issue; 

the number of services, beneficiaries, 

and claims affected; and the number of 

years that have passed between the 

claims and the remedy. 

Accordingly, we concluded that here, 

where we are remedying prior 

payments, it would be appropriate to set 

the remedy payment amount under 

section 1833(t)(2)(E) of the Act (42 

U.S.C. 1395l(t)(2)(E)) so that affected 

340B covered entity hospitals would be 

paid amounts that approximate what 

they would have been paid for these 


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23https://www.cms.gov/medicare/medicare-feefor-service-payment/hospitaloutpatientpps. 

drugs absent the 340B Payment Policy, 

which includes what affected 340B 

covered entity hospitals would 

otherwise have been paid by the 

beneficiary. Therefore, we proposed that 

the $9.0 billion payment amount would 

include $1.8 billion, an amount that is 

equivalent to what affected 340B 

covered entity hospitals would have 

collected from beneficiaries for these 

340B-acquired drugs if the 340B 

Payment Policy had not been in effect. 

We emphasized that, if our proposal 

was finalized, affected 340B covered 

entity hospitals could not bill 

beneficiaries for coinsurance on remedy 

payments—regardless of this 

adjustment—because we would issue 

this remedy payment through MAC 

instructions relying in part on our 

equitable adjustment authority under 

section 1833(t)(2)(E) of the Act (42 

U.S.C. 1395l(t)(2)(E)). We cautioned that 

CMS would consider appropriate 

administrative action for providers who 

nevertheless bill beneficiaries for 

coinsurance. We solicited comments 

from the public on our proposed 

approach to accounting for beneficiary 

cost sharing. 

We thank commenters for their input 

on our policy proposals. We have 

summarized the comments received and 

our responses to those comments in the 

following section. 

Comment: Commenters 

overwhelmingly supported our 

proposed approach and rationale for 

accounting for beneficiary cost sharing. 

Response: We appreciate commenters’ 

support. 

After consideration of comments 

received, and for the reasons stated in 

our proposed rule and in this final rule, 

we are finalizing our policy to account 

for beneficiary cost sharing as proposed. 

We will exercise our authority under 

section 1833(t)(2)(E) of the Act (42 

U.S.C. 1395l(t)(2)(E)) to make 

adjustments ‘‘as necessary to ensure 

equitable payments,’’ to pay the full 

$9.0 billion difference, including $1.8 

billion, an amount that is approximately 

equivalent to what affected 340B 

covered entity hospitals would have 

collected from beneficiaries for these 

340B-acquired drugs if the 340B 

Payment Policy had not been in effect 

from CY 2018 through September 27, 

2022, so that affected 340B covered 

entity hospitals are paid the 

approximate amount they would have 

been paid in full without application of 

the 340B Payment Policy. 

f. Remedy Payment Amounts 

We published the following data file 

that contained our calculations of the 

amounts owed under the abovedescribed methodology to each affected 

340B covered entity hospital for the 

proposed rule: https://www.cms.gov/ 

medicare/medicare-fee-for-servicepayment/hospitaloutpatientpps. We 

solicited comment from the public on 

the accuracy of the data in Addendum 

AAA of the proposed rule, particularly 

with respect to the estimated amount of 

remedy payment due to each hospital. 

This addendum can be found online 

through the CMS OPPS website.23

We thank commenters for their input 

on our policy proposals. We have 

summarized the comments received and 

our responses to those comments in the 

following section. 

Comment: A small number of 

commenters had concerns regarding the 

payment amounts, including a request 

for increased transparency. Some 

commenters expressed a general 

concern that some hospitals would 

receive very large lump sum payments 

relative to their usual OPPS payments. 

Similarly, one commenter supported the 

lump sum calculation methodology but 

requested that CMS share with 

participating 340B providers more 

details about the methodology and a list 

of their 340B claims on which it was 

used. Additionally, a couple 

commenters requested CMS verify their 

individual payment amounts. 

Specifically, one commenter indicated 

that the calculation of the amount owed 

to them was incorrect. This commenter 

believes that they were owed more than 

calculated for CYs 2020 and 2021. 

Another commenter stated that they 

were owed nearly $640,000 more than 

calculated due to claims from CY 2019 

that were resubmitted and reprocessed 

after September 27, 2022, and paid at 

the ASP minus 22.5 percent rate. This 

commenter requested that CMS take 

into account claims that were processed 

and paid at the lower rate through 

December 31, 2022. 

Response: We appreciate these 

commenters’ concerns and have 

reviewed the general and specific issues 

they raised. We also reviewed the 

payment data for these commenters who 

stated our calculations were incorrect. 

As a result of our review, we identified 

several claims accruing prior to CY 2022 

that providers submitted in late CY 

2022. Because those claims accrued 

prior to CY 2022, the MACs correctly 

processed those claims at the ASP 

minus 22.5 percent rate; and these 

claims should be part of the lump-sum 

payments. We have accordingly 

adjusted the remedy payment for 

affected claims. This means that some 

hospitals will receive slightly higher 

payments than in the proposed rule, 

which slightly increases the aggregate 

lump sum payments we are making 

from $9.003 in the proposed rule to 

$9.004 in this final rule. We also note 

it would be impractical to list the 

millions of claims used to calculate all 

of the lump sum payments. For 

increased transparency, Addendum 

AAA has been revised to include 

additional CY 2022 data (please see 

comment below on this subject). To 

resolve any lingering concerns by 

individual providers and provide the 

opportunity for additional transparency, 

we are establishing the technical 

correction process noted later in the 

rule. 

Comment: An additional commenter 

requested clarification with respect to 

two of its affiliated hospitals, which 

were identified on Addendum AAA as 

eligible for payment but did not 

participate in the 340B Program during 

the years in question. 

Response: We appreciate the 

commenter’s transparency. Our 

calculations are based on the 

information that hospitals originally 

used when submitting claims with the 

340B billing modifier, ‘‘JG.’’ These two 

hospitals used the 340B billing modifier 

‘‘JG’’ for some claims during the time 

period in which the 340B Payment 

Policy was in effect, and so they 

received reduced payments under the 

340B Payment Policy. The overall 

remedy payments for these entities are 

small relative to other remedy payments 

for other hospitals, which suggests they 

may have erroneously included the ‘‘JG’’ 

modifier when initially submitting 

claims. We will make remedy payments 

even to providers who submitted the 

‘‘JG’’ modifier incorrectly, because they 

would have received reduced payments 

under the 340B Payment Policy. 

Comment: One commenter stated that 

providers are unable to accurately verify 

estimates because the paid through date 

for claims used by CMS to create the 

estimates has not been documented and 

communicated to providers. The 

commenter requested that CMS disclose 

the paid through date to providers so 

that they can verify the accuracy of the 

calculations. Since the same issue will 

arise for any final settlement, the 

commenter additionally requested that 

CMS document and communicate to 

providers the paid through date used to 

arrive at a final settlement and give 

providers time to accept or refute that 

amount. 

Response: We processed (or, in some 

cases, reprocessed) any claims paid on 

or after September 28, 2022, using the 

default rate (generally ASP plus 6 


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percent). In order to ensure we captured 

all claims appropriately for this 

analysis, we included all claims with a 

Claims Process Date (the date the fiscal 

intermediary completes processing and 

releases the institutional claim to the 

CMS common working file) prior to 

October 12, 2022, or Date of Service on 

or before September 27, 2022, in our 

analysis to determine which claims 

needed to be remedied while ensuring 

we excluded those claims that were 

processed or reprocessed at the higher 

payment rate (generally ASP plus 6 

percent). 

Comment: Several commenters 

requested that CMS add an additional 

column to Addendum AAA displaying 

the total amount withheld from each 

340B hospital for the period from 

January 1, 2022, through September 27, 

2022, before claims were reprocessed to 

allow hospitals to calculate and confirm 

the CY 2022 reprocessed claims 

amounts. These commenters 

additionally requested that CMS 

identify the data sets that it used, as 

well as the cut-off date for any claims 

data it used, to calculate the amount of 

the reprocessed CY 2022 claims, even if 

those data sets were not publicly 

available. 

Response: We concur with the 

commenters that additional information 

regarding the process we used to 

calculate the remedy payment amounts 

for CY 2022 would be helpful for 

providers to calculate their CY 2022 

reprocessed claims amounts. Our 

calculations used data from the CMS 

Common Working File (CWF) OPPS 

data, CWF2023w38. We also included 

two additional columns on Addendum 

AAA: ‘‘CY 2022 (January 1 to September 

27) 340B Drugs Payment Withheld’’ and 

‘‘CY 2022 (January 1 to December 31) 

340B Remedy Payment Already Paid.’’ 

Comment: One commenter, 

referencing the proposed rule’s 

acknowledgment that the $1.5 billion 

estimated amount for CY 2022 claims 

through September 27 might change by 

the time the final rule is issued, 

requested that CMS include with the 

final rule an updated addendum of 

hospital-specific payments to ensure 

that all activity since the proposed rule 

was issued has been accounted for. 

Response: We agree. The final rule 

Addendum AAA has been updated with 

new hospital-specific payment amounts 

and accounts for all payment activity 

that has happened since the proposed 

rule was issued. Our updated claims 

data reflects that these hospitals 

received approximately $10.6 billion 

less in 340B drug payments (including 

money that would have been paid by 

Medicare and money that would have 

come from beneficiaries as copayments) 

than they would have for drugs 

provided in CY 2018 through September 

27, 2022, had the 340B policy not been 

implemented. 

Additionally, our updated analysis 

estimates that $1.6 billion of the total 

$10.6 billion that affected 340B covered 

entity hospitals did not receive as a 

result of the 340B Payment Policy has 

already been remedied through 

reprocessed claims. Accordingly, we 

estimate the remaining remedy amount 

that affected 340B covered entity 

hospitals have not yet received as a 

result of this policy is $9.004 billion 

(rounded to $9.0 billion for purposes of 

discussion in this final rule). 

Comment: One commenter requested 

clarification as to whether the amounts 

listed in Addendum AAA would be the 

actual amounts paid, or if those 

amounts would be subject to 

sequestration. If subject to sequestration, 

the commenter requested clarification as 

to the percentage of the reduction. 

Another commenter requested that CMS 

not impose sequestration on the 

repayments since the sequestration 

adjustment was suspended during the 

PHE when most of the payments 

occurred. 

Response: The calculated amounts in 

Addendum AAA are based on original 

claims that already included any 

applicable sequestration. We do not 

need to apply any additional 

adjustments for sequestration. The 

sequestration percentage, when 

applicable, that applied to the original 

claim will also apply to the remedy 

payment because the remedy amount is 

calculated from the sequestration 

reduced amount. For instance, if the 

original claim did not have any 

sequestration adjustment because the 

claim was paid during the COVID–19 

PHE when the sequestration adjustment 

was suspended, then remedy payment 

calculation for that claim would not 

reflect any sequestration adjustment. 

The lump sum payments were 

calculated to provide a payment amount 

as close as possible to what hospitals 

would have received if not for the 340B 

Payment Policy, including any 

sequestration adjustment that would 

have applied. The amounts included in 

Addendum AAA are the amounts that 

hospitals will receive, except that 

payment amounts may be affected by 

MACs continuing to follow normal 

accounting processes for collecting 

repayment amounts stemming from 

provider-specific overpayment 

obligations, adjustments resulting from 

errors identified through the lump-sum 

technical correction process described 

below, as well as other unique 

situations such as provider bankruptcy 

or payment suspension, any of which 

may impact the provider’s net payment 

amount. 

Comment: Many commenters 

requested a process for affected 340B 

covered entity hospitals to challenge 

CMS’s calculation of their remedy 

payment. One commenter requested that 

CMS provide hospitals with additional 

time, beyond the 60-day proposed rule 

comment period, to review the 

repayment amounts listed in the data 

file and submit data to CMS justifying 

an alternative repayment amount. 

Another commenter suggested that 

hospitals be provided with 120 days 

from the date of payment of the lump 

sum payment to file a dispute, with 

supporting evidence, that CMS 

underpaid the hospital for 340B claims 

for separately payable drugs provided 

from 2018–2022. One commenter 

requested that CMS establish a quick, 

collaborative method for addressing any 

miscalculation of the remedy payments 

due. Specifically, the commenter 

recommended a method with clear, 

short timelines and a requirement for 

MACs to respond and resolve any issues 

quickly. 

Response: We agree with commenters 

that there should be a prompt process 

for affected 340B covered entity 

hospitals to request the correction of 

any errors that hospitals identify in 

CMS’s calculation of the specific 

remedial payment. Consequently, we 

are establishing a technical correction 

process. An affected 340B covered 

entity hospital can alert CMS to 

potential errors in the calculation of 

their lump sum payment amount in 

Addendum AAA by emailing CMS at 

the following address, 

outpatientpps340b@cms.hhs.gov, no 

later than 11:59 p.m. Eastern Standard 

Time (EST) on November 30, 2023. 

Submissions must include (1) a 

description of the nature of the error; (2) 

a designated contact person for the 

purposes of addressing the error; and (3) 

relevant supporting documentation such 

as claim numbers, total units, payment 

amount received, date of payment. We 

will pay the lump sum to an affected 

340B covered entity hospital using this 

process after the alleged calculation 

error has been reviewed and resolved by 

CMS. We will work as diligently as 

possible to resolve any potential 

technical corrections submitted 

promptly. Depending on the complexity 

of the potential technical correction 

submitted, and the volume of overall 

technical corrections submitted, 

processing technical corrections could 

take us substantial additional time, and 

hospitals submitting technical 


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correction requests may be paid after 

other hospitals. 

Comment: Multiple commenters 

requested that CMS clarify that the final 

rule does not affect the procedural 

stature of any open or stayed 

administrative appeals and that it 

intends the final rule to be subject to 

judicial review. These commenters 

specifically requested that CMS state 

that reliance on section 1833(t)(2)(E) of 

the Act (42 U.S.C. 1395l(t)(2)(E)) as 

authority for these adjustments is not 

intended to create any implication that 

the adjustments are not subject to 

judicial review. 

Response: Because this rule fully 

compensates providers for the amounts 

they claimed they are owed on the 340B 

payment issue, we believe this action 

moots any pending appeals on that 

specific issue. Accordingly, if a provider 

were to proceed with a pending appeal 

that would, in effect, be seeking double 

recovery for the same service. A court’s 

jurisdiction to review all or part of this 

rule is outside the scope of this 

rulemaking. 

The following updated data file 

contains the final amounts owed under 

the previously described finalized 

methodology to each affected 340B 

covered entity hospital for the final rule: 

https://www.cms.gov/medicare/ 

medicare-fee-for-service-payment/

hospitaloutpatientpps. 

g. Anticipated Timing of Remedy 

Payments 

In the proposed rule (88 FR 44086), 

we stated that, if we finalized the 

proposal to pay affected 340B covered 

entity hospitals in the manner described 

above, we would propose to make these 

additional payments at the end of CY 

2023 or beginning of CY 2024, after the 

rule had been finalized and the MAC 

instructions for each affected 340B 

covered entity hospital had been issued. 

We received the following comments 

on our proposals. 

Comment: Commenters were nearly 

universally supportive of our proposal 

to make the remedy payments at the end 

of CY 2023 or the beginning of 2024. 

Response: We appreciate commenters’ 

support. 

Comment: One commenter, 

expressing concern about the financial 

situation of safety-net and rural 

hospitals, requested that, prior to CMS 

finalizing its rule related to the 340B 

remedy, CMS authorize the MACs to 

make an initial payment to hospitals 

that request it in the amount listed in 

the proposed rule Addendum AAA. 

Then, in the final rule, the commenter 

suggests that CMS would instruct the 

MACs to make an incremental payment 

to any hospitals that elected to receive 

funds immediately based on the final 

rule and any additional claims that were 

processed through September 27, 2022. 

In other words, this commenter requests 

that CMS instruct the MACs to pay 

hospitals that ask for immediate 

payment the amount listed in the 

proposed rule Addendum AAA prior to 

the effective date of the final rule and 

then, in the final rule, instruct the 

MACs to pay any additional amount due 

based on the final rule Addendum AAA. 

Response: While we appreciate the 

commenter’s concerns, we are unable to 

authorize any payments until this rule 

and policy is finalized and effective. As 

stated above, payments will not be made 

until this rule is effective, which will 

occur 60 days after the rule is displayed 

at the Office of the Federal Register. As 

additionally noted above, to ensure 

payments are made accurately, there 

may be an additional delay for hospitals 

requesting a technical correction. 

After consideration of comments 

received, for the reasons stated in the 

proposed rule and this final rule, subject 

to our clarification above and the 

technical corrections procedure 

discussed earlier, we are finalizing our 

proposal to make these additional 

payments at the end of CY 2023 or 

beginning of CY 2024. In summary, we 

intend to issue instructions for hospitals 

who do not request any correction to 

MACs as soon as possible after the 

technical corrections submission 

deadline has passed. MACs will be 

instructed to pay providers as soon as 

possible after the rule is effective, and 

payments will be made no later than 60 

days after the MAC’s receipt of the 

instructions. We will issue instructions 

to pay hospitals who submit technical 

correction requests after those requests 

are resolved. 

h. Eligibility of Remedy Payments for 

Interest 

In the proposed rule (88 FR 44086), 

CMS also considered its authority to pay 

interest on the remedy payments but 

concluded that we did not believe we 

had the authority to do so. 

We received the following comments 

on our proposals. 

Comment: Many commenters 

disagreed that CMS lacks the authority 

to pay interest on the remedy payments, 

pointing to various statutes discussed in 

the following paragraphs. The majority 

of these commenters relied on section 

1833(j) of the Act (42 U.S.C. 1395l(j)), 

which provides that whenever a final 

determination is made that the amount 

of payment made under this part either 

to a provider of services or to another 

person pursuant to an assignment under 

section 1842(b)(3)(B)(ii) of the Act was 

in excess of or less than the amount of 

payment that is due, and payment of 

such excess or deficit is not made (or 

effected by offset) within 30 days of the 

date of the determination, interest shall 

accrue on the balance of such excess or 

deficit not paid or offset (to the extent 

that the balance is owed by or owing to 

the provider) at a rate determined in 

accordance with the regulations of the 

Secretary of the Treasury applicable to 

charges for late payments. Instead, these 

commenters ask us to construe the 

Supreme Court’s decision in American 

Hospital Association as a ‘‘final 

determination.’’ 

Response: As described here and in 

the following several responses, we do 

not agree that any provision identified 

by commenters provides CMS with 

authority to pay interest. Commenters 

do not identify any administrative ‘‘final 

determination’’ that would trigger the 

interest provision in section 1833(j) of 

the Act (42 U.S.C. 1395l(j)). And our 

regulations foreclose commenters’ 

suggestion to treat the Supreme Court’s 

decision as a ‘‘final determination.’’ Our 

regulations define ‘‘final determination’’ 

in section 1833(j) of the Act (42 U.S.C. 

1395l(j)) to mean ‘‘[a] written 

determination of an underpayment.’’ 42 

CFR405.378(c)(1)(i)(B). We have 

previously explained that this definition 

refers to ‘‘administrative, not judicial, 

determinations; therefore, there is no 

interest obligation under these 

regulations for judicial determinations.’’ 

Medicare Program; Changes Concerning 

Interest Rates Charged on Overpayments 

and Underpayments, 56 FR 31332, 

31335 (1991). 

That interpretation is reinforced by 

the specific litigation interest provisions 

in the Medicare statute. Congress 

provided that cost reports appealed to 

the Provider Reimbursement Review 

Board are generally subject to interest 

beginning 180 days after an 

intermediary’s or the Secretary’s final 

determination. See section 1878(f)(2) of 

the Act (42 U.S.C. 1395oo(f)(2)). And in 

the Medicare Prescription Drug, 

Improvement and Modernization Act of 

2003, Congress amended the judicial 

review process for individual appeals 

and authorized litigation interest only in 

cases granted expedited judicial review 

under section 1869(b)(2) of the Act (42 

U.S.C. 1395ff(b)(2). See Medicare 

Prescription Drug, Improvement and 

Modernization Act of 2003, Public Law 

108–173, section 931(a), 117 Stat. 2066, 

2399 (2003). By providing interest 

provisions that apply specifically to 

judicial determinations, Congress 

confirmed our reading that section 

1833(j) of the Act (42 U.S.C. 1395l(j)) 


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applies only to administrative 

determinations. 

Additionally, changing our 

interpretation of administrative 

determination may cause the various 

interest statutes to conflict. For 

example, if a cost report appeal is 

denied by an intermediary and a court 

ultimately finds that payment should 

have been made, would interest run 

from 180 days after the intermediary’s 

decision under section 1878(f)(2) of the 

Act (42 U.S.C. 1395oo(f)(2)), or from 30 

days after the court’s decision, under 

commenter’s interpretation of section 

1833(j)? We decline to construe section 

1833(j) of the Act (42 U.S.C. 1395l(j)) in 

a way that could conflict with other 

provisions of the Act. 

We also disagree that the Supreme 

Court’s decision would be a qualifying 

‘‘final determination’’ under section 

1833(j) of the Act (42 U.S.C. 1395l(j)), 

even assuming judicial decisions could 

sometimes qualify. Interest under this 

statute runs from a ‘‘final 

determination’’ that the payment made 

‘‘was in excess of or less than the 

amount of payment that is due.’’ But the 

Supreme Court never calculated how 

much less the plaintiff hospitals were 

paid than due, declining to consider 

remedies in the first instance and 

instead focusing on the purely legal 

issue of whether the payment rates in 

the CY 2018 and 2019 OPPS rules 

exceeded CMS’s authority under section 

1833(t)(14) of the Act (42 U.S.C. 

1395l(t)(14)). Am. Hosp. Ass’n, 142 S. 

Ct. at 1903, 1906. On remand, the 

district court similarly rejected the 

plaintiff hospitals’ invitation to 

calculate the amount owed, whether to 

the parties before the court or to the 

entire industry. See Am. Hosp. Ass’n, 

2023 WL 143337, at *3 (declining to 

issue ‘‘order commanding HHS to repay 

each underpaid claim to the penny, 

[because] that cannot possibly be the 

only rational choice available to the 

agency’’). Because the Supreme Court 

never determined the amount of 

underpayment on which interest would 

run, its decision is not a ‘‘final 

determination’’ of the ‘‘amount’’ of 

underpayment under section 1833(j) of 

the Act (42 U.S.C. 1395l(j)). 

Because commenters have not 

identified a final administrative 

determination of an underpayment, we 

do not believe that section 1833(j) of the 

Act (42 U.S.C. 1395l(j)), as construed by 

42 CFR 405.378(c)(1), would authorize 

CMS to pay interest on the proposed 

remedy payments. 

Comment: Two commenters argued 

that even if CMS is correct that interest 

is not due on the amount owed to all 

hospitals that will receive lump sum 

payments, interest is due to plaintiffs in 

several cases pending before the United 

States District Court for the District of 

Columbia that were stayed pending the 

outcome of CMS’s remedy discussed in 

the proposed rule. These plaintiffs, the 

commenters contend, are entitled to 

prevailing party interest under 42 CFR 

405.990(j)(2). These commenters argue 

that, in appealing CMS’s initial 

determination to pay 340B drug claims 

at the unlawful rate, these plaintiffs 

clearly communicated to CMS that the 

rate of ASP minus 22.5 percent 

exceeded the Secretary’s authority and 

should instead have been paid at ASP 

plus 6 percent as required by law. When 

CMS refused to remit payment of ASP 

plus 6 percent through these 

administrative proceedings, the 

plaintiffs thus sufficiently exhausted the 

administrative appeals process, giving 

them standing for judicial review under 

42 U.S.C. 405(g), and entitling them to 

the usual interest awarded to prevailing 

parties that seek an expedited path to 

judicial review. 

Response: 42 CFR 405.990(j)(2) 

implements section 1869(b)(2)(C)(iv) of 

the Act (42 U.S.C. 1395ff(b)(2)(C)(iv)). 

That provision allows a reviewing court 

to award interest to a prevailing party in 

litigation where a provider of services or 

supplier was granted expedited judicial 

review pursuant to section 1869(b)(2) of 

the Act (42 U.S.C. 1395ff(b)(2)). We are 

not aware of any providers who 

received expedited judicial review 

pursuant to subparagraph (b)(2), and so, 

even assuming that provision authorizes 

CMS to pay interest under section 

1869(b)(2) of the Act (42 U.S.C. 

1395ff(b)(2)) without a court order, it 

would not authorize interest payments 

on the remedy payments here. 

To the extent that commenters mean 

to suggest that section 1869(b)(2)(C)(iv) 

of the Act (42 U.S.C. 1395ff(b)(2)(C)(iv)) 

also applies when a court excuses the 

usual exhaustion requirements 

contained in section 1869(b)(1) of the 

Act (42 U.S.C. 1395ff(b)(1)), we disagree. 

Litigation interest is the exception to 

cases filed under section 1869, not the 

rule. No statute authorizes interest for 

litigants who follow the usual 

administrative appeal procedures 

contained in subsection (b)(1). And 

courts have held that it is subsection 

(b)(1)’s reference to section 205(g) that 

authorizes courts to excuse subsection 

(b)(1)’s exhaustion requirement. See 

Tataranowicz v. Sullivan, 959 F.2d 268, 

272 (D.C. Cir. 1992). Subsection (b)(2) 

contains no such reference to section 

205(g), and so we doubt the same 

reasoning would apply. Cf. 1869(b)(2) of 

the Act (42 U.S.C. 1395ff(b)(2)) (limiting 

review to the ‘‘civil action described in 

this subparagraph’’). If Congress wanted 

to extend litigation interest to cases 

where courts had waived exhaustion 

under subsection (b)(1), it could have 

done so when amending that statute to 

add subsection (b)(2). Because Congress 

did not, we decline any invitation to 

extend section 1869(b)(2)(C)(iv) (42 

U.S.C. 1395ff(b)(2)(C)(iv) beyond its 

plain text, especially considering 

implications litigation interest has on 

the United States’ sovereign immunity 

and Congress’s control of the public fisc. 

See, for example, Libr. of Cong. v. Shaw, 

478 U.S. 310, 316 (1986) (‘‘For well over 

a century, this Court, executive 

agencies, and Congress itself 

consistently have recognized that 

federal statutes cannot be read to permit 

interest to run on a recovery against the 

United States unless Congress 

affirmatively mandates that result.’’). 

Comment: One commenter stated that 

the Federal Tort Claims Act provides for 

post-judgment interest (28 U.S.C. 2674) 

and requested post-judgment interest 

from June 15, 2022, the date of the 

Supreme Court’s decision, to the date of 

final payment. Another commenter 

argued that the remedy payments are 

subject to the Prompt Payment Act, as 

amended, and its rules, which state that 

‘‘the temporary unavailability of funds 

does not relieve an agency from the 

obligation to pay these interest penalties 

or the additional penalties required 

under § 1315.11.’’ See 5 CFR 

1315.10(b)(4). This commenter 

additionally notes that the failure of 

CMS to make interest payments could 

result in additional litigation. Similarly, 

another commenter stated that section 

1815(d) of the Act (42 U.S.C. 1395g(d)) 

and common law provide for the 

payment of interest on underpayments 

to Medicare providers. 

Response: We do not agree with 

commenters that the authorities cited 

would provide CMS the ability to 

include interest as part of these lump 

sum remedy payments. No lawsuit has 

been filed under the Federal Tort Claims 

Act, and so its interest provisions are 

irrelevant. See 28 U.S.C. 2674 (limiting 

section to ‘‘the provisions of this title 

relating to tort claims’’). Nor do we 

believe Medicare providers are subject 

to the Prompt Payment Act’s terms. Cf. 

5 CFR 1315.1 (limiting applicability to 

procurement contracts and vendors). 

Even if they were, that statute does not 

apply to instances where, as here, 

‘‘payment that is not made because of a 

dispute between the head of an agency 

and a business concern over the amount 

of payment.’’ 31 U.S.C. 3907(c). Section 

1815 of the Act (42 U.S.C. 1395g(d)) 

governs Part A payments, not Part B, 

and so is similarly irrelevant. See SSA 


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section 1815(d) (42 U.S.C. 1395g(d)) 

(limiting applicability to payments 

‘‘under this part’’). 

Comment: A couple commenters 

directed CMS to the Medicare Claims 

Processing Manual (100–04, Chapter 1, 

Section 80.2.2) for instructions for 

assessing and calculating interest due 

on non-periodic interim (PIP) claims not 

paid in a timely manner by fiscal 

intermediaries and carriers. Another 

commenter referenced MLN Matters No. 

MM3557 and argued that the 340B 

claims were clean and unpaid, 

therefore, based on CMS regulations, 

interest should be paid from the date of 

receipt of the claim. These commenters 

assert that these claims were not 

processed in a timely manner, rendering 

them eligible for interest accrual. 

Response: We appreciate commenters 

highlighting these instructions. Our 

clean claims regulations are found at 42 

CFR 405.922 and implement section 

1842(c)(2)(C) of the Act (42 U.S.C. 

1395u(c)(2)(C)). Section 1842(c)(2)(B)(i) 

of the Act (42 U.S.C. 1395u(c)(2)(B)(i)) 

defines a clean claim as a claim that has 

no defect or impropriety (including any 

lack of any required substantiating 

documentation) or particular 

circumstance requiring special 

treatment that prevents timely payment 

from being made on the claim under 

this part. Section 1842(c)(2)(C) of the 

Act (42 U.S.C. 1395u(c)(2)(C)) provides 

that if payment is not issued, mailed, or 

otherwise transmitted within an 

applicable number of calendar days 

after a clean claim is received, interest 

shall be paid at the rate used for 

purposes of section 3902(a) of title 31, 

United States Code for the period 

beginning on the day after the required 

payment date and ending on the date on 

which payment is made. Our 

longstanding position has been that 

section 1842(c)(2)(C) of the Act (42 

U.S.C. 1395u(c)(2)(C)) does not apply in 

situations like this one where a payment 

regulation was properly applied by the 

contractor to deny a claim that is 

ultimately held unlawful by a court. No 

contractor has the authority to ignore 

CMS’s binding regulations and make a 

payment at odds with the regulations 

within 30 days or otherwise, and so we 

believe this is a ‘‘particular 

circumstance requiring special 

treatment.’’ Accord Medicare Program: 

Changes to the Medicare Claims Appeal 

Procedures, 74 FR 65296, 65302 (2009) 

(‘‘Claims initially denied and 

subsequently paid following a favorable 

appeal decision, or revised following a 

reopening action are, by their nature, 

claims that require special treatment.’’). 

As noted above, the Act speaks 

expressly to the issue of litigation 

interest. And reading section 

1842(c)(2)(C) of the Act (42 U.S.C. 

1395u(c)(2)(C)) to apply to litigation 

interest raises a similar conflict as 

reading section 1833(j) of the Act (42 

U.S.C. 1395l(j) to apply to litigation 

interest. For example, if a claim denied 

by a contractor under CMS’s regulations 

was later certified for expedited judicial 

review under section 1869(b)(2) of the 

Act (42 U.S.C. 1395ff(b)(2)), would 

interest run from 30 days after receipt 

by the contractor under section 

1842(c)(2)(C) of the Act (42 U.S.C. 

1395u(c)(2)(C)), or from 60 days after 

certification under section 

1869(b)(2)(C)(iv) of the Act (42 U.S.C. 

1395ff(b)(2)(C)(iv))? We decline to 

construe section 1842(c)(2)(C) of the Act 

(42 U.S.C. 1395u(c)(2)(C)) in a way that 

could conflict with other provisions of 

the Act. 

Comment: One commenter requested 

that CMS share the citations for the 

authority prohibiting the payment of 

interest. 

Response: As noted above, the 

Supreme Court has clarified that ‘‘[f]or 

well over a century, this Court, 

executive agencies, and Congress itself 

consistently have recognized that 

Federal statutes cannot be read to 

permit interest to run on a recovery 

against the United States unless 

Congress affirmatively mandates that 

result.’’ Libr. of Cong. v. Shaw, 478 U.S. 

310, 316 (1986). The proper analysis is 

thus whether there is legal authority 

affirmatively mandating the payment of 

interest here. CMS’s inability to pay 

interest is a consequence of a lack of 

authority authorizing it to pay interest, 

not any authority prohibiting it from 

paying interest. 

Comment: One commenter 

recommended that CMS work with 

Congress to allow the remedy to include 

interest. 

Response: We appreciate the 

commenter’s recommendation. As 

noted, a legislative change would 

require Congressional action. 

Comment: One commenter asked if 

CMS has considered adjusting future 

budget neutrality provisions to account 

for the amount of interest reasonably 

owed 340B providers. 

Response: Since we are not adopting 

a policy to pay interest in this rule, we 

have not examined whether doing so 

would require changes to the budget 

neutrality adjustments discussed below. 

We agree with the commenter that if we 

were to pay interest, we would need to 

evaluate what, if any, impact such 

interest would have on budget 

neutrality requirements. 

After a consideration of comments 

received, and for the reasons discussed 

above, we continue to believe that we 

do not have the authority to include 

interest as part of the lump sum 

payments. We therefore are finalizing 

our proposal that the lump sum remedy 

payments would not include interest as 

proposed. 

2. OPPS Non-Drug Item and Service 

Payments From CY 2018 Through CY 

2022 

a. Background 

As described in the proposed rule, the 

340B Payment Policy was implemented 

in a budget neutral manner under 

sections 1833(t)(9)(B) and 1833(t)(14)(H) 

of the Act (42 U.S.C. 1395l(t)(9)(B) & 

(t)(14)(H)) by increasing non-drug item 

and service payments to all OPPS 

providers for CY 2018 through CY 2022. 

As we explained in the proposed rule, 

to comply with the statutory budget 

neutrality requirements in sections 

1833(t)(9)(B) and 1833(t)(14)(H) of the 

Act (42 U.S.C. 1395l(t)(9)(B) and 

(t)(14)(H)), as well as section 

1833(t)(2)(E) of the Act (42 U.S.C. 

1395l(t)(2)(E)), CMS must account for 

these additional payments, which were 

made solely due to the 340B Payment 

Policy that was in effect from CY 2018 

through CY 2022, in determining a 

remedy for the 340B policy. As 

described in the proposed rule, after the 

Supreme Court’s decision in American 

Hospital Association, those additional 

payments became a windfall—payments 

the hospitals should not have received 

but did anyway. We noted that to 

comply with budget neutrality and 

restore the situation as closely as 

reasonably possible to the state that 

would exist if we simply re-ran all the 

claims from 2018 to 2022 under the 

correct payment rules, we must recover 

this windfall. 

As summarized in the proposed rule, 

the reduction in 340B drug payments 

made to affected 340B covered entity 

hospitals from CY 2018 through CY 

2022 was offset by an increase in nondrug item and service payments made to 

all hospitals paid under the OPPS 

during the same time period to comply 

with statutory budget neutrality 

requirements. In other words, all 

hospitals were paid more under the 

OPPS for non-drug items and services 

for CY 2018 through CY 2022 than they 

would have been paid absent the 340B 

Payment Policy. As we explained, 

starting in CY 2018, CMS applied an 

approximate 3.19 percent increase to the 

OPPS conversion factor to offset the 

decreased OPPS 340B drug payments. 

And, as we also explained, because we 

proposed to make additional payments 

to affected 340B covered entity hospitals 


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to pay them what they would have been 

paid had the 340B policy never been 

implemented, we were required to 

correspondingly propose to make an 

offset to maintain budget neutrality as if 

the 340B Payment Policy had not been 

in effect during CY 2018 through CY 

2022. As detailed in the proposed rule, 

this is consistent with the policy 

finalized in the CY 2023 OPPS/ASC 

final rule with comment period (87 FR 

71976) where CMS finalized a minus 

3.09 percent adjustment to the 

conversion factor as this adjustment 

removes the effect of the 340B policy as 

originally adopted in CY 2018, again, as 

described in more detail in section I.C. 

of the proposed rule. The CY 2023 

adjustment to the conversion factor 

ensures it is equivalent to the 

conversion factor that would be in place 

if the 340B Payment Policy had never 

been implemented. 

As we described in the proposed rule, 

to calculate the additional amount CMS 

paid for non-drug items and services, 

we proposed to include those assigned 

the following status indicators, SI = J1, 

J2, P, Q1, Q2, Q3, R, S, T, U, V. These 

status indicators generally capture the 

non-drug items and services impacted 

by a change in the OPPS conversion 

factor. For additional details on these 

status indicators, we refer readers to 

Addenda D1 of the CY 2023 OPPS/ASC 

final rule with comment period for the 

most recent OPPS status indicators and 

their definitions. This file is available 

on the CMS website.24 As we noted in 

the proposed rule, we calculated the 

adjusted payment (the payment that 

would have been made for the non-drug 

item or service absent the budget 

neutrality adjustment to the conversion 

factor due to the 340B Payment Policy) 

by taking the amount paid for the nondrug item or service and dividing it by 

1.0319 (the amount by which the 

conversion factor was increased during 

CYs 2018 through 2022 to budget 

neutralize the effect of the 340B 

Payment Policy). We proposed that the 

amount that would need to be offset to 

maintain budget neutrality in crafting 

this remedy would be based on the 

payments to providers that would have 

been made for non-drug items and 

services absent the 340B Payment Policy 

during CY 2018 through CY 2022, and 

the Medicare payment to 340B 

providers for the amount equivalent to 

the additional drug payments that 

would have otherwise been paid as 

beneficiary cost-sharing. Based on these 

factors, we proposed prospectively to 

offset $7.8 billion in order to maintain 

budget neutrality. This figure was 

calculated based on past claims data 

with 80 percent of this amount based on 

the Medicare share and 20 percent 

based on the beneficiary share. As we 

explained, our budget -neutrality 

adjustment in the 2018 through 2022 

OPPS rules reflected a prediction 

regarding how much we would spend 

on 340B drugs—a prediction that turned 

out to be too low. As it turned out, 340B 

hospitals spent more on 340B drugs 

than we expected, so our policy ended 

up saving the Trust Fund (and 

beneficiaries) more money from cutting 

the rates paid for 340B drugs than the 

Trust Fund (and beneficiaries) paid for 

non-drug services in our budgetneutrality adjustment to offset the 

savings. We explained that our 

proposed remedy would achieve budget 

neutrality by reversing that imbalance. 

We proposed that in aggregate, the total 

additional payment that providers 

would receive as a result of this remedy, 

$10.5 billion, would be larger than the 

amount of payment that would be 

prospectively offset, $7.8 billion. As we 

explain below and stated in the 

proposed rule, we believe that our 

proposed remedy, which would 

effectively reverse the imbalance that 

arose under the policy the Supreme 

Court deemed unlawful and would 

reasonably approximate the results that 

would occur if we simply re-ran the 

claims after eliminating the 340B 

adjustment, reflects the best approach to 

budget neutrality in these unique 

circumstances. We solicited comments 

from the public on our proposed 

approach to implementing budget 

neutrality. 

Comment: We received many 

comments on our proposed approach to 

implementing budget neutrality. 

Response: These comments are 

addressed in Section II.B.2.b of this final 

rule. 

b. Prospective Adjustment to Payments 

for Non-Drug Items and Services To 

Offset the Increased Payments for NonDrug Items and Services Made in CY 

2018 Through CY 2022 

As described in the proposed rule (88 

FR 44087), we believe that sections 

1833(t)(2)(E) and (t)(14) of the Act (42 

U.S.C. 1395l(t)(2)(E) and (t)(14)) are 

properly read to require budget 

neutrality. As we explained in the 

proposed rule, section 1833(t)(2)(E) of 

the Act (42 U.S.C. 1395l(t)(2)(E)) 

provides that adjustments under that 

provision must be made in a budget 

neutral manner. Section 1833(t)(14)(H) 

of the Act (42 U.S.C. 1395l(t)(14)(H)) 

states that additional expenditures 

resulting from this paragraph shall not 

be taken into account in establishing the 

conversion, weighting, and other 

adjustment factors for 2004 and 2005 

under paragraph (9), but shall be taken 

into account for subsequent years, while 

section 1833(t)(9)(B) of the Act (42 

U.S.C. 1395l(t)(9)(B)) states that the 

adjustments for a year may not cause the 

estimated amount of expenditures under 

this part for the year to increase or 

decrease from the estimated amount of 

expenditures under this part that would 

have been made if the adjustments had 

not been made. To implement these 

requirements, we proposed to unwind 

the additional payments that were made 

for non-drug items and services to all 

providers from CY 2018 through CY 

2022. In other words, along with 

reversing the rate change we discussed 

in the proposed rule, we proposed to 

reverse the accompanying increase in 

the conversion factor for CYs 2018 

through 2022 that was solely 

attributable to the adoption of the 340B 

Payment Policy. 

As described in the proposed rule, to 

reduce the burden on providers of 

offsetting the $7.8 billion offset required 

to maintain budget neutrality, we 

proposed to implement the adjustment 

prospectively. We proposed to, 

beginning in CY 2025, reduce all 

payments for non-drug items and 

services to all OPPS providers—except 

any hospital that enrolled in Medicare 

after January 1, 2018—by 0.5 percent 

each year until the total offset was 

reached (which we estimated to be 

approximately 16 years). As stated in 

the proposed rule, starting this 

reduction in CY 2025 would allow CMS 

time to finalize its methodology, and 

then apply its methodology to calculate 

and publish the payment rates in the CY 

2025 OPPS/ASC proposed rule. We 

stated it would also allow adequate time 

for impacted parties to assess and 

prepare for the new payment rates that 

would be calculated using a reduced 

conversion factor. Additionally, as we 

remarked in the proposed rule, we 

believed a 0.5 percent annual reduction 

in the conversion factor would be 

appropriate because it would balance 

the need to address the past payments 

for non-drug items and services to 

ensure budget neutrality while also 

ensuring that the offset was not 

immediately, in the short-term, overly 

financially burdensome on impacted 

entities, especially those in rural 

communities, which we believed would 

be the case if we were to apply an 

adjustment for the full offset amount in 

a single year. 

In the proposed rule, we 

acknowledged that, in litigation, we at 


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one point questioned the American 

Hospital Association’s suggestion that 

we could achieve budget neutrality by 

decreasing Medicare payments in future 

years, noting that section 1833(t)(9) of 

the Act (42 U.S.C. 1395l(t)(9)) requires 

budget neutrality for a particular ‘‘year.’’ 

See Am. Hosp. Ass’n v. Becerra, Br. for 

the Respondents, at 30 (U.S. No. 20– 

1114).25 At the same time, however, the 

government’s briefing pointed to the 

District Court’s conclusion that if the 

Secretary was to retroactively increase 

the 2018 and 2019 payments for 340B 

hospitals, ‘‘budget neutrality would 

require him to retroactively lower the 

2018 and 2019 rates for other Medicare 

Part B products and services.’’ Ibid. In 

the proposed rule, we indicated that we 

had further considered section 

1833(t)(9) of the Act (42 U.S.C. 

1395l(t)(9)) in light of the Supreme 

Court’s decision holding that judicial 

review was available and also 

recognizing the statutory requirement of 

budget neutrality, and that consequently 

different ways of approaching the 

remedy had come into focus. 

As we explained in the proposed rule, 

our proposal was consistent with 

section 1833(t)(9) of the Act: It would 

offset the amounts of money that 

constitute excess payments in past 

years—which are effectively 

overpayments for those years (that is, 

2018 to 2022) in light of the Supreme 

Court’s decision. In other words, while 

we proposed reducing the conversion 

factor in future years, we would be 

doing so not by seeking to budget 

neutralize payments across a period of 

years rather than in a particular ‘‘year,’’ 

but instead by adjusting payment rates 

for each year from 2018 to 2022 to 

account for the Supreme Court’s 

decision. We proposed that we would 

then make the requisite additional 

payments to 340B hospitals for those 

years and collect the excess payments 

from other hospitals in future years. We 

also explained that because the 

estimated amount of expenditures for 

each of 2018 to 2022 would still be 

budget neutralized—indeed, we stated 

that it was our best effort to implement 

the policy that would have been in 

effect had the 340B policy never been 

implemented in the first place—we 

believed it would be consistent with the 

provision that adjustments may not 

‘‘cause the estimated amount of 

expenditures under this part for the year 

to increase or decrease.’’ See section 

1833(t)(9)(B) of the Act (42 U.S.C. 

1395l(t)(9)(B)). As noted in the proposed 

rule, we believed that this interpretation 

would account for reliance interests 

hospitals may have in payments already 

made while staying consistent with the 

budget neutrality requirements repeated 

throughout the OPPS statute in sections 

1833(t)(2)(E), (t)(9), and (t)(14)(H) (42 

U.S.C. 1395l(t)(2)(E), (t)(9) and 

(t)(14)(H)). And, as discussed in the 

proposed rule, we concluded that 

avoiding a windfall to providers was 

consistent with the agency’s 

recoupment authority. We invited 

comments on these aspects of our 

proposal. 

We also acknowledged that under our 

proposal the Part B Trust Fund would 

pay out more for remedial payments 

than it would recover over time based 

on the reduction in payments for nondrug items and services. As we 

explained, that is a consequence of 

many factors. The most significant 

factor is our estimate in the CY 2018 

OPPS/ASC final rule of the amount that 

expenditures for 340B-acquired drugs 

would decrease under the 340B 

Payment Policy. As part of the 340B 

Payment Policy, we budget neutralized 

the decreased payments for 340Bacquired drugs by applying a 3.19 

percent adjustment to the conversion 

factor to increase expenditures for nondrug items and services. In the proposed 

rule, we acknowledged that Medicare 

could not perfectly have calculated a 

precise estimate when it first made the 

budget neutrality adjustment in the CY 

2018 final rule with comment period. In 

the CY 2018 final rule with comment 

period, we discussed that, because data 

on drugs that are purchased with a 340B 

discount are not publicly available, it 

was not possible to estimate more 

accurately the amount of the aggregate 

payment reduction. That imprecision 

impacted the budget neutrality 

adjustment we calculated. We discussed 

that other potential offsetting factors 

included possible changes in provider 

behavior and overall market changes 

that may have lowered the impact of the 

payment reduction in the CY 2018 

OPPS/ASC final rule with comment 

period (82 FR 52623). 

We now know that CMS 

underestimated the growth in 

expenditures for 340B drugs in CYs 

2018 through 2022. Therefore, as we 

stated in the proposed rule, our budget 

neutrality calculations for those years 

ended up increasing payments for nondrug services by less than we decreased 

payments for 340B drugs. As we 

explained, we followed our standard 

approach not to propose to re-calculate 

what the budget neutrality offset would 

have been beginning in 2018 if we had 

used more accurate assumptions. 

Rather, we proposed simply to unwind 

the 3.19 percent budget neutrality 

adjustment we set beginning in 2018. 

Because of our flawed assumptions in 

2018, however, the total amount of our 

proposed remedy payments to 340B 

hospitals for 340B drugs would thus be 

greater than the future reduction to 

payments. 

As we explained in the proposed rule, 

there were other reasons for the 

difference between the lump-sum 

payment and our future reductions to 

non-drug spending. Some of these 

reasons increase that gap; others do the 

opposite. First, a large portion of the CY 

2022 340B drug claims for dates of 

service between January 1, 2022, and 

September 27, 2022, have already been 

remedied as a result of being processed 

or reprocessed at the default drug 

payment rate. However, none of the 

non-drug item and service claims from 

CY 2022 have been offset yet to account 

for our proposed method of budget 

neutralization. Second, during CY 2022 

CMS began making payment for 340B 

drugs at the default drug payment rate, 

generally ASP plus 6 percent, for claims 

processed on or after September 28, 

2022; however, no adjustment was made 

for the increased payment of the nondrug item and service claims that were 

processed during this time. Therefore, 

as we explained, there was over an 

entire quarter of claims for non-drug 

items and services that were paid a 

higher rate due to the 340B Payment 

Policy that still needed to be offset, 

while the 340B drug claims for that 

quarter had already been paid correctly. 

Additionally, as we remarked in the 

proposed rule, our proposal included in 

the remedy payments the amount that 

affected 340B covered entity hospitals 

would otherwise have been paid by 

beneficiaries. This, we explained, would 

approximate what the hospitals would 

have been paid for these drugs absent 

the 340B Payment Policy. Because the 

statute requires that this adjustment be 

budget neutral, we proposed to include 

in the prospective offset calculation an 

amount to offset this increase in 

Medicare payments. 

In sum, we proposed in the proposed 

rule a total prospective offset of $7.8 

billion to maintain budget neutrality as 

if the 340B Payment Policy had never 

been in effect and therefore had never 

adjusted the OPPS conversion factor. 

That offset encompasses both the 

windfall providers received from the 

Medicare Trust Fund for non-drug 

services between 2018 and 2022, as well 

as the additional copayments they 

received from beneficiaries on those 

services. And we proposed to use it to 

offset both the payments we are making 


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to compensate 340B hospitals for the 

lower amounts Medicare paid them and 

the equitable adjustment we are making 

to compensate for the additional 

beneficiary copayments they would 

have received. 

To avoid potentially overburdening 

providers with an immediate downward 

adjustment to the OPPS conversion 

factor, we proposed to decrease future 

payments for every non-drug item and 

service for every hospital. As we 

explained, this approach was similar to 

the original budget neutrality 

adjustment in the 340B Payment Policy 

that increased the payment for every 

non-drug item and service for CY 2018 

through CY 2022 to offset the downward 

adjustment in the payment rate for 

drugs acquired under the 340B Program. 

We acknowledged in the proposed rule 

that, depending on how a hospital’s 

future mix of drug and non-drug 

services compared to its past mix of 

drug and non-drug services, as well as 

any absolute growth in a hospital’s nondrug services, some hospitals might 

ultimately receive slightly more (or less) 

of a payment reduction than the 

payment increase they received in CY 

2018 through CY 2022. We additionally 

acknowledged that there is often some 

imprecision inherent in budget 

neutrality calculations, and being more 

precise would require that we 

recalculate the additional amount that 

each hospital received under the prior 

policy and then apply a specific 

reduction to that hospital’s future nondrug service payment rates to offset that 

amount. As we explained, that 

alternative was very similar to the 

claims reprocessing alternative that we 

discussed in section II.A.2 of the 

proposed rule, which would impose 

significant burdens and payment delays 

for 340B providers. We also explained 

that because it would be 

administratively unworkable to tailor 

individual payment reductions for each 

of the thousands of impacted hospitals 

for over a decade and a half, meaning 

we would likely need to collect a lump 

sum budget neutrality recoupment. We 

noted that it would impose all the 

burdens of an up-front budget neutrality 

recoupment that we decided against 

proposing, as explained in section II.A.3 

of the proposed rule. We indicated that, 

except in the case of truly new 

hospitals, which we proposed to 

exclude from the prospective offset 

described under section II.B.2.c of the 

proposed rule, we did not believe our 

proposed approach would so 

significantly undercompensate hospitals 

to require that kind of precision, despite 

these potential distributional 

consequences. See Shands Jacksonville 

Med. Ctr., Inc. v. Azar, 959 F.3d 1113, 

1120 (D.C. Cir. 2020) (rejecting 

challenge to remedy rule even when it 

left some hospitals ‘‘slightly better off 

and others slightly worse off than they 

would have been had the rate reduction 

never taken effect’’). Rather, we 

explained that we believed that our 

remedy would come as close as 

reasonably possible to turning back the 

clock to restore us to the place in which 

we would have been absent the policy 

the Supreme Court held unlawful. As 

we emphasized in the proposed rule, 

this remedy applies in truly unique 

circumstances: we must apply budget 

neutrality in a way that may not be 

purely prospective, but may be partially 

retroactive to rectify an adjudicated past 

violation of law. As discussed in the 

proposed rule, re-running all the 

relevant claims as if the 340B Payment 

Policy did not occur would be close to 

impossible administratively. 

Consequently, given these unique 

circumstances, we explained that we 

believed our proposed approach 

properly applied the budget neutrality 

principle, even if it resulted in some 

effectively unavoidable imprecision. 

Accordingly, as described in the 

proposed rule, beginning in CY 2025, 

we proposed to reduce OPPS payments 

for non-drug items and services 

annually by decreasing the OPPS 

conversion factor by 0.5 percent each 

year until the total offset, estimated to 

be $7.8 billion in the proposed rule, was 

reached. We explained that we 

recognized that the proposed rule was 

unique and therefore required a unique 

prospective offset period. We also 

explained that we believed an annual 

reduction of 0.5 percent would offset 

this amount in a reasonable amount of 

time while not imposing too significant 

of a reduction on hospitals in any 

particular year. At the time of the 

proposed rule, we estimated that this 

process would take approximately 16 

years (Table 1). As detailed in the 

proposed rule, this estimate was based 

on current OPPS payments that were 

made through the OPPS conversion 

factor and typical year-over-year 

increases in OPPS payments over the 

past ten years. We noted that, similar to 

the original 340B budget neutrality 

adjustment to the conversion factor, 

both Medicare payments under the 

OPPS and beneficiary cost-sharing 

would be impacted by the change in the 

conversion factor. As described in the 

proposed rule, in this instance, 

beneficiaries would generally have 

lower co-insurance payments for nondrug items and services as a result of the 

proposed 0.5 percent annual reduction 

to the OPPS conversion factor for the 

duration of the required budget 

neutrality offset. 

We invited comment on our estimated 

budget neutrality offset calculations 

described in the proposed rule, 

including the discussion of our method 

of budget neutralization not fully 

aligning with the money we predicted 

the Part B Trust Fund would pay out in 

lump sum payments for 340B-acquired 

drugs. In the proposed rule, we stated 

that we would adjust this estimate in 

future CY annual OPPS rules after CY 

2025, based on updated data, such as 

claims and aggregate OPPS spending 

estimates, to account for how much of 

the total additional non-drug item and 

service payment amount had been offset 

by the time of each annual rule. In the 

proposed rule, we stated that in the final 

CY rulemaking for this process, when 

we estimated the remaining amount of 

Medicare payment that would needed to 

be offset fully within the prospective 

year, the 0.5 percent reduction amount 

would be reduced in the final year in 

which the adjustment applied, if 

needed, to the percentage estimated to 

be sufficient to offset the remaining 

amount by the end of that calendar year. 

After this final prospective adjustment 

was made, we proposed that we would 

not make any additional adjustments to 

the OPPS conversion factor for purposes 

of offsetting the additional Medicare 

payments made to remedy the OPPS 

340B Payment Policy, nor would we 

make any additional future adjustments 

if the amount of the offset in the final 

year of this adjustment was more or less 

than we had estimated in rulemaking for 

that CY. We proposed to codify the 0.5 

percent reduction in the OPPS 

conversion factor effective for CY 2025 

in the regulations by adding new 

paragraph (b)(1)(iv)(B)(12) to § 419.32. 

BILLING CODE 4120–01–P 


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BILLING CODE 4120–01–C 

We sought comments on the annual 

percent reduction method described in 

the proposed rule and whether an 

alternative option—including those 

discussed in section II.A of the 

proposed rule—would be appropriate. 

We suggested that an additional 

possible alternative timeline for 

maintaining budget neutrality could be 

to offset a fixed dollar amount each year 

over a fixed period of time such as 5, 10, 

or 15 years. By way of an example, we 

suggested that we could divide the $7.8 

billion number by 10 in order to offset 

$780 million per year from CY 2025 

through CY 2034 by making an 

adjustment to the conversion factor to 

reflect an estimated $780 million 

reduction in non-drug item and service 

spending for each year. 

As described in the proposed rule, we 

also considered whether hospitals 

needed additional time to prepare 

following any finalized policy, and, as 


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TABLE 1: ILLUSTRATION OF THE PROPOSED 0.5 PERCENT CONVERSION 

FACTOR ADJUSTMENT TO THE OPPS NON-DRUG ITEMS AND SERVICES 

BEGINNING CY 2025 TO MAINTAIN BUDGET NEUTRALITY 

CY2024 CY2025 CY2026 CY2027 CY2028 

Total Applicable 

OPPS Non-Drug $63,724 $66,910 $70,256 $73,769 $77,457 Item and Service 

Spending (millions) 

0.5-Percent 

Payment Reduction $0 $335 $351 $369 $387 

Amount (millions) 

Estimated Total 

Cumulative Offset $0 $335 $686 $1,055 $1,442 

(millions) 

CY2030 CY2031 CY2032 CY2033 CY2034 

Total Applicable 

OPPS Non-Drug $85,369 $89,667 $94,150 $98,858 $103,801 Item and Service 

Spending (millions) 

0.5-Percent 

Payment Reduction $427 $448 $471 $494 $519 

Amount (millions) 

Estimated Total 

Cumulative Offset $2,276 $2,724 $3,195 $3,689 $4,208 

(millions) 

CY2036 CY2037 CY2038 CY2039 CY2040 

Total Applicable 

OPPS Non-Drug $114,440 $120,162 $126,170 $132,479 $139,102 Item and Service 

Spendine: (millions) 

0.5-Percent 

Payment Reduction $572 $601 $631 $662 $581* 

Amount (millions) 

Estimated Total 

Cumulative Offset $5,325 $5,926 $6,557 $7,219 $7,800 

(millions) 

*Note, the final year's offeet is estimated to be less than 0.5 percent in order to meet the total estimated offeet of $7.8 billion. 

CY2029 

$81,330 

$407 

$1,849 

CY2035 

$108,991 

$545 

$4,753 

We also note the Total Applicable OPPS Non-Drug Item and Service Spending are estimates based on an assumption of 5 percent 

annual growth. The 5 percent annual growth is determined from a 10-year baseline percentage increase. 
77174 Federal Register / Vol. 88, No. 215 / Wednesday, November 8, 2023 / Rules and Regulations 

such, sought comment on whether 

delaying the proposed reduction in the 

conversation factor from CY 2025 to CY 

2026 would provide hospitals with 

additional time to make necessary 

arrangements. 

We received the following comments 

on our proposals. 

Comment: Many commenters argued 

that since, in their view, sections 

1833(t)(14) and (t)(2)(E) of the Act (42 

U.S.C. 1395l(t)(14) and (t)(2)(E)) do not 

apply to the remedy payments (for the 

reasons described under section II.B.1), 

the budget neutrality requirements of 

those statutes also do not apply to the 

remedy payments. 

Response: We explain at length above 

why sections 1833(t)(14) and (t)(2)(E) of 

the Act (42 U.S.C. 1395l(t)(14) and 

(t)(2)(E)) are the proper authorities to 

make these remedy payments. We 

therefore disagree with commenters that 

budget neutrality requirements in those 

provisions would not also apply. And 

even if a budget neutrality adjustment is 

not statutorily required, it is an 

appropriate exercise of the agency’s 

statutory and common-law or inherent 

recoupment authorities as a policy 

matter, as we explain further later in 

this section. 

Comment: Some commenters argued 

that section 1833(t)(14)(H) of the Act (42 

U.S.C. 1395l(t)(14)(H)) cannot authorize 

our unwinding of the non-drug item and 

service payments from the 340B 

Payment Policy. That provision reads, 

as relevant: ‘‘Additional expenditures 

resulting from this paragraph shall not 

be taken into account in establishing the 

conversion, weighting, and other 

adjustment factors for 2004 and 2005 

under paragraph (9), but shall be taken 

into account for subsequent years.’’ In 

their view, there is nothing ‘‘additional’’ 

about the lump sum payment, because 

it is what 340B hospitals should have 

been paid in the first place. And the 

payment is not being made ‘‘as a result 

of this paragraph’’ but rather the 

agency’s loss of a court case. These 

commenters further disagreed with our 

reading of section 1833(t)(14)’s reference 

to paragraph (9), which directs CMS to 

adjust the groups, relative payment 

weights, and wage indices in the OPPS 

‘‘for a year.’’ These commenters argued 

that this provision is prospective in 

nature and therefore cannot be relied 

upon to require or authorize what they 

characterize as a corresponding 

retrospective recoupment from 

hospitals. One commenter interpreted 

‘‘additional expenditures’’ in section 

1833(t)(14)(H) of the Act (42 U.S.C. 

1395l(t)(14)(H)) to refer only to 

expenditures from CMS electing to 

refine its drug payment methodology as 

permitted under section 1833(t)(14) of 

the Act (42 U.S.C. 1395l(t)(14)). The 

commenter asserted that this means 

performing a survey and changing the 

drug payment methodology or refining 

the overhead cost payment, and that, in 

this case, the additional expenditures 

are neither of these and are instead ‘‘a 

loss at the Supreme Court, not a 

payment methodology refinement.’’ 

Response: We disagree with 

commenters’ interpretation of sections 

1833(t)(14)(H) and (t)(9)(B) of the Act 

(42 U.S.C. 1395l(t)(14)(H) & (t)(9)(B)). As 

an initial matter, commenters overlook 

that we are not adjusting future 

payments by the $9 billion lump sum 

payment or by the $10.5 billion total 

cost of this remedy rule. Rather, we are 

unwinding the payment increases for 

non-drug services and items in the 340B 

Payment Policy (82 FR 59482) in order 

to place providers in as close to a 

situation as they would have been if the 

340B Payment Policy never existed. 

Additionally, the Supreme Court 

stated it would ‘‘not address potential 

remedies.’’ Am. Hosp. Ass’n, 142 S. Ct. 

at 1903. We are using section 1833(t)(14) 

of the Act (and sections 1871(e) and 

1833(t)(2)(E) of the Act, as relevant) to 

unwind the 340B Payment Policy. Any 

increased expenditures are therefore a 

result of paragraph (14). Section 

1833(t)(14) of the Act (42 U.S.C. 

1395l(t)(14)) does not contain an 

exception to the budget neutrality 

requirement when unwinding the 

agency’s past interpretations. 

Ultimately, we are responding to the 

Supreme Court’s decision for CY 2018 

through CY 2022 the same way as we 

responded to the Supreme Court’s 

decision in the CY 2023 OPPS final rule: 

unwinding both the payment decrease 

for 340B-acquired drugs and the 

payment increase for non-drug items 

and services. No one objected to the 

3.09 percent decrease to payments for 

non-drug items and services, despite it 

responding to the same Supreme Court 

decision and restoring payments for 

340B-acquired drugs to what they 

should have been all along. We believe 

our approach here is analogous. 

We also disagree that the reference in 

section 1833(t)(9)(B) of the Act (42 

U.S.C. 1395l(t)(9)(B)) to adjustments 

‘‘for a year’’ diminishes our ability to 

return providers to the situation they 

would have been absent the 340B 

Remedy Policy. We previously 

explained that the OPPS’s generally 

prospective nature does not prevent us 

from remedying legal errors identified 

by courts. We believe we should apply 

section 1833(t)(9)(B) consistent with 

that instruction; if a court decision 

invalidates a policy that impacts 

payments ‘‘for a’’ particular past ‘‘year,’’ 

we can account under section 1833(t)(9) 

for the impact the legally correct policy 

would have had for that same year. That 

is especially true when, as here, the cut 

to 340B-acquired drugs was so 

inextricably intertwined with the 3.19 

percent increase to payments for nondrug items and services budget 

neutralized. Because we are making 

adjustments to payments for CY 2018 

through CY 2022, section 1833(t)(9)(B) 

of the Act (42 U.S.C. 1395l(t)(9)(B)) 

requires us to make corresponding 

budget neutralizing adjustments to the 

‘‘estimated amount of expenditures’’ for 

each of those years. To the extent 

necessary, this final rule can be viewed 

as a retroactive adjustment to the 

payment rates for each of 2018 through 

2022, as authorized by section 

1871(e)(1)(A) of the Act ((42 U.S.C. 

1395hh(e)(1)(A)). We could have, for 

example, increased the payment rate for 

340B-acquired drugs for CY 2018, and 

decreased the payment rate for non-drug 

items and services by 3.09 percent for 

CY 2018 and reprocessed all affected 

claims. While that solution was not 

generally supported by the commenters 

for different reasons, all payment 

adjustments would have been made in 

the same year. The fact that we are 

accomplishing nearly the same result 

(that is, unwinding the payment 

decreases and increases for 2018–2022) 

through the reconciliation process 

described above and implementing the 

proper payment or offset amounts does 

not, in our view, relieve us of the budget 

neutrality requirements in the statute 

nor does it render our proposed remedy 

unreasonable or unsupported by the 

statutory scheme as a whole. 

Comment: One commenter posited 

that the proposed offsets are not budget 

neutral because there is no ‘‘budget’’ for 

the period spanning from 2018 to 2041. 

Response: The term ‘‘budget 

neutrality’’ is a term of art and does not 

reference a particular ‘‘budget.’’ And 

even if the term ‘‘budget’’ should be 

construed separately from the rest of the 

term, a budget does not necessarily have 

to apply to a defined time frame. See 

BUDGET, Black’s Law Dictionary (11th 

Ed. 2019) (‘‘A sum of money allocated 

to a particular purpose or project.’’). 

Here, we understand budget neutrality 

in section 1833(t)(2)(E) (and, to the 

extent relevant, the title of section 

1833(t)(9)(B)) generally to refer to the 

impact of our policies on OPPS and the 

Part B Trust Fund—not to any particular 

written document. 

Comment: Some commenters argue 

that section 1833(t)(2)(E) of the Act (42 

U.S.C. 1395l(t)(2)(E) similarly cannot be 

used to unwind the payment increases 


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26See Reply In Support Of Plaintiffs’ Motion to 

Hold Unlawful And Remedy Defendants’ Past 

Underpayment of 340b Drugs, Am. Hospital Ass’n 

v. Becerra, Case No. 1:18–cv–2084, Dkt. 78 at 14– 

17 (Sep. 21, 2022). 

27https://www.congress.gov/108/crpt/hrpt391/ 

CRPT-108hrpt391.pdf. 

for non-drug payments and services, 

both because the provision is 

prospective in nature and because its 

reference to ‘‘equitable payments’’ refers 

to ‘‘payments,’’ not recoupments or 

reductions. They argue the surrounding 

statutory language supports this 

payment-only reading, as ‘‘outlier 

adjustments under paragraph (5) and 

transitional pass-through payments 

under paragraph (6)’’ should be read to 

refer to ‘‘additional payment[s],’’ not 

funding that CMS seeks to recoup from 

hospitals. 

Response: We addressed above why 

we believe OPPS’s prospective nature 

does not make it inapplicable to this 

remedy rule. Just as section 1833(t)(2)(E) 

of the Act (42 U.S.C. 1395l(t)(2)(E)) is 

broad enough to encompass individual 

payments for cancer hospitals (76 FR 

74204), it is broad enough to encompass 

the adjustments to future payments for 

non-drug items and services we finalize 

here. Indeed, adjusting future payment 

years to ensure providers are paid fairly 

falls comfortably inside the plain text of 

section 1833(t)(2)(E) of the Act (42 

U.S.C. 1395l(t)(2)(E)). We disagree with 

commenters that the term ‘‘equitable 

payments’’ can never include 

reductions. The statute authorizes 

‘‘adjustments to ensure equitable 

payments’’—not just upward 

adjustments to ensure equitable 

payments. Similarly, we disagree with 

the assertion that ‘‘equitable payments’’ 

excludes adjustments to recoup money 

that should not have been paid; as 

explained above, restoring parties to the 

situation they should have been is 

equitable in every sense of the term. 

Comment: A few commenters argued 

that the retroactive rulemaking authority 

in section 1871(e)(1)(A) of the Act (42 

U.S.C. 1395hh(e)(1)(A)) (or anywhere 

else) does not authorize budget 

neutrality. One commenter argued that 

CMS only discussed its retroactive 

rulemaking authority in the proposed 

rule with respect to the authority to 

make the remedy payments, not to 

budget neutralize the remedy payments. 

The commenter argues that this is for 

good reason because CMS cannot rely 

upon any general retroactive rulemaking 

statutes to implement an offset because 

it would rely upon paragraph (9) which 

is prospective only.26 Another 

commenter referenced ‘‘. . . the risk 

that HHS may lack authority to recoup 

these funds at all because of the 

presumption against retroactive 

rulemaking,’’ quoting the district court’s 

remand decision. See Am. Hosp. Ass’n, 

2023 WL 143337, at *5. 

Response: We disagree that our 

retroactive rulemaking authority would 

not encompass budget neutrality 

adjustments. To the extent our proposed 

rule could be construed to disclaim 

reliance on section 1871(e)’s retroactive 

rulemaking authority to our budget 

neutrality adjustment, we clarify here 

that we intend to rely on that authority 

to the extent our budget neutrality 

adjustment is retroactive. 

We read the quoted statement from 

the district court in American Hospital 

Association simply to acknowledge that 

the plaintiffs argued that CMS lacked 

retroactive rulemaking authority. That 

court did not resolve the question one 

way or another. By contrast, when 

Congress passed section 1871(e) of the 

Act (42 U.S.C. 1395hh(e)), it expressly 

acknowledged the general presumption 

against retroactive rulemaking, 

suggesting it intended to depart from 

that general rule. See H.R. Rep. 108–391 

at 756.27 And when it did so, Congress 

had already instructed CMS to set up 

many prospective payment systems, 

including OPPS. We believe we should 

harmonize section 1833(t)(9) of the Act 

(42 U.S.C. 1395l(t)(9)) and the other 

prospective payment statutes with 

section 1871(e) of the Act (42 U.S.C. 

1395hh(e)), not read them to conflict. 

Such a reading would also be 

inconsistent with courts’ holding that 

the fact that section 1833(t) of Act (42 

U.S.C. 1395l(t)) sets up a general 

prospective system does not mean it 

implicitly precludes retrospective 

review. 

Comment: Two commenters argued 

that budget neutrality does not apply to 

the payments made to plaintiffs in 

several cases pending before the U.S. 

District Court for the District of 

Columbia that were stayed pending the 

outcome of CMS’s remedy discussed in 

the proposed rule. According to these 

commenters, these plaintiffs’ 

entitlement to remedial payments is 

based on judicial review of their 

individual 340B drug claims under 

section 205(g) of the Act (42 U.S.C. 

405(g)), and therefore the plaintiffs do 

not rely on associational standing or 

seek relief that would apply to a broad 

class of members, which CMS argues 

implicates budget neutrality. These 

commenters argue that the plaintiffs’ 

challenge to CMS’s 340B Payment 

Policy under section 205(g) of the Act 

(42 U.S.C. 405(g)) in no way implicates 

the budget neutrality provisions 

referenced by CMS in the proposed rule 

and that CMS must recognize that the 

plaintiffs have preserved their rights to 

seek relief under section 205(g). In their 

view, section 205(g) provides a process 

for all hospitals to pursue relief of their 

own underpaid claims and does not 

impose or require a single ‘‘one size fits 

all’’ remedy or require budget neutrality 

recoupment on favorable payment 

decisions under that process. For this 

narrow class of hospitals, the 

commenters maintain, the appropriate 

remedy is to make the hospitals whole 

in the same manner that would 

otherwise occur when the claims are 

decided favorably through the 

administrative claims appeals process— 

that is, without a budget neutrality 

recoupment. 

Response: We agree with commenters 

to the extent they question whether the 

associational standing doctrine on 

which some plaintiffs relied can 

override the presentment requirements 

in section 205(g) of the Act (42 U.S.C. 

405(g)), authorize the type of 

individualized payment recalculations 

addressed in this rulemaking, or 

otherwise allow industry groups to 

serve as a class representative for their 

members without complying with the 

applicable Federal Rules of Civil 

Procedure. See Warth v. Seldin, 422 

U.S. 490, 515–16 (1975) (noting 

associational standing most appropriate 

for prospective relief and not available 

for individualized monetary 

calculations). But we do not believe that 

difference requires us to treat hospitals 

with pending cases differently from 

those without pending cases for the 

budget neutrality adjustment finalized 

in this rulemaking. 

‘‘One of the earliest principles 

developed in American administrative 

law was the idea that ‘the choice made 

between proceeding by general rule or 

by individual, ad hoc litigation is one 

that lies primarily in the informed 

discretion of the administrative 

agency.’ ’’ Almy v. Sebelius, 679 F.3d 

297, 303 (4th Cir. 2012) (quoting Sec. & 

Exch. Comm’n v. Chenery Corp., 332 

U.S. 194, 203 (1947)). We do not believe 

that by prescribing an adjudication 

process in sections 205(b) and (g) of the 

Act (as incorporated by section 1869), 

the statute impliedly prohibits us from 

also addressing through rulemaking 

interpretative concerns identified by 

courts or insulates those with pending 

adjudications from the effects of such 

rulemaking. Nor do those provisions 

necessarily exempt pending 

adjudications from other statutory 

requirements, such as budget neutrality. 

Comment: Many commenters 

disagreed that, even if budget neutrality 

was not statutorily required, CMS could 


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still exercise its authority under section 

1833(t)(2)(E) of the Act (42 U.S.C. 

1395l(t)(2)(E)) and its longstanding 

inherent and common-law recoupment 

authority to offset the extra payments. 

These commenters reiterated that 

section 1833(t)(2)(E) of the Act (42 

U.S.C. 1395l(t)(2)(e)) does not authorize 

CMS to make the lump sum payments 

and, therefore, the budget neutrality 

requirements of (t)(2)(E) do not apply to 

the lump sum payments. These 

commenters also assert that CMS does 

not have a common-law duty to seek 

recoupment, so any reliance on 

common-law would be voluntary, and 

no common law power of recoupment 

authorizes the type of recoupment 

proposed by CMS. They assert that any 

common-law authority that the 

government may have to recoup funds 

can only be exercised by suing in court. 

Response: We respectfully disagree 

with these commenters. As we have 

explained, we believe a budget 

neutrality adjustment is statutorily 

required and, even if not statutorily 

required, an appropriate exercise of the 

agency’s statutory and common-law or 

inherent recoupment authorities as a 

policy matter. As we explain elsewhere 

in the rule, we believe it falls within our 

authority to make adjustments 

‘‘necessary to ensure equitable 

payments’’ under section 1833(t)(2)(E) 

of the Act (42 U.S.C. 1395l(t)(2)(E)) to 

account for and place hospitals in 

nearly the same position as they would 

have been absent the 340B Payment 

Policy. With respect to commenters’ 

assertion that CMS lacks a common-law 

duty to seek recoupment, we clarify that 

we would pursue recoupment even if 

we were not strictly required to do so 

by common law; the common law 

reflects the judgment that the 

government should avoid funding 

windfalls to private parties. We agree 

with that judgment. Finally, courts have 

not limited the government’s authority 

to recoup funds only to lawsuits; courts 

have acknowledged that agencies may 

recoup funds through use of a setoff. 

See, for example, Mount Sinai Hosp. of 

Gr. Miami, v. Weinberger, 517 F.2d 329, 

337 (5th Cir. 1975) (‘‘In some 

circumstances when government funds 

are improperly paid out the government 

has a claim enforceable either by direct 

suit or by setoff against money owed by 

the government to the recipient of the 

illegally dispensed funds.’’ (footnotes 

omitted)). 

Comment: Many of these same 

commenters disagreed with CMS’s 

reasoning that applying budget 

neutrality was justified as sound public 

policy because the payments constitute 

an unwarranted windfall to hospitals 

that the Trust Fund has a strong interest 

in recovering and that hospitals have no 

legitimate reliance interest in retaining. 

These commenters argued that it was 

inappropriate for CMS to characterize 

the receipt of these funds as a 

‘‘windfall’’ since hospitals had no 

choice but to accept the funds. 

Commenters additionally objected to 

CMS’s use of the term because it implies 

that CMS is taking no responsibility for 

its own role in creating the situation 

resulting in the payment of the funds 

that it is now proposing to recoup. 

These commenters also argued that the 

proposed rule’s reference to any interest 

that the Trust Fund may have in 

recoupment is overstated because, based 

on the most recent Annual Report of the 

Boards of Trustees of the Federal 

Hospital Insurance and Federal 

Supplementary Medicare Insurance 

Trust Funds, there is no risk that the 

SMI Trust Fund will become insolvent 

in the foreseeable future. These 

commenters disagreed with CMS’s 

contention that achieving budget 

neutrality serves an important interest 

in protecting the public fisc. These 

commenters argued that applying 

budget neutrality principles increases 

risks for the public fisc because CMS 

knows that it can take ‘‘aggressive or 

unsupported positions at the outset’’ 

and then simply recoup funds later to 

make up for any mistakes. Finally, these 

commenters also disagreed with CMS’s 

contention that hospitals have no 

legitimate reliance interest in 

permanently retaining the funds 

proposed to be recouped. Many of these 

commenters stated that hospitals 

properly relied on and have already 

spent the payments CMS made between 

2018 and 2022 and that this reliance 

was particularly pronounced given the 

COVID–19 PHE. 

One commenter opined that, to the 

extent CMS concludes that it is 

unreasonable to burden the Trust Fund, 

and given a lack of authority for a 

budget neutrality adjustment or 

retroactive rulemaking, CMS can 

reasonably conclude that it has no 

available funds (nor specific 

appropriation) for the remedy payment, 

and therefore, the U.S. Treasury 

Department’s Judgment Fund, 31 U.S.C. 

1304, could be the appropriate vehicle 

for satisfaction of providers’ claims in 

this case. 

Response: While we appreciate the 

commenter’s suggested alternative for 

funding the remedy payments, we 

disagree that we lack the authority to 

make the lump-sum payments, budget 

neutralize the remedy, or engage in 

retroactive rulemaking for the reasons 

stated earlier in this rule. We continue 

to believe a budget neutrality 

adjustment is statutorily required and, 

even if not statutorily required, an 

appropriate exercise of the agency’s 

statutory and common-law or inherent 

recoupment authorities as a policy 

matter. We also disagree that our 

approach would encourage aggressive 

statutory interpretations by the agency 

or otherwise threaten the public fisc. We 

of course intend to discharge faithfully 

our obligation to interpret statutes as 

best we understand them, and the 

resources the agency has expended 

litigating and then unwinding the 340B 

Payment Policy is itself a significant 

incentive against departing from that 

intention. And exempting adjustments 

that stem from a court’s decision in 

litigation from the budget neutrality 

principles that would otherwise apply 

in rulemaking distorts incentives for 

litigants in a way that would itself 

encourage strategic behavior. Allowing 

litigants to escape otherwise applicable 

budget neutrality constraints might 

encourage potential litigants to press 

aggressive statutory interpretations in 

court. We believe the best policy is the 

one that returns all parties as close as 

we can to the situation they would have 

been in if the 340B Payment Policy had 

never been adopted. That policy best 

ensures that the only money actually 

spent is money authorized to be spent 

by the statute, independent of any 

strategic behavior. 

While there is no immediate solvency 

crisis in the Part B Trust Fund, as its 

stewards we have an obligation to 

preserve the Fund for future 

generations. And while we acknowledge 

that our budget neutrality will affect 

hospitals’ medium-term revenue, we 

have moderated that effect by spreading 

out our recovery of unwarranted 

payments over a period of many years. 

We disagree that any reliance on our 

previous payment increases was 

reasonable under the circumstances 

here or that we are wrong to 

characterize those payment increases as 

windfalls, regardless of whether 

hospitals could decline the payments or 

not. Finally, we are not wrong to 

characterize those prior payments as 

windfalls, regardless of whether 

hospitals could decline the payments or 

not. No one suggests we could have 

increased payments for non-drug items 

and services if we had not decreased 

payments for 340B drugs, PHE or not. 

Now that the legal justification for the 

payments cuts has fallen short, so has 

any legal justification for the payment 

increases. We take full responsibility for 

the legal error ultimately found by the 

Supreme Court. But agency error does 

not expand hospitals’ statutory 


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28These commenters also return to the example 

of H. Lee Moffitt Center & Research Hospital v. 

Azar, 324 F. Supp. 3d 1, 15 (D.D.C. 2018), where 

the court commented that in 2007, HHS 

retroactively adjusted payment rates to several rural 

hospitals without offsetting recoupments to achieve 

budget neutrality We addressed that example above. 

29One commenter suggested that CMS never 

updated budget neutrality calculations in the 

Physician Fee Schedule (PFS) after incorrectly 

predicting how often certain new PFS codes would 

be utilized. The commenter failed to cite any source 

for this comment, but even assuming the 

commenter is correct that we have mis-projected 

utilization for certain PFS codes, that is just another 

example of a factual projection that we routinely do 

not update, as explained below. 

30https://www.merriam-webster.com/dictionary/ 

estimate. 

entitlement to Medicare payments. Cf. 

Heckler v. Community Health Services, 

467 U.S. 51, 62 (1984) (‘‘There is no 

doubt that respondent will be adversely 

affected by the Government’s 

recoupment of the funds that it has 

already spent . . . [but] respondent 

[may not] claim any right to expand its 

services to levels greater than those it 

would have provided had the error 

never occurred.’’) We repeatedly 

emphasized to the hospital community 

that we may need to revisit budget 

neutrality if the 340B Payment Policy 

were found to be unlawful; it was clear 

that the payment increases for non-drug 

items and services were potentially 

conditioned on the legality of that 

policy. To that end, the industry filed 

multiple briefs disputing our budget 

neutrality position in court. 

Comment: Several commenters stated 

that CMS’s approach to budget 

neutrality is inconsistent with its past 

practices. These commenters argue that 

CMS did not budget neutralize past 

changes made to budget neutral 

systems, such as the OPPS clinical 

diagnostic laboratory services (citing 80 

FR 70354),28 as well as changes to the 

Inpatient Prospective Payment System 

wage index (citing § 412.64(e)(1)(ii)) and 

outlier adjustments (citing 88 FR 27222– 

23).29 They contend that CMS has 

previously applied budget neutrality 

retroactively only when expressly 

authorized to do so by Congress. 

Response: Commenters’ past 

examples are not analogous to the 

remedy payment in this rule. Most of 

these adjustments are examples where 

CMS’s projections of utilization or some 

other threshold did not meet a projected 

target. 80 FR 70353 (explaining agency 

‘‘overestimated the adjustment 

necessary to account for the new policy 

to package laboratory tests’’); 88 FR 

27223 (noting ‘‘the percentage of actual 

outlier payments relative to actual total 

payments is higher than we projected 

for FY 2022’’). In those cases, CMS 

declined to make a retroactive budget 

neutralization adjustment based on 

updated data. 80 FR 70354 (noting 

adjustment ‘‘would not recoup 

‘overpayments’ made for’’ past years); 

88 FR 27223 (‘‘[W]e do not make 

retroactive adjustments to outlier 

payments’’ to update projections). 

Commenters correctly point out that 

CMS also has sometimes corrected past 

projections when expressly authorized 

by Congress. (72 FR 47186; 78 FR 

50515–16.) 

As we previously explained, CMS is 

not in this rule revising its budget 

neutrality factor to update its factual 

assumptions, i.e., the difference 

between the estimated and actual 

budget impact of the 340B Payment 

Policy. Instead, it is unwinding the legal 

consequences of an unlawful payment 

policy. Those two changes are different. 

When we first implemented the 340B 

Payment Policy, we also underestimated 

how much hospitals would ultimately 

dispense those drugs. We thus failed to 

increase non-drug payments and 

services by the amount needed fully to 

offset the payment cuts to 340Bacquired drugs. But under our 

consistent approach not to update our 

factual assumptions underlying our 

projections, we are not updating our 

estimation in this final rule. Updating 

that estimation would require 

recalculating the 3.19 percent payment 

adjustment for non-drug goods and 

services so that the new rate would 

reflect the full $10.6 billion that CMS in 

fact saved under the cuts for 340Bacquired drugs. Instead, CMS is simply 

reversing that 3.19 percent payment 

increase it implemented beginning in 

CY 2018 for non-drug goods and 

services, unwinding its legal error so 

that parties are as close as possible to 

the same position as they would have 

been in had CMS set the legally correct 

payment rates back in CY 2018. This 

approach—unwinding an unlawful 

payment policy while not updating 

factual projections—is consistent with 

CMS’s general approach to budget 

neutrality. 

Commenters are also wrong that the 

general IPPS wage index budget 

neutrality regulation they cite exempts 

adverse wage index judicial decisions 

from budget neutrality. Instead, it 

addresses specific statutory exemptions 

to the general budget neutrality rule. See 

86 FR 45176 (discussing 

§ 412.64(h)(4)(vii)) and 75 FR 50160 

(discussing § 412.64(e)(4)); see also SSA 

§ 1886(d)(3)(E)(i). The regulation 

addressing adverse wage index judicial 

decisions is silent on the issue of budget 

neutrality. See 42 CFR 412.64(l) (‘‘[I]f a 

judicial decision reverses a CMS denial 

of a hospital’s wage data revision 

request, CMS pays the hospital by 

applying a revised wage index that 

reflects the revised wage data as if 

CMS’s decision had been favorable 

rather than unfavorable.’’). Commenters 

point to no wage index decision that is 

inconsistent with the budget neutrality 

policy in this rule, even assuming the 

policy would apply equally to IPPS. 

Comment: Several commenters 

claimed that non-budget neutral 

remedies are not the result of a de 

minimis exception to a requirement to 

budget neutralize as claimed by CMS, 

and that any de minimis exception lacks 

any statutory basis. 

Response: We explained in section I.A 

of this final rule how we have 

approached budget neutrality when a 

post-rulemaking payment change would 

have a de minimis impact on estimated 

OPPS payments, and in section II.B.1 of 

this final rule why the remedies to 

which commenters have pointed are 

consistent with that policy. As an initial 

matter, we disagree that this 

interpretation of budget neutrality is not 

based in the statute. As we explained in 

the proposed rule, section 1833(t)(9) of 

the Act (42 U.S.C. 1395l(t)(9)) instructs 

us to budget neutralize OPPS based on 

the amount of ‘‘estimated 

expenditures.’’ Because there is a 

certain amount of approximation 

inherent in the term ‘‘estimate,’’ its use 

authorizes us to round to $0 payment 

amounts that would have only a de 

minimis impact on estimated 

expenditures. See ‘‘Estimate,’’ MerriamWebster Dictionary (‘‘to judge 

tentatively or approximately the value, 

worth, or significance of’’).30 It makes 

sense that a Congress concerned about 

cost containment, see H.R. Rep. No. 

106–436, at 33–34 (1999), would direct 

the agency to account for significant 

budgetary impacts, while giving the 

agency some discretion with how to 

handle minor payments that would not 

meaningfully impact the Part B Trust 

Fund. 

Even if commenters were correct, 

however, that we have not applied our 

budget neutrality policy precisely as we 

articulated in the proposed rule and 

here, we still believe we should adopt 

this understanding of budget neutrality 

as the appropriate policy to apply in 

this case and going forward. It protects 

the public fisc, the Medicare Trust fund, 

and beneficiaries against expenditures 

that prove to not be authorized by law 

while accounting for the burden and 

cost to the agency and providers of 

making after-the-fact changes to a 

principally prospective payment 

system. 


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Comment: Some commenters argued 

that CMS should not budget neutralize 

since no court ruling has required 

budget neutrality and no court has 

found that hospital payments for nondrug items and services in CYs 2018– 

2022 were unlawfully paid or received 

(despite the unlawful reduction in 340B 

payments resulting in increases to those 

rates). These commenters point out that 

the Supreme Court only ruled that the 

Secretary may not vary payment rates 

for drugs and biologicals among groups 

of hospitals in the absence of having 

conducted a survey of hospitals’ 

acquisition costs. The Court explicitly 

decided not to address arguments 

regarding budget neutrality. Likewise, 

the District Court’s subsequent order 

vacating CMS’s 340B reimbursement 

rate for the remainder of 2022 did so 

without requiring any offset for budget 

neutrality. 

Similarly, one commenter suggested 

that, as an alternative to offsetting 

payment, CMS rely on Section 1870 of 

the Act (42 U.S.C 1395gg) to recover 

payment. This statute describes when 

and how CMS may recover incorrect 

payments it makes on behalf of an 

individual. The commenter states that, 

while it does not authorize CMS to 

offset payments to account for an 

overpayment, its approach is ‘‘far more 

rational, and limited, than CMS’s 

overbroad proposal.’’ The commenter 

further encourages CMS to rely on 42 

U.S.C 1395gg because, in addition to 

addressing overpayments on a 

beneficiary-specific basis, it also permits 

CMS to forgo recovery where the 

individual for whom the incorrect 

payment was made was without fault 

and making the adjustment would 

‘‘defeat the purposes of subchapter II or 

subchapter XVIII or would be against 

equity and good conscience.’’ 

Response: When we implemented the 

payment reduction for 340B-acquired 

drugs in CY 2018, we also implemented 

a corresponding increase to the OPPS 

conversion factor that increased the 

OPPS payment for non-drug items and 

services. When the payment reduction 

for 340B-acquired drugs was eliminated 

for CY 2023 after the Supreme Court 

found the policy unlawful, we increased 

340B drug payments and 

correspondingly decreased the OPPS 

conversion factor. As we have made 

clear throughout the litigation and in 

prior rulemaking, the increases in OPPS 

payments for non-drug items and 

services were directly and inextricably 

linked to the decreases in payments for 

340B-acquired drugs. But for the 

reductions in the 340B drug payments, 

we would never have increased 

payments for the non-drug items and 

services; therefore, we believe that if the 

340B payments are invalid, then the 

increased payments for non-drug items 

and services are invalid, too. While we 

acknowledge that litigants challenged 

only the payment increase, when we 

have made clear that two payment 

adjustments are so closely linked so that 

they are really part of the same policy, 

we believe the policies should rise and 

fall together regardless of artful pleading 

strategies. While commenters are correct 

that the increase to non-drug items and 

services were authorized under our read 

of the statute at the time they were 

promulgated, they omit that this 

statutory authorization hinged on 

payment reductions that the Supreme 

Court held exceeded our statutory 

authority. 

We also do not agree with the 

commenter’s invitation to rely on 

section 1870 of the Act (42 U.S.C. 

1395gg) to forego recovery. Section 1870 

speaks to the issue of when providers 

can shift liability to beneficiaries for 

overpayments, which can in turn be 

waived in certain circumstances. See 

section 1870 of the Act. It is silent about 

the situation here where CMS adjusts 

future payments through its budget 

neutrality authority. We believe that 

given the close connection between the 

illegal decreased payments for 340Bacquired drugs and the increased 

payments for non-drug items and 

services, and the impact of failing to 

budget neutralize these payments on the 

public fisc and beneficiaries, section 

1833(t) of the Act (42 U.S.C. 1395l(t)) 

applies rather than section 1870 of the 

Act (42 U.S.C. 1395gg). 

Comment: One commenter 

recommended that CMS work with 

Congress to forgo an offset. 

Response: We appreciate the 

commenter’s recommendation. As 

noted, legislative changes would require 

Congressional action. 

Comment: One commenter noted that 

implementing a prospective adjustment 

poses challenges due to the varying 

volumes and services that change from 

year to year at each facility, and that 

consequently any prospective payment 

reduction would lead to inaccuracies in 

the calculation. Due to the inability to 

properly match prospective adjustments 

to prior increased payments, this 

commenter suggests that CMS not 

finalize any prospective adjustments. 

Response: We recognize that there are 

challenges to implementing our budget 

neutrality offsets prospectively and that 

the amount we collect from hospitals 

imperfectly offsets the amount by which 

the 340B Payment Policy increased each 

hospital’s payments for non-drug 

services and items. We disagree, 

however, that the alternative to a 

prospective budget neutrality 

adjustment is no budget neutrality 

adjustment. Rather, to stay consistent 

with the statute, the alternative is a onetime debit for the increased payments, 

as discussed in section II.A. We 

discussed why we did not select that 

approach above, and given that 

decision, our proposed approach 

properly applies the budget neutrality 

principle as evenly as possible, even if 

the calculations may not prove to be tothe-penny exact. See Shands 

Jacksonville Med. Ctr., 959 F.3d at 1119 

(agency may weigh ‘‘the competing 

values of finality and accuracy’’). 

Comment: One commenter supported 

our proposed budget neutrality 

adjustment and suggested that, if 

interest cannot be paid on the lump sum 

payments, CMS withhold the budget 

neutral payment reductions from 340B 

providers for the number of years 

required to equal the value of interest 

payments. 

Response: We appreciate the 

commenter’s suggestion, however, as 

described earlier in this rule, we lack 

the authority to pay interest on the 

lump-sum payments regardless of 

whatever method or mechanism might 

facilitate the payment of such interest. 

Comment: MedPAC supported our 

proposed budget neutrality adjustment, 

arguing that since the reduced 340B 

payments were implemented in a 

budget neutral manner in CY 2018, any 

remedy should likewise be budget 

neutral. It additionally indicated that, of 

all of the alternatives CMS considered, 

CMS selected the best option. However, 

MedPAC was concerned about the effect 

of the immediate lump sum payment 

and 16-year recoupment on the 

Medicare premium. It requested that the 

reduction in payment rates be aligned 

with the remedy payments so that the 

effects on the Part B premium and Part 

B finances are mitigated. MedPAC also 

expressed concern that reducing the 

payment rates for non-drug items and 

services could cause inequities because 

some hospitals will come out net 

winners or net losers and requested that 

CMS consider ways to reduce these 

inequities if they are significant enough. 

For example, the commenter suggests, 

CMS could require hospitals to list on 

their cost reports the revenue gained 

from 2018 to 2022 and the revenue 

decrease from the 0.5 percent reduction 

and then use the cost reports to make 

reconciliations. 

Response: We thank MedPAC for its 

support for our proposed budget 

neutrality adjustment. While we 

appreciate its concern about the 

remedy’s effect on the Medicare Part B 


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premium, we believe the proposed 

prospective offset is appropriate in 

order to minimize the financial burden 

on hospitals, especially given the 

difficulties caused by the COVID–19 

PHE. On similar issues of concern, such 

as the prospective offset start date, many 

commenters argued that hospitals are 

suffering from financial challenges of 

unprecedented workforce shortages, 

inflation, supply chain disruptions, 

eroding margins, cost increases due to 

increases in supplies and staffing costs 

and the lingering effects of the COVID– 

19 PHE. We believe it is appropriate to 

take those factors into consideration 

here as well. And we expect 

beneficiaries to obtain the benefit of a 

lower Part B premium in future years as 

the budget neutrality adjustment is 

implemented. As acknowledged 

previously, there is often some inherent 

imprecision in budget neutrality 

calculations. However, given these 

unique circumstances, coupled with the 

operational challenges posed by the 

commenter’s suggestion, we believe our 

proposed approach properly applies the 

budget neutrality principle in a fair, 

reasonable manner, even if it results in 

some unavoidable imprecision. See 

Shands Jacksonville Md. Ctr., 959 F.3d 

at 1120 (agency need not ‘‘precisely 

compensate each hospital for payments 

that were reduced’’). 

Comment: Another commenter 

supported our proposed budget 

neutrality adjustment but requested that 

recoupment occur over a shorter 

timeframe than 16 years. The 

commenter proposed 5 years as a 

possible timeframe, which, in their 

view, would be the same amount of time 

that the conversion factor was 

‘‘artificially inflated’’ as a result of 

payment to 340B hospitals at ASP 

minus 22.5 percent. Alternatively, the 

commenter suggested offsetting a fixed 

dollar amount each year over a fixed 

period of time. For example, dividing 

7.8 billion by 5 in order to offset $1.56 

billion per year from CY 2024 to CY 

2028 by making an adjustment to the 

conversion factor to reflect an estimated 

$1.56 billion reduction in non-drug 

items and services spending for each 

year. 

Response: We appreciate the 

commenter’s suggestion for the offset to 

be implemented over a shorter 

timeframe than 16 years; however, we 

believe that the proposed 0.5 percent 

annual reduction properly reverses the 

increased payments for non-drug items 

and services to comply with statutory 

budget neutrality requirements while at 

the same time accounting for any 

reliance interests and ensuring that the 

offset is not overly burdensome to 

impacted entities. 

Comment: One commenter 

recommended that CMS increase the 

budget neutrality adjustment for OPPS 

non-drug items and services and apply 

it over a shorter time frame. This 

commenter agreed with us that some 

imprecision in calculating budget 

neutrality adjustments is unavoidable. 

However, the commenter contends that 

CMS unnecessarily exacerbates the 

imprecision by choosing to recoup 

budget neutrality payments over a 16- 

year period rather than a shorter time 

frame. In the commenter’s view, this 

time frame increases the chance that the 

relative and absolute amounts of nondrug services furnished by hospitals 

will deviate from what they were under 

the original budget neutrality 

adjustment and that the magnitude of 

these deviations will increase. The 

commenter argues that it is appropriate 

to go with a greater reduction rate 

because (1) the original budget 

neutrality adjustment increased 

payment for OPPS non-drug items and 

services by 3.19 percent per year, over 

six times higher than the adjustment 

proposed by CMS; and (2) Part B 

reimbursement of hospitals has grown at 

a rate of 5 percent per year on average 

between 2017 and 2021 (roughly 4 

percent when excluding spending on 

separately payable drugs under the 

OPPS). The commenter also argues that 

CMS should recoup $10.5 billion rather 

than the proposed $6.2 billion. The 

commenter proposes three alternative 

recoupment scenarios with annual 

budget neutrality adjustments that are 

greater than the 0.5 percent proposed 

reduction in OPPS non-drug items and 

services. Scenario 1 would impose a 

1.25 percent annual reduction, which 

would recover the $7.8 billion within 8 

years (or 10 years for the commenter’s 

recommended 10.5 billion). Scenario 2 

would impose a 2.25 percent annual 

reduction, which recover the $7.8 

billion within 5 years (or 7 years for the 

commenter’s proposed 10.5 billion). 

Scenario 3 would impose a 3 percent 

annual reduction, which would recover 

the $7.8 billion within 4 years (or 5 

years for the commenter’s proposed 10.5 

billion). 

Response: We appreciate the 

commenter’s suggestion to increase the 

budget neutrality adjustment and apply 

it over a shorter time frame and the 

detailed examples of how we might do 

so. However, as we stated previously, 

we believe that the proposed 0.5 percent 

annual reduction (and resulting 16-year 

implementation timeframe) properly 

reverses the increased payments for 

non-drug items and services to comply 

with statutory budget neutrality 

requirements while at the same time 

accounting for any reliance interests and 

ensuring that the offset is not overly 

burdensome on impacted entities. 

Additionally, while we understand the 

rationale behind prospectively offsetting 

$10.6 billion, standard remedial 

principles and basic fairness support 

situating hospitals as closely as possible 

to the financial situation they would 

have been in absent the 340B Payment 

Policy. That means ensuring hospitals 

receive $10.6 billion (between the onetime lump sum remedy payment of 

approximately 9.0 billion and the 

processing, and reprocessing, of CY 

340B 2022 claims of approximately 1.6 

billion) for 340B drugs and ensuring a 

corresponding $7.8 billion is offset in 

order to maintain budget neutrality. 

Comment: One commenter 

recommended that CMS incorporate 

recoupment estimates into the 

calculation of retrospective lump sum 

payments. Under this suggested 

arrangement, providers would be paid a 

‘‘net’’ lump sum payment. The 

commenter suggested that, if this results 

in a significant debt for a provider, then 

CMS should provide an interest-free, 

flexible, long term repayment plan. 

Response: We thank the commenter 

for this suggestion. This proposed 

approach is similar to the option 

discussed previously in section II.A of 

this final rule.3, titled ‘‘Aggregate 

Hospital Payments from CY 2018 

Through September 27th of CY 2022.’’ 

Please see that section for our 

consideration of this approach. 

Comment: One commenter requested 

clarification regarding the impact of the 

proposed 16-year OPPS conversion 

factor reduction on the ASC payment 

system. The commenter referenced the 

CY 2023 OPPS final rule in which CMS 

stated that changes to the OPPS 

conversion factor do not impact the ASC 

conversion factor but that there may be 

an indirect impact on ASC payments for 

device-intensive procedures. The 

commenter requests that CMS provide a 

more detailed assessment of the impact 

of its proposed 340B remedy on ASC 

payment rates. Specifically, the 

commenter requests additional details 

on the magnitude of the change in 

payments for device-intensive 

procedures with and without the OPPS 

conversion factor reduction. The 

commenter recognizes CMS’s 

acknowledgement that specific provider 

types would experience differentiated 

reimbursement outcomes depending on 

how much of their payments are based 

on the OPPS conversion factor, but the 

commenter believes that CMS should 

specifically address the impact of its 


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proposed remedy on the ASC payment 

system via a regulatory impact analysis. 

Response: We thank the commenter 

for expressing this concern, and we note 

that all impacts of this prospective offset 

to the OPPS conversion factor on other 

payment systems in a particular year 

will be discussed during that year’s 

applicable rulemaking cycle, including 

the specific issues that are raised by this 

commenter. 

Comment: Nearly all commenters 

supported a CY 2026 start date for the 

initiation of the adjustment to the 

conversion factor to provide hospitals 

with additional time to make necessary 

arrangements. These commenters cited 

various rationales, including the 

extraordinary financial challenges 

caused by unprecedented workforce 

shortages, inflation, supply chain 

disruptions, eroding margins, cost 

increases due to increases in supplies 

and staffing costs and the lingering 

effects of the COVID–19 PHE. One 

commenter supported finalizing the 

proposed CY 2025 start date, arguing 

that hospitals do not need additional 

time to make necessary arrangements 

since they have known since the date of 

the Supreme Court decision that they 

would not be permitted to keep the 

windfall they received from CY 2018 

through CY 2022. 

Response: Based on the broad support 

to start the adjustment to the conversion 

in CY 2026 among commenters, we 

believe finalizing a CY 2026 start date 

for the initiation of the adjustment to 

the conversion factor is appropriate to 

provide entities additional time to 

prepare for the new payment rates. We 

agree with commenters that an 

additional year would allow more time 

for hospitals to recover from the 

financial challenges described above 

and to assess and prepare for the new 

payment rates that will be calculated 

using a reduced conversion factor. We 

appreciate the input of the commenter 

who supported finalizing the start date 

as proposed. As noted elsewhere in the 

rule, we agree that hospitals have been 

on notice about a potential budget 

neutrality adjustment for quite a while. 

But hospitals did not know the details 

of our proposed policy until we issued 

the proposed rule, and so we believe an 

additional year to prepare is merited in 

this unique situation. 

Comment: One commenter stated that 

the proposed rule does not provide 

sufficient information on the impact of 

the decreased conversion factor on 

individual hospitals and requested that 

CMS provide greater transparency of its 

calculations by including the budget 

neutrality calculations related to the 

recoupment in each future year’s OPPS 

proposed rules. 

Response: We appreciate the 

commenter’s suggestion and intend to 

take it into consideration in future 

OPPS/ASC rulemaking cycles. We note 

that the impact of the 0.5 percent 

reduction to the OPPS conversion factor 

will be discussed in each year’s 

calendar year OPPS/ASC calendar year 

rule, including the financial impact on 

particular groups of hospitals. 

Comment: One commenter requested 

that CMS provide greater clarity on each 

individual hospital’s repayment 

obligations during the recoupment 

period. The commenter observed that 

changes in utilization could make the 

estimated recoupment period longer or 

shorter than CMS estimates and 

expressed concern that this could result 

in hospitals refunding more in 

additional payments than they ever 

received during the CY 2018 through CY 

2022 period. The commenter requested 

that CMS ensure that hospitals not be 

required to pay more in the recoupment 

than what they were initially paid in 

increased non-drug payments during the 

CY 2018 through CY 2022 time frame. 

Response: We acknowledge that it is 

possible that some individual hospitals 

refund more in additional payments 

than they received in non-drug 

payments. But that is the consequence 

of structuring payments through a future 

payment cut rather than, for example, 

clawing back or recouping increased 

payment amounts between 2018 

through 2022. Our methodology 

properly reverses the increased 

payments for non-drug items and 

services to comply with statutory budget 

neutrality requirements while at the 

same time accounting for any reliance 

interests and ensuring that the offset is 

not overly burdensome on impacted 

entities. In the aggregate, we expect 

hospitals will be prospectively offset 

approximately the same amount that 

they received in increased non-drug 

item and service spending from CY 2018 

through CY 2022 as a result of the 340B 

Payment Policy. And while changes to 

utilization and other behaviors will 

leave ‘‘some hospitals slightly better off 

and others slightly worse off than they 

would have been had the rate reduction 

never taken effect,’’ such differences are 

permissible variations inherent in a 

prospective remedy. Shands 

Jacksonville Med. Ctr., Inc. v. Azar, 959 

F.3d 1113, 1120 (D.C. Cir. 2020). We 

have tried to mitigate that effect by 

limiting the future recoupment to 

providers that did in fact benefit from 

the increased payments in the past. 

Comment: One commenter expressed 

concern about the application of the 0.5 

percent reduction to new non-drug 

items and services that were not 

available from January 1, 2018, through 

September 27, 2022, and which, 

therefore, were not reimbursed at the 

higher rate. This commenter requested 

that CMS create a system that excepts 

items and services that are new since 

October 1, 2022, from the 0.5 percent 

reduction. The commenter suggested 

that this could be accomplished with 

the creation of a new status indicator 

that would alert MACs to the service 

being new post-October, which could 

then be adjudicated at the MAC level 

using the same methods applied to take 

the adjustment for sequestration. 

Similarly, one commenter urged CMS to 

consider other factors that could impact 

the recoupment and address them in the 

final rule. The commenter specifically 

asked for clarification as to how hospital 

closures during the recoupment period 

would impact other hospitals’ 

repayment obligations during the 

recoupment period and if hospitals that 

remain open would be required to 

shoulder the debt associated with the 

closed hospitals. 

Response: To begin, if for any reasons 

the number of hospitals paid under the 

OPPS that are subject to the prospective 

offset decrease, that will not impact the 

total amount of the offset. Otherwise, 

changes in what items and services 

providers bill to Medicare is one 

example of the changes to utilization 

and other behaviors discussed above in 

the preceding comment. As we 

acknowledge here, those changes will 

inevitably lead to some distributive 

effects, but we have done what we can 

to mitigate that effect by limiting the 

future recoupment to providers that did 

in fact benefit from the increased 

payments in the past. Specifically, 

exempting new items and services from 

this payment adjustment may distort 

providers’ incentives to prescribe items 

and services based on whether they 

existed between CY 2018 and 2022 

rather than whether they are medically 

appropriate, potentially impacting the 

care providers give to beneficiaries. And 

the more exceptions we create, the more 

complicated we make the payment 

reduction. Complications increase the 

risk of delays or errors in implementing 

this final rule. 

Comment: Many commenters argued 

that budget neutrality adjustments will 

have severe negative impacts on 

hospitals and might impair hospitals’ 

ability to continue providing services to 

vulnerable patients/communities. 

Various commenters requested that 

rural hospitals, free-standing children’s 

hospitals, free-standing cancer hospitals 


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and safety-net hospitals be excluded 

from the prospective offset. 

Response: We acknowledge that our 

proposal to decrease future payments 

will have a financial impact across all 

hospitals paid under the OPPS, except 

for new providers as described below, 

and we are particularly mindful of the 

impact on vulnerable patients and 

communities. But future decreases are, 

on aggregate, the mirror image of prior 

payment increases that, as we have 

repeatedly stated, would otherwise be a 

windfall to providers. And such 

windfalls are not cost-free; as we noted 

previously, the costs are ultimately 

borne by beneficiaries and taxpayers— 

including the vulnerable patients and 

communities to which commenters 

themselves refer. Additionally, we note 

that under section 1833(t)(7)(D)(ii) of the 

Act (42 U.S.C. 1395l(t)(7)(D)(ii)), cancer 

and children’s hospitals receive 

transitional outpatient payments (TOPs) 

which permanently hold them harmless 

to their ‘‘pre-Balanced Budget Act of 

1997 (BBA) amount’’ as specified under 

the terms of the statute. These hospitals 

are permanently held harmless to their 

‘‘pre-BBA amount,’’ and they receive 

hold harmless payments to ensure that 

they do not receive a payment that is 

lower in amount under the OPPS than 

the payment amount they would have 

received before implementation of the 

OPPS. 

After consideration of the comments 

received, and for the reasons stated in 

the proposed and in this final rule, we 

are finalizing our policy largely as 

proposed. We believe that sections 

1833(t)(2)(E) and (t)(14) of the Act (42 

U.S.C. 1395l(t)(2)(E) and (t)(14)), under 

which we proposed to make this 

proposed remedy payment, are properly 

read to require budget neutrality. We are 

finalizing that budget neutrality will be 

maintained through a 0.5 percent 

reduction to the OPPS conversion factor 

over an estimated 16-year time period 

until a total of $7.8 billion is offset. As 

previously mentioned, we were 

convinced by commenters that we 

should start the prospective offset in CY 

2026. As such, we are codifying the 0.5 

percent reduction in the OPPS 

conversion factor effective for CY 2026 

in the regulations by adding new 

paragraph (b)(1)(iv)(B)(12) to § 419.32. 

The exact impact on OPPS payment 

rates as a result of this reduction will be 

reflected in the annual OPPS/ASC 

proposed and final rules. See Table 2 for 

an illustration of this finalized payment 

mechanism. 

BILLING CODE 4120–01–P 


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BILLING CODE 4120–01–C 

c. Exclusion of New Providers 

In the proposed rule (88 FR 44080), 

CMS recognized that any hospital that 

enrolled in Medicare after January 1, 

2018, received less than the full amount 

of the increased non-drug item and 

service payments made during that time 

than they otherwise would have 

received if enrolled prior to that date. 

As we explained in that rule, this was 

because the increased non-drug item 

and service payments were being paid 

during all of CY 2018 through CY 2022, 

so any hospital that was not enrolled in 

Medicare for the full duration of that 

time period did not receive the full 

amount of increased non-drug items and 

service payments. We noted that, while 

the 340B drug payments increased to 

the default rate effective September 28, 


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TABLE 2: ILLUSTRATION OF THE FINALIZED 0.5 PERCENT CONVERSION 

FACTOR ADJUSTMENT TO THE OPPS NON-DRUG ITEMS AND SERVICES 

BEGINNING CY 2026 TO MAINTAIN BUDGET NEUTRALITY 

CY2025 CY2026 CY2027 CY2028 CY2029 

Total Applicable 

OPPS Non-Drug $66,910 $70,256 $73,769 $77,457 $81,330 Item and Service 

Spendin2 (millions) 

0.5-Percent 

Payment Reduction $0 $351 $369 $387 $407 

Amount (millions) 

Estimated Total 

Cumulative Offset $0 $351 $720 $1,107 $1,514 

(millions) 

CY2031 CY2032 CY2033 CY2034 CY2035 

Total Applicable 

OPPS Non-Drug $89,667 $94,150 $98,858 $103,801 $108,991 Item and Service 

Spendin2 (millions) 

0.5-Percent 

Payment Reduction $448 $471 $494 $519 $545 

Amount (millions) 

Estimated Total 

Cumulative Offset $2,389 $2,860 $3,354 $3,873 $4,418 

(millions) 

CY2037 CY2038 CY2039 CY2040 CY2041 

Total Applicable 

OPPS Non-Drug $120,162 $126,170 $132,479 $139,102 $114,440 Item and Service 

Spendin2 (millions) 

0.5-Percent 

Payment Reduction $601 $631 $662 $695 $188* 

Amount (millions) 

Estimated Total 

Cumulative Offset $5,591 $6,222 $6,885 $7,580 $7,769 

(millions) 

*Note, the final year's offset is estimated to be less than 0.5 percent in order to meet the total estimated offset of $7.8 billion 

(rounded). 

CY2030 

$85,369 

$427 

$1,941 

CY2036 

$114,440 

$572 

$4,991 

We also note the Total Applicable OPPS Non-Drug Item and Service Spending are estimates based on an assumption of 5 percent 

annual growth. The 5 percent annual growth is determined from a 10-year baseline percentage increase. 
Federal Register / Vol. 88, No. 215 / Wednesday, November 8, 2023 / Rules and Regulations 77183 

31https://www.cms.gov/medicare/medicare-feefor-service-payment/hospitaloutpatientpps. 32https://www.cms.gov/medicare/medicare-feefor-service-payment/hospitaloutpatientpps. 

2022, following the Supreme Court’s 

decision, the increased conversion 

factor and associated increased nondrug item and service payments were in 

effect until December 31, 2022. We 

therefore proposed that these providers 

would not be subject to the prospective 

rate reduction, which was 

predominantly designed to offset those 

non-drug item and service payments 

made during CY 2018 through CY 2022. 

Consequently, in the proposed rule, 

we proposed to designate any hospital 

that enrolled in Medicare after January 

1, 2018, as a ‘‘new provider’’ for 

purposes of the conversion factor 

adjustment to offset those additional 

expenditures by Medicare to remedy the 

340B Payment Policy and to pay these 

hospitals the rate for non-drug items 

and services that would apply in the 

absence of the conversion factor 

adjustment implemented due to the 

340B Payment Policy remedy. As we 

explained, that meant that we would 

calculate payment rates for new 

providers using the conversion factor 

before applying the proposed 0.5 

percent annual adjustment that would 

apply for hospitals that are not ‘‘new 

providers’’ for purposes of this policy. 

For the purpose of designating a new 

provider, we proposed the date of 

enrollment in Medicare as the 

provider’s CMS certification number 

(CCN) effective date. Providers that met 

this definition, and that we proposed 

would be excluded from the prospective 

payment adjustment, were listed in 

Addendum BBB to the proposed rule. 

This addendum can be found online 

through the CMS OPPS website.31 As 

reflected in this file, we determined that 

approximately 300 providers out of the 

approximately 3,900 OPPS providers 

met this definition. We proposed to 

codify the exclusion of new providers 

from the prospective payment 

adjustment to the conversion factor for 

the duration of its application in the 

regulations by adding new paragraph 

(b)(1)(iv)(B)(12) to § 419.32. 

We also clarified in the proposed rule 

that the proposed ‘‘new provider’’ 

designation was intended to apply only 

to truly new providers, meaning those 

that were not enrolled in Medicare as of 

January 1, 2018. Our proposal to 

exclude ‘‘new providers’’ from the 

prospective rate reduction would not 

apply to providers that were enrolled in 

Medicare before January 1, 2018, and 

subsequently had a change in 

ownership that resulted in a new CCN, 

in part due to the fact that these 

providers would have received 

increased non-drug item and service 

payments for the duration of the 340B 

Payment Policy from CY 2018 through 

CY 2022. We recognized in the 

proposed rule that this approach would 

exempt some hospitals receiving the 

340B lump sum payment from the 

prospective offset and explained that we 

considered creating various levels of 

exclusion from the prospective offset 

depending on how long the specific 

hospital received increased non-drug 

item and service payments as a result of 

the 340B Payment Policy. However, we 

concluded that it was not 

administratively feasible for CMS, or 

likely desired by providers, to create 

many different sets of payment rates for 

different groups of hospitals for the 

duration of the proposed 16-year offset 

period depending on how much of the 

period of CY 2018 through CY 2022 the 

provider was enrolled in Medicare. 

Consequently, we proposed that any 

hospital that enrolled in Medicare after 

January 1, 2018, would be exempt from 

the annual adjustment to the conversion 

factor to offset lump sum payments to 

affected 340B covered entity hospitals. 

We explained that we were proposing to 

exempt those hospitals because they 

received less than the full amount of the 

increased non-drug item and service 

payments made during CY 2018 through 

CY 2022 due to the 340B Payment 

Policy than they otherwise would have 

received if enrolled prior to that date. 

We solicited comments on our 

proposed definition of a ‘‘new provider’’ 

and our proposal to exempt new 

providers from the annual adjustment to 

the conversion factor to offset lump sum 

payments to affected 340B covered 

entity hospitals. We also solicited 

comments on whether there were any 

other easily identifiable categories of 

providers who should be similarly 

exempted from the annual adjustment to 

the conversion factor. 

We received the following comments 

on our proposals. 

Comment: One commenter expressed 

concern with the breadth of the new 

provider exemption. This commenter 

suggested that hospitals should be 

subject to reduced payment rates for a 

period of time commensurate with the 

period of time they benefited from the 

increased payment rates. For example, 

the commenter argued, that if a hospital 

began its Medicare participation on 

January 1, 2020, the hospital would 

have benefited from the increased 

payment rates for 3 years (2020–2022) 

which is 60 percent of the time that the 

increased payments were in place. For 

this hospital, the commenter argued, 

CMS would require that the reduced 

payment rates would apply for 60 

percent of the time CMS expects the 

reduced payments to be in place (9.6 

years for 16-year timeframe). 

Response: We acknowledge that a 

more individualized application of the 

exception would lead to more precise 

adjustments and potentially decrease 

the distributive effects discussed above. 

However, consistent with our general 

approach in this rule of complying with 

the budget neutrality requirement while 

avoiding undue administrative burdens, 

we believe that such an approach is not 

feasible because it would result in many 

different lengths of payment or OPPS 

conversion factor adjustments. The 

more complicated we make the payment 

reduction, the closer it approaches reprocessing all payments—an approach 

we rejected previously in section II.A of 

this final rule. And as noted above, 

complications increase the risk we will 

face delays or errors in implementing 

this final rule. 

Comment: Another commenter 

appreciated the exclusion of new 

providers but expressed concern that 

over the long term the exclusion could 

either be overlooked or reversed due to 

future rulemaking and reimbursement 

adjustments. 

Response: While there is always the 

risk of inadvertent error, we believe we 

have clearly defined the universe of 

qualifying providers, and so we believe 

the risk of overlooking them is relatively 

low. Should we choose to change our 

policy in the future, we would do so 

through notice and comment 

rulemaking, and interested parties 

would have the opportunity to express 

their concerns. Hospitals that will be 

excluded under the prospective 

payment adjustment are listed in 

Addendum BBB to this final rule. This 

addendum can be found online through 

the CMS OPPS website.32 During 

subsequent annual rulemaking, an 

updated addendum of hospitals will be 

included in that year’s calendar year 

OPPS/ASC rule. Any errors or 

omissions in the addenda should be 

addressed through the public notice and 

comment period for that year’s rule. 

After considering the comments 

received, we are finalizing our policy as 

proposed, and will designate any 

hospital that enrolled in Medicare on or 

after January 2, 2018, as a ‘‘new 

provider’’ and will pay these hospitals 

the rate for non-drug items and services 

that would apply in the absence of the 

conversion factor adjustment 

implemented due to the 340B Payment 

Policy remedy. This means that we will 

calculate payment rates for new 


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33Available at https://www.cms.gov/files/ 

document/cmsopps340bupdate508g.pdf. 

providers using the conversion factor 

before applying the 0.5 percent annual 

adjustment that would apply for 

hospitals that are not ‘‘new providers’’ 

for purposes of this policy. 

We are codifying the exclusion of new 

providers from the prospective payment 

adjustment to the conversion factor for 

the duration of its application in the 

regulations by adding new paragraph 

(b)(1)(iv)(B)(12) to § 419.32 as proposed, 

except we are adding ‘‘biologicals’’ to 

the reference to separately payable 

drugs. We are adding ‘‘biologicals’’ to 

the regulation text at 419.32 in order to 

ensure that the regulation text matches 

our finalized policy regarding the 

calculation of prospective payment rates 

for hospital services and the exclusion 

of separately payable drugs and 

biologicals from that prospective 

payment rate. 

d. Additional Comments Received 

Comment: We received a couple of 

comments asking for CMS to use its 

current drug acquisition survey to 

inform OPPS 340B payment rates. 

Similarly, we heard from commenters 

that we should conduct another survey. 

Further, commenters requested we make 

changes to how Medicare pays for 340Bacquired drugs. Similarly, commenters 

asked for reform to the 340B Program as 

a whole. 

Response: We appreciate these 

comments but many of them are out of 

the scope of this rule. HRSA manages 

the 340B Program more generally, and 

more broad comments with respect to 

that program are not the subject of this 

rulemaking. OPPS payment policy will 

be included in the appropriate year’s 

annual rule. As noted above, we 

previously suggested that we might use 

our survey of CY 2018 and 2019 cost 

data to inform the remedy. (84 FR 

61322.) But as we subsequently noted, 

we received many comments on the 

survey data, and using that data, which 

surveyed only 340B hospitals, might not 

comport with the Supreme Court’s 

decision. Using it would introduce new 

complexities into the rate calculation, 

for instance, by requiring consideration 

of adjustments to the data and other 

factors (85 FR 86052). We do not believe 

it is worth delaying the remedy 

payments to allow for such 

considerations or for us to conduct a 

new survey many years after the fact. 

Comment: Many commenters 

expressed concern about Medicare 

Advantage Organizations (hereinafter 

referred to as ‘‘MAOs’’) realizing a 

‘‘windfall’’ as a result of reducing 

outpatient payments without making 

corresponding repayments to hospitals. 

Specifically, these commenters argued 

that MAOs will see the benefit of 

reducing outpatient payments to all 

hospitals for non-drug items and 

services by 0.5 percent starting in CY 

2026 but will not be required to repay 

affected 340B covered entity hospitals 

the amounts that were withheld for 

340B drugs from 2018 through 2022. 

These commenters requested that CMS 

consider several courses of action to 

ensure MAOs fully comply with the 

remedy. 

Response: We appreciate commenters’ 

concerns; however, these comments are 

out of the scope of this final rule. We 

refer commenters to the Hospital 

Outpatient Prospective Payment System 

Update on Payment Rates for Drugs 

Acquired through the 340B Program— 

Informational for MAOs memorandum 

that was issued by CMS on December 

20, 2022.33 In that memorandum, we 

summarized the issue with the 

Outpatient Prospective Payment system 

rule related to payments for 340B 

acquired drugs and provided references 

to the relevant CMS-issued materials 

that were issued after the Supreme 

Court decision that vacated the 

differential payment rates. We clarified 

that for Medicare Advantage, MAOs 

must pay non-contract providers or 

facilities for services and items at least 

the amount they would have received 

under Original Medicare payment rules, 

in accordance with section 1852(a)(2) of 

the Act (42 U.S.C. 1395w–22). In 

accordance with section 

1854(a)(6)(B)(iii) of the Act (42 U.S.C. 

1395w–22(a)(6)(B)(iii)), CMS may not 

require MAOs to contract with a 

particular healthcare provider or use 

particular pricing structures with their 

contracted providers. Therefore, MAOs 

that contract with a provider or facility 

eligible for 340B drugs can negotiate the 

terms and conditions of payment 

directly with the provider or facility and 

CMS cannot interfere in the payment 

rates that MAOs set in contracts with 

providers and facilities. 

Comment: A few commenters alleged 

Accountable Care Organizations will 

continue to be unfairly impacted by 

CMS not addressing the disparity 

between paying for 340B drugs at the 

lower price of ASP minus 22.5 percent 

in ACO benchmarks (that is, between 

2018–2022) and the higher price of ASP 

plus 6 percent in performance years. 

The commenters urge CMS to correct 

this disparity by adjusting its 

calculation of ACOs’ performance year 

expenditures to correct for this 

difference without ACOs having to early 

renew. The commenters argued an 

adjustment would help ACOs that 

include ACO providers/suppliers that 

are 340B providers, who help underserved patients and address the health 

disparities CMS wants to eliminate 

through policymaking. 

Response: The Shared Savings 

Program includes Parts A and B fee-forservice claims and individually 

beneficiary identifiable final payments 

made under a demonstration, pilot or 

time limited program in benchmark and 

performance year expenditure 

calculations. Historical benchmark year 

expenditures are risk-adjusted, and a 

blend of national and regional growth 

rates are used to trend forward 

expenditures for each benchmark year 

(benchmark year 1 and 2) to benchmark 

year 3. Benchmark expenditures are 

further updated by trending forward to 

the performance year during financial 

reconciliation. Risk adjustment is 

applied to account for changes in 

severity and case mix of the ACO’s 

assigned beneficiaries between the 

benchmark period and the performance 

year, and the use of a blended national 

and regional trend adjusts an ACO’s 

historical benchmark expenditures to 

remain comparable to changes in 

performance year expenditures 

including changes in Medicare payment 

policy and other factors affecting 

expenditures. The payment rate for 

340B-acquired drugs included in Shared 

Savings Program PY 2023 financial 

calculations will be ASP plus 6 percent. 

For ACOs participating in PY 2023 that 

have historical benchmark years for 

which payments for 340B-acquired 

drugs were based on the ASP minus 

22.5 percent rate (2018–2022), the 

differences between the 340B-acquired 

drug payments included in historical 

benchmark year and performance year 

expenditure calculations have the 

potential to be mitigated when CMS 

updates the benchmark using a blend of 

national and regional growth rates. 

Additionally, for ACOs with agreement 

periods starting January 1, 2024, we 

finalized policies through rulemaking 

that may also support ACOs impacted 

by the changes in 340B-acquired drug 

payment rates, such as policies to 

reduce the impact of the negative 

regional adjustment, incorporate a prior 

savings adjustment in historical 

benchmarks for renewing and reentering ACOs, and modifying the 

methodology for updating the historical 

benchmark to incorporate a prospective, 

external factor. These policies are 

expected to encourage new and 

continued participation from ACOs 

serving medically complex and high 

cost of care populations. 


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Any adjustments to 340B-acquired 

drug claims with CY 2022 dates of 

service that were processed on or before 

March 31, 2023, are reflected in 

Medicare Shared Savings Program 

(Shared Savings Program) expenditure 

calculations used in Performance Year 

(PY) 2022 financial reconciliation and 

will be used to calculate historical 

benchmarks for ACOs for which CY 

2022 is a benchmark year. Any 

adjustment to claims with CY 2022 

dates of service that were processed 

after March 31, 2023, or that have not 

yet been submitted or processed are not 

reflected in PY 2022 Shared Savings 

Program expenditure calculations and 

would not be used to calculate historical 

benchmarks for ACOs for which CY 

2022 is a benchmark year. 

Additionally, CMS will provide lumpsum payments to providers that 

received reduced reimbursement for 

340B-aquired drugs from CY 2018 

through September 27th of CY 2022, 

such lump sum payments will be 

adjusted to ensure that CMS does not 

make duplicate payments for claims that 

had already been reprocessed at the 

higher payment rate. These lump sum 

payments will not be included in 

Shared Savings Program calculations, as 

these payments would not be 

individually beneficiary identifiable. 

Comment: One commenter urged 

CMS to consider recommendations 

outlined in the ASCO 340B drug pricing 

reform statement in any future approach 

to reforming the 340B Program. The 

commenter requested that when 

proposing further policy changes and 

updates, CMS analyze the impact of the 

policies, including whether the 

proposals satisfy the original intent of 

the legislation, the presence or absence 

of appropriate safeguards for 

compliance and oversight, and the 

unique considerations related to cancer 

patients and other vulnerable patients. 

Response: We appreciate the 

commenter’s concerns; however, this 

comment is out of the scope of this final 

rule. 

Summary of Finalized Policy 

As discussed in the preceding 

sections, after consideration of the 

public comments we received, and for 

the reasons stated in our proposed rule 

and in this final rule, we are finalizing 

the proposed remedy for the 340B 

Payment Policy for CYs 2018–2022, 

with the one exception that we are 

changing the implementation date of the 

0.5 percent adjustment from CY 2025 to 

CY 2026. Using our authority under 

sections 1833(t)(14) and (t)(2)(E) of the 

Act (42 U.S.C. 1395l(t)(14) and (t)(2)(E)) 

and, to the extent necessary, section 

1871(e)(1)(A) of the Act (42 U.S.C. 

1395hh(e)(1)(A)), we will make a onetime lump sum payment to each 

affected 340B covered entity hospital 

calculated as the difference between 

what the affected 340B covered entity 

hospital received for 340B-acquired 

drugs during the time period at issue 

and approximately what they would 

have received for 340B-acquired drugs if 

the 340B adjustment had not been in 

place, which includes what the affected 

340B covered entity hospital would 

otherwise have been paid by the 

beneficiary. The amount of the lump 

sum payment that has been calculated 

for each affected 340B covered entity 

hospital is listed in Addendum AAA. 

Following the deadline to submit a 

request for technical correction to the 

amount listed in Addendum AAA, we 

will issue instructions to the Medicare 

Administrative Contractor (MAC) for 

each affected 340B covered entity 

hospital that has not submitted a request 

for technical correction by the deadline 

discussed in this rule. We will instruct 

the MAC to issue a one-time lump sum 

payment to those hospitals in the 

amount listed in Addendum AAA 

within 60 calendar days of the MAC’s 

receipt of the instruction. We will 

instruct MACs to pay hospitals that 

submit a request for technical correction 

through a similar process after the 

technical correction process is 

completed, and the payment amount for 

those providers will be based on the 

result of the technical correction 

process. The lump sum payments do not 

include interest. In aggregate, the lump 

sum payments we calculate here will 

total $9.0 billion and will include a 

portion equivalent to the amount that 

beneficiaries, through cost-sharing, 

would have paid hospitals. 

To comply with the budget neutrality 

requirements of the authorities we are 

relying on to make the one-time lump 

sum remedy payments, and 

alternatively relying on our equitable 

adjustment or common-law and 

inherent recoupment authorities, 

beginning in CY 2026, we will reduce 

all payments for non-drug items and 

services to all OPPS providers, except 

new providers (hospitals with a CMS 

CCN effective date of January 2, 2018, or 

later), by 0.5 percent each year until the 

total estimated offset of $7.8 billion is 

reached. We currently estimate that the 

payment decrease will be completed 

after approximately 16 years. To 

implement this reduction and exception 

for new providers, we are finalizing the 

proposed regulation text changes at 

§ 419.32(b)(1)(iv)(B) as proposed, except 

for changing the implementation date of 

the 0.5 percent reduction from CY 2025 

to CY 2026. 

III. Collection of Information 

Requirements 

This document does not impose 

information collection requirements; 

that is, reporting, recordkeeping, or 

third-party disclosure requirements. 

Consequently, there is no need for 

review by the Office of Management and 

Budget under the authority of the 

Paperwork Reduction Act of 1995 (44 

U.S.C. 3501 et seq.). 

IV. Regulatory Impact Analysis 

Comment: One commenter alleged 

that there is a significant discrepancy in 

CMS’s total OPPS payments data, which 

could impact how long it would take for 

CMS to effectuate any recoupment. 

Specifically, the commenter argued that 

there is a $23 billion dollar discrepancy 

between the amount of total OPPS 

payments stated in the proposed 2024 

OPPS rule ($88.6 billion) and the 

amount of OPPS payments for all 

providers stated in the OPPS impact file 

for the proposed 2024 OPPS rule 

($65.65 billion). The commenter 

expressed concern about this 

discrepancy and its effect on individual 

hospitals and the 16-year recoupment 

period. 

Response: We agree that there are 

differences between the spending 

numbers in the OPPS impact files 

versus overall OPPS spending estimates. 

The OPPS impact file associated with 

each proposed and final rule primarily 

displays the effects of current and 

prospective policies based on historical 

claims. It also excludes lines from 

estimated payment that are removed 

from the ratesetting process for OPPS 

purposes. In contrast, the overall OPPS 

spending estimate is based on 

projections of future spending and 

include estimated changes in 

enrollment, utilization, and case mix. 

We also agree that things may change 

over the course of the 16-year 

recoupment period, and we will 

monitor the impact of these prospective 

reductions as well as recoupment 

amounts over the course of that time 

period. 

A. Statement of Need 

From CY 2018 through September 

27th of CY 2022, CMS paid a lower rate 

(generally ASP minus 22.5 percent) to 

certain hospitals for drugs acquired 

through the 340B discount program. The 

purpose of this policy was to pay these 

hospitals for 340B drugs at a rate that 

more accurately reflected the actual 

costs they incurred to acquire them. 

This 340B policy was the subject of 


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several years of litigation, which 

culminated in a decision of the Supreme 

Court of the United States in American 

Hospital Association v. Becerra, 142 S. 

Ct. 1896 (2022), which held that if CMS 

has not conducted a survey of hospitals’ 

acquisition costs, it may not vary the 

payment rates for outpatient 

prescription drugs by hospital group. 

The Supreme Court subsequently 

remanded the case, and the District 

Court ultimately remanded the case to 

CMS to implement a remedy to address 

the reduced payment amounts to the 

plaintiff hospitals from CY 2018 through 

September 27th of CY 2022. 

This final rule describes the remedy 

CMS is finalizing to comply with the 

District Court’s remand. It remedies the 

reduced payment amounts to the 

affected 340B covered entity hospitals 

by (1) calculating the amount each 

hospital would have received for 340B 

drugs from CY 2018 through September 

27th of 2022 had the 340B policy not 

been in place; (2) subtracting from that 

total the amount each hospital received 

for 340B drugs from CY 2018 through 

September 27th of CY 2022; and (3) 

paying each affected 340B covered 

entity hospital the difference between 

these amounts by issuing instructions to 

the relevant MAC instructing it to issue 

a one-time lump sum payment to the 

hospital. The amount of the lump sum 

payment includes the portion of the 

payment amount that would have been 

paid from the Part B Trust Fund and the 

portion of the payment amount that 

would have been paid in the form of 

beneficiary coinsurance if not for the 

340B Payment Policy. 

To comply with statutory budget 

neutrality requirements, we proposed 

and are finalizing to annually reduce 

OPPS payments for non-drug items and 

services beginning in CY 2026 by 

decreasing the OPPS conversion factor 

by 0.5 percent each year until a total 

offset of an estimated $7.8 billion is 

reached. 

B. Overall Impact 

We have examined the impacts of this 

rule as required by Executive Order 

12866 on Regulatory Planning and 

Review (September 30, 1993), Executive 

Order 13563 on Improving Regulation 

and Regulatory Review (January 18, 

2011), Executive Order 14094 on 

Modernizing Regulatory Review (April 

6, 2023), the Regulatory Flexibility Act 

(RFA) (September 19, 1980, Pub. L. 

96354) (5 U.S.C. 601–612), section 

1102(b) of the Act (42 U.S.C. 1302(b), 

section 202 of the Unfunded Mandates 

Reform Act of 1995 (March 22, 1995; 

Pub. L. 104–4) (2 U.S.C. 602), Executive 

Order 13132 on Federalism (August 4, 

1999), and the Congressional Review 

Act (5 U.S.C. 804(2)). 

Executive Orders 12866 and 13563 

direct agencies to assess all costs and 

benefits of available regulatory 

alternatives and, if regulation is 

necessary, to select regulatory 

approaches that maximize net benefits 

(including potential economic, 

environmental, public health and safety 

effects, distributive impacts, and 

equity). The Executive Order 14094 

entitled ‘‘Modernizing Regulatory 

Review’’ (hereinafter referred to as the 

‘‘Modernizing E.O.’’) amends section 

3(f)(1) of Executive Order 12866 

(Regulatory Planning and Review). The 

amended section 3(f) of Executive Order 

12866 defines a ‘‘significant regulatory 

action’’ as an action that is likely to 

result in a rule: (1) having an annual 

effect on the economy of $200 million 

or more in any 1 year, or adversely 

affect in a material way the economy, a 

sector of the economy, productivity, 

competition, jobs, the environment, 

public health or safety, or State, local, 

territorial, or Tribal governments or 

communities; (2) creating a serious 

inconsistency or otherwise interfering 

with an action taken or planned by 

another agency; (3) materially altering 

the budgetary impacts of entitlements, 

grants, user fees, or loan programs or the 

rights and obligations of recipients 

thereof; or (4) raising legal or policy 

issues for which centralized review 

would meaningfully further the 

President’s priorities or the principles 

set forth in this Executive order. 

A regulatory impact analysis (RIA) 

must be prepared for rules with 

significant regulatory action(s) and/or 

with significant effects as per section 

3(f)(1) of Executive Order 12866 ($200 

million or more in any 1 year). Based on 

our estimates, the Office of Management 

and Budget’s (OMB’s) Office of 

Information and Regulatory Affairs has 

determined this rulemaking is 

significant per section 3(f)(1) economic 

effect. Accordingly, we have prepared a 

Regulatory Impact Analysis that to the 

best of our ability presents the costs and 

benefits of the rulemaking. Therefore, 

OMB has reviewed these proposed 

regulations, and the Department has 

provided the following assessment of 

their impact. 

As required by statute, we are 

implementing this court-ordered 

remedy in a budget neutral manner, and 

we estimate that the total increase in 

Federal Government expenditures, due 

only to the changes in this final rule, 

will be $2.8 billion. We took into 

consideration the additional Medicare 

drug payments of $9.0 billion to the 

estimated 1,700 340B covered entity 

hospitals to which the drug payment 

remedy will apply, and the $6.2 billion 

in reduced Medicare prospective 

payments for non-drug items and 

services beginning in CY 2026 to offset 

the additional payments that were made 

for non-drug items and services from CY 

2018 through CY 2022 as part of the 

340B Payment Policy and the amount of 

the 340B drug remedy payments that 

would otherwise have been paid by the 

beneficiary. We note that this $6.2 

billion figure is the portion of reduced 

Medicare prospective payments 

specifically, and this represents 

approximately 80 percent of the total 

$7.8 billion offset that we proposed. 

Beneficiaries will experience reduced 

prospective co-insurance payments 

representing approximately the 

remaining 20 percent of the total $7.8 

billion offset. The $9.0 billion amount is 

an estimate of the total aggregate 

additional payments that still need to be 

made to 340B hospitals for drugs that 

were paid less due to the 340B policy 

from CY 2018 through September 27, 

2022. 

While we consider the amount of 

additional payment made to affected 

340B covered entity hospitals for 340Bacquired drug claims with dates of 

service from January 1, 2022, through 

September 27, 2022, that were 

reprocessed at the default drug payment 

rate after the 340B Payment Policy was 

vacated, estimated at $1.6 billion, for 

purposes of the total aggregate remedy 

payment to affected 340B covered entity 

hospitals, we are not including that $1.6 

billion in our calculation here, which 

estimates the total increase in Federal 

Government expenditures due only to 

the proposed changes in this final rule. 

This $1.6 billion in remedy payments 

has already been made after the District 

Court’s order. 

The two amounts described above, 

$9.0 billion and $6.2 billion, are not 

equal because the separate amounts 

associated with restoring 340B-acquired 

drug payments to ASP plus 6 percent 

and unwinding the associated 3.19 

percent rate increase for non-drug items 

and services are not equal to each other. 

This is due to many factors. Some 

factors that decreased the gap include 

the facts that Medicare’s payment policy 

adjustment for 340B acquired drugs 

ended on September 27, 2022, while the 

original conversion factor adjustment of 

minus 3.19 percent remained in effect 

until December 31, 2022, and most of 

the 340B drug claims with dates of 

service between January 1, 2022, and 

September 27, 2022, have already been 

reprocessed at the higher default drug 

payment rate, while none of the 

increased non-drug item and service 


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Federal Register / Vol. 88, No. 215 / Wednesday, November 8, 2023 / Rules and Regulations 77187 

payment during this time period have 

been remedied. By contrast, some 

factors that increased the gap include 

the facts that this remedy rule pays 

340B providers an amount equivalent to 

the lost beneficiary cost-sharing 340B 

providers would have received for 

340B-acquired drugs if the 340B 

Payment Policy had not been in effect 

as part of the lump sum payments to 

providers, and the original budget 

neutrality adjustment to increase the 

conversion factor in CY 2018 did not 

keep pace with the reduction in 340B 

drug payments for the remainder of the 

years for which the 340B Payment 

Policy previously applied. In aggregate, 

the total additional payment that 

providers will receive as a result of this 

remedy, $10.6 billion, will be larger 

than the amount of payment that will be 

prospectively offset, $7.8 billion. 

To explain the last factor in more 

detail, from CY 2018 through CY 2022, 

the actual spending associated with 

340B-acquired drugs changed from what 

we projected in the CY 2018 OPPS/ASC 

final rule with comment period. As we 

noted above in section II.B.2 of this final 

rule, the actual total reduction in 340Bacquired drug payments during this 

time period outpaced the corresponding 

increase in non-drug item and service 

payments. This final rule maintains 

budget neutrality by undoing the 

original 340B Payment Policy. This 

approach is consistent with how we 

unwound the 340B Payment Policy 

prospectively, as described in the CY 

2023 OPPS/ASC final rule with 

comment period (87 FR 71975). There, 

we maintained budget neutrality by 

removing the effect of the 340B policy 

as originally implemented in CY 2018 

from the CY 2023 conversion factor, and 

ensured it was equivalent to the 

conversion factor that would be in place 

if the 340B Payment Policy had never 

existed. We did not increase the rate we 

paid for 340B-acquired drugs without 

making a corresponding change to the 

conversion factor. Nor did we adjust the 

conversion factor to account for the 

actual increase in the utilization for 

340B drugs. In Table 3 of this final rule, 

we display the impact of these proposed 

policy changes on drug payments, 

including aggregate payment by hospital 

type. Specific 340B-acquired drug lump 

sum payment amounts, by individual 

hospital, can be found in Addendum 

AAA. The impact for specific hospital 

types of the reduced prospective 

payment for non-drug items and 

services beginning in CY 2026 would be 

included in each proposed and final 

rule for calendar years in which the 

prospective reduction would apply, 

beginning in CY 2026. 

C. Detailed Economic Analysis 

Column 1: Total Number of Hospitals 

The first line in Column 1 in Table 3 

shows the total number of facilities 

(1,686), including designated cancer and 

children’s hospitals and Community 

Mental Health Centers (CMHCs), that 

will receive remedy payments under 

this final rule. We excluded all hospitals 

and CMHCs that we do not expect will 

experience any direct effect from the 

remedy payments in this final rule. We 

show the total number of OPPS 

hospitals (1,686) that will receive 

remedy payments, excluding the PPSexempt cancer and children’s hospitals 

and CMHCs, on the second line of the 

table. We excluded cancer and 

children’s hospitals because section 

1833(t)(7)(D)(ii) of the Act (42 U.S.C. 

1395l(t)(7)(D)(ii)) provides transitional 

outpatient payments (TOPs), which 

permanently hold harmless cancer 

hospitals and children’s hospitals to 

their ‘‘pre-Balanced Budget Act of 1997 

(BBA) amount’’ as specified under the 

terms of the statute. 

Column 2: Remedy for the 340B 

Payment Policy (in Millions) 

Column 2 shows the estimated 

remedy payments that will be made 

under this final rule to various 

categories of affected providers. We note 

that certain categories of providers may 

experience limited effects due to either 

having no providers in the category, or 

limited billing associated with 340Bacquired drugs. We also note that a 

provider’s placement within the 

categories may vary due to their 

characteristic information potentially 

changing across the years in question 

(CY 2018 through CY 2022). 

Column 3: CY 2022 Reprocessed 

Payment Differential (in Millions) 

Column 3 displays the estimated 

payment impact of any CY 2022 claims 

that have been reprocessed by the 

MACs. We note that these claims, which 

include dates of service for services 

furnished prior to September 28, 2022, 

were not reprocessed their payments 

otherwise would have been included as 

remedy payments in Column 2. 

Column 4: Total 340B Drug Remedy 

Payments 

Column 4 includes the total remedy 

payments, which is the sum of column 

2 and column 3. 

BILLING CODE 4120–01–P 


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TABLE 3: ESTIMATED FINANCIAL IMPACT OF THE LUMP-SUM REMEDY 

PAYMENTS ON OPPS PROVIDERS 

(1) (2) (3) (4) 

Total 

3408 

Drug 

CY 2022 Remedy 

Remedy Reprocessed Payments 

Number Payment Payment (Sum of 

of (in Differential Columns 

Row Hospitals millions) (in millions) 2 and 3) 

1 ALL PROVIDERS * 1,686 9,003.8 1,615.6 10,619.4 

2 ALL HOSPITALS 1,655 9,003.5 1,615.5 10,619.0 

(excludes hospitals held harmless and CMHCs) 

3 URBAN HOSPITALS 1,324 8,543.8 1,562.8 10,106.6 

4 LARGE URBAN 625 4,322.7 843.8 5,166.5 

(GT 1 MILL.) 

5 OTHER URBAN 699 4,221.1 719.0 4,940.1 

(LE 1 MILL.) 

6 RURAL HOSPITALS 331 453.4 51.3 504.7 

7 SOLE COMMUNITY 152 94.2 6.1 100.3 

8 OTHER RURAL 179 359.2 45.1 404.3 

BEDS (URBAN) 

9 0 - 99 BEDS 224 259.0 46.6 305.6 

10 100-199 BEDS 382 823.9 131.3 955.2 

11 200-299 BEDS 253 1,197.3 211.5 1,408.8 

12 300-499 BEDS 272 1,980.1 355.2 2,335.3 

13 500 + BEDS 193 4,283.4 818.3 5,101.7 

BEDS (RURAL) 

14 0 -49 BEDS 128 80.3 8.3 88.6 

15 50- 100 BEDS 117 101.2 15.8 117.0 

16 101- 149 BEDS 41 88.8 9.4 98.2 

17 150- 199 BEDS 22 89.9 8.3 98.2 

18 200 + BEDS 23 93.2 9.5 102.7 

REGION (URBAN) 

19 NEW ENGLAND 73 609.9 123.7 733.6 

20 MIDDLE ATLANTIC 165 1,177.2 244.6 1,421.8 

21 SOUTH ATLANTIC 225 1,590.3 289.6 1,879.9 

22 EAST NORTH CENT. 236 1,315.4 247.8 1,563.2 

23 EAST SOUTH CENT. 75 668.0 113.4 781.4 

24 WEST NORTH CENT. 80 749.7 135.3 885.0 

25 WEST SOUTH CENT. 149 608.8 104.0 712.8 

26 MOUNTAIN 90 564.0 96.1 660.1 

27 PACIFIC 228 1,260.5 208.2 1,468.7 

28 PUERTO RICO 3 0.0 0.0 0.0 
Federal Register / Vol. 88, No. 215 / Wednesday, November 8, 2023 / Rules and Regulations 77189 

BILLING CODE 4120–01–C We estimate that the total monetary 

transfer will be approximately $9.0 

billion. The $9.0 billion includes the 

proposed additional lump sum drug 


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29 

30 

31 

32 

33 

34 

35 

36 

37 

38 

39 

40 

41 

42 

43 

44 

45 

46 

47 

48 

49 

50 

51 

52 

53 

54 

REGION (RURAL) 

NEW ENGLAND 11 25.1 1.4 

MIDDLE ATLANTIC 23 32.2 3.6 

SOUTH ATLANTIC 54 94.7 8.0 

EAST NORTH CENT. 48 67.1 8.1 

EAST SOUTH CENT. 77 145.2 20.0 

WEST NORTH CENT. 30 6.8 0.7 

WEST SOUTH CENT. 54 19.5 1.4 

MOUNTAIN 20 28.1 2.9 

PACIFIC 14 34.7 5.3 

TEACHING STATUS 

NON-TEACH I NG 818 1,673.3 291.6 

MINOR 522 2,780.8 464.0 

MAJOR 315 4,543.1 858.5 

DSH PATIENT PERCENT 

0 0 0.0 0.0 

GT O - 0.10 31 16.5 0.4 

0.10-0.16 65 6.9 0.1 

0.16 - 0.23 178 54.4 15.7 

0.23 - 0.35 728 3,832.4 711.4 

GE 0.35 642 5,086.9 886.4 

DSH NOT AVAILABLE** 11 0.1 0.0 

URBAN TEACHING/DSH 

TEACHING & DSH 775 7,168.4 1,308.8 

NO TEACHING/DSH 539 1,375.3 254.0 

NO TEACHING/NO DSH 0 0.0 0.0 

DSH NOT AVAILABLE2 10 0.1 0.0 

TYPE OF OWNERSHIP 

VOLUNTARY 1,241 7,208.2 1,308.9 

PROPRIETARY 152 32.1 7.1 

GOVERNMENT 262 1,757.0 298.1 

Column (1) shows total hospitals that are expected to receive payments related to the 340B 

policy under this final rule. 

Column (2) includes the estimated drug remedy payment made to account for the policies 

described in this final rule during the time period of CY 2018 through CY 2022. 

Column (3) displays the estimated payment impact of any CY 2022 claims that have been 

reprocessed by the MACs. We note that if these claims, which include dates of service for 

services furnished prior to September 28, 2022, were not reprocessed their payments would 

otherwise have been included as remedy payments in Column 2. 

Column (4) includes the total remedy payments, which is the sum of column 2 and column 3 

* These 1,686 providers include children and cancer hospitals, which are held harmless to 

pre-BBA amounts, and CMHCs. We note that this also includes 22 providers who are not 

expected to receive 340b remedy payments but who had reprocessed CY 2022 claims. 

** Complete DSH numbers are not available for providers that are not paid under IPPS, 

including rehabilitation, psychiatric, and long-term care hospitals. 

26.5 

35.8 

102.7 

75.2 

165.2 

7.5 

20.9 

31.0 

40.0 

1,964.9 

3,244.8 

5,401.6 

0.0 

16.9 

7.0 

70.1 

4,543.8 

5,973.3 

0.1 

8,477.2 

1,629.3 

0.0 

0.1 

8,517.1 

39.2 

2,055.1 
77190 Federal Register / Vol. 88, No. 215 / Wednesday, November 8, 2023 / Rules and Regulations 

34We note that Table 1 illustrates the prospective 

reductions of $7.8 billion that represent the reduced 

Medicare payments as well as reduced cost-sharing 

paid by the beneficiary. The $6.2 billion of the 

financial impacts discussed here represents only 

the Medicare payments over the full span of this 

offset. 

payments to the 1,686 affected 340B 

covered entity hospitals. The $9.0 

billion amount is an estimate of the total 

aggregate additional payments that will 

need to be made to the affected 340B 

covered entity hospitals for drugs that 

were paid less due to the 340B policy 

from CY 2018 through September 27th 

of CY 2022. As noted previously, the 

estimated total amount required to 

remedy providers is $10.6 billion, 

which includes the $1.6 billion that has 

already been paid through 340B drug 

claims processing and reprocessing that 

occurred for CY 2022 claims. 

We note that, in this final rule, we 

described our policy to annually reduce 

OPPS payments for non-drug items and 

services beginning in CY 2026, by 

decreasing the OPPS conversion factor 

by 0.5 percent each year until we have 

offset the full amount of the additional 

payments made for non-drug items and 

services from CY 2018 through CY 2022 

due to the increase in the conversion 

factor in those years in response to the 

340B payment policy adjustment. This 

prospective offset will apply to all OPPS 

providers, including 340B providers, 

aside from those OPPS providers 

explicitly excluded as previously 

discussed. The overall impact of these 

prospective reductions is estimated to 

be minus $6.2 billion in Medicare 

payments alone over the full span of 

this proposed offset. The estimated 

impact of this offset for each calendar 

year for which the offset is estimated to 

apply is detailed in Table 2 of this final 

rule.34 The impact of this offset on 

payments to each provider type for each 

calendar year in which the offset is in 

effect will be included in the regulatory 

impact analysis for the applicable 

annual OPPS rulemaking, beginning for 

CY 2026. However, we note that 

generally the impact of that annual 0.5 

percent reduction to the OPPS 

conversion factor on individual 

providers, as well as categories of 

providers, will depend on the 

percentage of their OPPS payments that 

are conversion factor-based, and in most 

cases will be a decrease of slightly less 

than 0.5 percent of overall OPPS 

payments. Please see Table 4 below for 

our estimated total impact to the OPPS 

payments based on the information 

provided in Table 2. 


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TABLE 4: ESTIMATED ANNUAL IMPACT TO OPPS SPENDING BASED ON 

0.5 PERCENT ADJUSTMENT TO THE CONVERSION FACTOR 

CY2026 CY2027 CY2028 CY2029 CY2030 CY2031 

0.5-Percent 

Payment Reduction $351 $369 $387 $407 $427 $448 

Amount (millions) 

CY2032 CY2033 CY2034 CY2035 CY2036 CY2037 

0.5-Percent 

Payment Reduction $471 $494 $519 $545 $572 $600 

Amount (millions) 

CY2038 CY2039 CY2040 CY2041 

0.5-Percent 

Payment Reduction $631 $662 $696 $188 

Amount (millions) 

Total Offset: $7 .8 billion 
Federal Register / Vol. 88, No. 215 / Wednesday, November 8, 2023 / Rules and Regulations 77191 

35https://www.bls.gov/oes/current/oes_nat.htm. 

D. Regulatory Review Cost Estimation 

If regulations impose administrative 

costs on private entities, such as the 

time needed to read and interpret this 

final rule, we should estimate the cost 

associated with regulatory review. Due 

to the uncertainty involved with 

accurately quantifying the number of 

entities that will review the rule, we 

assume that the total number of unique 

commenters on last year’s CY 2023 

OPPS/ASC proposed rule will be the 

number of reviewers of the proposed 

rule. We acknowledge that this 

assumption may understate or overstate 

the costs of reviewing this rule. It is 

possible that not all commenters 

reviewed last year’s rule in detail, and 

it is also possible that some reviewers 

chose not to comment on the proposed 

rule. For these reasons we thought that 

the number of past commenters would 

be a fair estimate of the number of 

reviewers of this rule. 

For the purposes of our estimate, we 

assume that each reviewer reads 100 

percent of the rule. We welcomed any 

public comments on the approach in 

estimating the number of entities that 

would review the proposed rule. We did 

not receive any public comments 

specific to our solicitation. 

Using the mean hourly wage 

information from the Bureau of Labor 

Statistics (BLS) for medical and health 

service managers (Code 11–9111), we 

estimate that the cost of reviewing this 

rule is $123.06 per hour, which is 

double the BLS hourly rate in order to 

account for fringe benefits and other 

indirect costs in addition to the hourly 

wage itself.35 Assuming an average 

reading speed, we estimate that it would 

take approximately 3 hours for the staff 

to review this final rule. For each entity 

that reviews the rule, the estimated cost 

is $369.18 (3 hours × $123.06). 

Therefore, we estimate that the total cost 

of reviewing this regulation is $608,778 

($369.18 × 1,649). We received 1,649 

comments on the proposed rule, which 

we estimate to be equivalent to the 

estimated number of reviewers. 

E. Alternatives Considered 

As also discussed in section II.A 

above, we evaluated several options to 

determine which remedy would best 

achieve the objectives of unwinding the 

unlawful 340B Payment Policy while 

making certain OPPS providers as close 

to whole as is administratively feasible. 

For example, we considered making 

additional payments to affected 340B 

covered entity hospitals for 340Bacquired drugs from CY 2018 through 

September 27th of CY 2022 without 

proposing an adjustment to maintain 

budget neutrality, which for the reasons 

stated in section II.A.1 and II.B.2 we 

determined not to be supported by the 

statute or the proper exercise of our 

equitable adjustment or common-law 

and inherent recoupment authorities. 

We further considered retrospectively 

reprocessing all claims from CY 2018 

through September 27th of CY 2022, 

which, for the reasons stated in section 

II.A.2, we determined not to be 

operationally feasible and to delay 

remedy payments to hospitals. 

We also considered calculating onetime aggregate payment adjustments for 

each provider for the CY 2018 through 

September 27th of CY 2022 time-period, 

including both additional payments for 

340B-acquired drugs and reduced 

payments for non-drug items and 

services under sections 1833(t)(2)(E) and 

(t)(14) of the Act (42 U.S.C. 

1395l(t)(2)(E) and (t)(14)), along with 

our retroactive rulemaking authority in 

section 1871(e)(1)(A) of the Act (42 

U.S.C. 1395hh(e)(1)(A)). This option 

would have involved: (1) calculating the 

total additional payments for each 

hospital that would have been paid for 

separately payable non-pass-through 

340B-acquired drugs from CY 2018 

through September 27th of 2022 in the 

absence of the 340B Payment Policy; (2) 

calculating the additional amount each 

hospital was paid under the OPPS from 

CY 2018 through CY 2022 for non-drug 

items and services as a result of the 

340B policy; (3) subtracting (2) from (1); 

and (4) issuing a payment to, or 

requiring a recoupment from, each 

hospital for the 5-year period in which 

the 340B Payment Policy was in effect, 

which as for the reasons stated in 

section II.A.3 we determined not to be 

appropriate in these circumstances. 

Such an approach would require 

immediate, and in many cases large, 

recoupments from the majority of OPPS 

hospitals and would impose a 

substantial, immediate burden on these 

hospitals as well as an uncertain impact 

on beneficiaries. Given this burden, the 

financial strain many hospitals 

experienced during the recent COVID– 

19 PHE, and the amount of time that has 

transpired since the original payments 

for these drugs, items, and services were 

made, we decided not to propose this 

option and overly burden these 

hospitals in this way, making our final 

option much more generous to OPPS 

providers. 

We refer readers to section II.A of this 

final rule for additional discussion of all 

the alternatives we considered, 

including our reasons for not suggesting 

them as our final policy. 

We are finalizing the prospective 

offset for reasons previously discussed 

to begin in CY 2026, which we believe 

is appropriate rather than other years, as 

we believe starting this reduction in CY 

2026 is responsive to commenter 

concerns, and will allow CMS time to 

finalize the appropriate methodology, 

and then calculate and publish the 

payment rates derived from this policy 

in the CY 2026 OPPS/ASC proposed 

rule, allowing adequate time for 

impacted parties to assess and prepare 

for the new payment rates that will be 

calculated using a reduced conversion 

factor. 

F. Accounting Statement and Table 

As required by OMB Circular A–4 

(available at https://

www.whitehouse.gov/wp-content/ 

uploads/legacy_drupal_files/omb/ 

circulars/A4/a-4.pdf), we have prepared 

an accounting statement in Table 5 

showing the classification of the impact 

associated with the provisions of this 

final rule. 

BILLING CODE 4120–01–P 


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BILLING CODE 4120–01–C 

We note readers can find providerlevel calculations of lump-sum 

Medicare payments in Addendum AAA 

to this final rule. If an affected 340B 

covered hospital entity believes that the 

payment amount listed for them in 

Addendum AAA is inaccurate, they can 

request that CMS review the amount 

using the technical correction processes 

described earlier in this rule. 

We note that the approximately $9.0 

billion of expected transfers in this final 

rule is the $9.0 billion in expected 

additional lump sum drug remedy 

payments associated with this final rule. 

Some of this amount, $1.6 billion of the 

total $10.6 billion, has already been 

remedied through processed or 

reprocessed 340B drug claims for claims 

with dates of service from January 1, 

2022, through September 27, 2022. We 

also outline the anticipated $7.8 billion 

offset to Medicare spending and 

beneficiary cost-sharing to be 

implemented through a 0.5 percent 

reduction to the OPPS conversion factor 

for certain providers. Table 5 provides 

the present value of the prospective 

offset adjustment using discount rates of 

three and seven percent. We note a 

commenter referenced the present value 

of the prospective offset adjustment due 

to the projected long timeframe. We 

believe the prospective 0.5 percentage 

annual reduction in the conversion 

factor is appropriate because it 

addresses budget neutrality while also 

ensuring that the offset was not overly 

financially burdensome on impacted 

entities. 

G. Regulatory Flexibility Act (RFA) 

The RFA requires agencies to analyze 

options for regulatory relief of small 


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TABLE 5: ACCOUNTING STATEMENT 

Category Estimate Source Citation Year Dollar 

One-time hnpact table and impact file, CY 2018 through monetized $9.0 billion based on the respective 2018 

transfers thromm 2022 claims CY2022 

Federal Government to 

From whom to affected 340B covered 

whom? entity hospitals 

Previously 340 drug claims with dates of 

monetized service from January 1, 2022, 

transfers through September 27, 2022, 

(occurring $1.6 billion that have already been CY2022 

before the processed or reprocessed at 

finalization of the default drug payment rate, 

this rule) _generally ASP plus 6 percent 

Federal Government and 

From whom to beneficiaries to affected 

whom? 340B covered entity 

hospitals 

Total: $10.6 billion 

Transfers* Year Dollar Discount Period Covered Rate 

Federal 

Annualized -$465.0 2023 7% CYs 2026-2041 

Monetized 

($Millions/Year) 

-$476.9 2023 3% CYs 2026-2041 

Federal Government and 

beneficiaries to 

From whom to Hospitals and other 

whom? providers who receive 

payment under the 

hospital OPPS ( other 

than new providers). 

*The reduction in annualized monetized transfers is reflective of the aggregate $7.8 billion in 

future reductions to the OPPS conversion factor based on the parameters of this final rule for 

calendar years 2026-2041. 
Federal Register / Vol. 88, No. 215 / Wednesday, November 8, 2023 / Rules and Regulations 77193 

entities, if a rule has a significant impact 

on a substantial number of small 

entities. For purposes of the RFA, many 

hospitals are considered small 

businesses either by the Small Business 

Administration’s size standards with 

total revenues of $41.5 million or less in 

any single year or by the hospital’s notfor-profit status. For details, we refer 

readers to the Small Business 

Administration’s ‘‘Table of Size 

Standards’’ at https://www.sba.gov/ 

content/table-small-business-size 

standards. As its measure of significant 

economic impact on a substantial 

number of small entities, HHS uses a 

change in revenue of more than 3 to 5 

percent. We believe that this threshold 

will be reached by the requirements in 

this final rule. As a result, the Secretary 

has determined that this rule will have 

a significant impact on a substantial 

number of small entities. 

In addition, section 1102(b) of the Act 

(42 U.S.C. 1302(b)) requires us to 

prepare a regulatory impact analysis if 

a rule may have a significant impact on 

the operations of a substantial number 

of small rural hospitals. This analysis 

must conform to the provisions of 

section 604 of the RFA. For purposes of 

section 1102(b) of the Act (42 U.S.C. 

1302(b)), we define a small rural 

hospital as a hospital that is located 

outside of a metropolitan statistical area 

and has 100 or fewer beds. We estimate 

that this final rule will result in 

approximately $185 million in remedy 

payments to 245 small rural hospitals. 

We note that the estimated payment 

impact for any category of small entity 

would depend on the degree to which 

these entities furnished 340B-acquired 

drugs. 

The analysis, together with the 

remainder of this final rule, provides a 

regulatory flexibility analysis and a 

regulatory impact analysis. We note that 

the policies contained in this final rule 

will apply more broadly to OPPS 

providers and would not specifically 

focus on small rural hospitals. As a 

result, the impact on those providers 

may depend more significantly on their 

case mix of services as well as the extent 

to which they furnished 340B-acquired 

drugs. However, small rural hospitals 

will experience significant effects from 

this final rule through the 340B remedy 

payments if they furnished a significant 

amount of 340B-acquired drugs and 

used the ‘‘JG’’ modifier. 

H. Unfunded Mandates Reform Act 

(UMRA) 

Section 202 of the Unfunded 

Mandates Reform Act of 1995 (UMRA) 

(2 U.S.C. 602) also requires that agencies 

assess anticipated costs and benefits 

before issuing any rule whose mandates 

require spending in any 1 year of $100 

million in 1995 dollars, updated 

annually for inflation. In 2023, that 

threshold is approximately $177 

million. This final rule does not 

mandate any requirements for State, 

local, or Tribal governments, or for the 

private sector. 

I. Federalism 

Executive Order 13132 establishes 

certain requirements that an agency 

must meet when it promulgates a 

proposed rule (and subsequent final 

rule) that imposes substantial direct 

requirement costs on State and local 

governments, preempts State law, or 

otherwise has federalism implications. 

We have examined the OPPS and ASC 

provisions included in this final rule in 

accordance with Executive Order 13132, 

Federalism, and have determined that 

they will not have a substantial direct 

effect on State, local, or Tribal 

governments, preempt State law, or 

otherwise have a federalism 

implication. As reflected in Table 3 of 

this final rule, we estimate that 

payments to impacted governmental 

hospitals (including State and local 

governmental hospitals) will increase by 

approximately $1.8 billion if the 

policies included in this final rule are 

finalized. Future adjustments to the 

OPPS conversion factor to offset the 

additional non-drug item and service 

payments made from CY 2018 through 

CY 2022 due to the 340B Payment 

Policy will be discussed in the annual 

rulemaking to which the adjustment 

will apply. 

This final regulation is subject to the 

Congressional Review Act provisions of 

the Small Business Regulatory 

Enforcement Fairness Act of 1996 (5 

U.S.C. 801 et seq.) and has been 

transmitted to the Congress and the 

Comptroller General for review. 

J. Congressional Review Act 

Pursuant to Subtitle E of the Small 

Business Regulatory Enforcement 

Fairness Act of 1996 (the Congressional 

Review Act), the Office of Information 

and Regulatory Affairs has determined 

that this action meets the criteria set 

forth in 5 U.S.C. 804(2). 

The analyses we have provided in this 

section of this final rule, in conjunction 

with the remainder of this document, 

demonstrate that this final rule is 

consistent with the regulatory 

philosophy and principles identified in 

Executive Order 12866 as amended by 

Executive Order 14094, the RFA, and 

section 1102(b) of the Act (42 U.S.C. 

1302(b)). 

This final rule will affect payments to 

a small number of small rural hospitals, 

as well as other classes of hospitals, and 

some effects may be significant. 

In accordance with the provisions of 

Executive Order 12866, this regulation 

was reviewed by the Office of 

Management and Budget. 

Chiquita Brooks-LaSure, 

Administrator of the Centers for 

Medicare & Medicaid Services, 

approved this document on October 26, 

2023. 

List of Subjects in 42 CFR Part 419 

Hospitals, Medicare, Reporting and 

recordkeeping requirements. 

For the reasons set forth in the 

preamble, the Centers for Medicare & 

Medicaid Services amends 42 CFR part 

419 as set forth below: 

PART 419—PROSPECTIVE PAYMENT 

SYSTEMS FOR HOSPITAL 

OUTPATIENT DEPARTMENT 

SERVICES 

■ 1. The authority citation for part 419 

continues to read as follows: 

Authority: 42 U.S.C. 1302, 1395l(t), and 

1395hh. 

■ 2. Section 419.32 is amended by 

revising paragraph (b)(1)(iv)(B)(11) and 

adding paragraph (b)(1)(iv)(B)(12) to 

read as follows: 

§ 419.32 Calculation of prospective 

payment rates for hospital outpatient 

services. 

* * * * * 

(b) * * * 

(1) * * * 

(iv) * * * 

(B) * * * 

(11) For calendar year 2020 through 

calendar year 2025, a multifactor 

productivity adjustment (as determined 

by CMS). 

(12) Beginning in calendar year 2026, 

a multifactor productivity adjustment 

(as determined by CMS), and 0.5 

percentage point reduction, except that 

the 0.5 percentage point reduction shall 

not apply to hospital outpatient items 

and services, not including separately 

payable drugs or biologicals, furnished 


lotter on DSK11XQN23PROD with RULES2
77194 Federal Register / Vol. 88, No. 215 / Wednesday, November 8, 2023 / Rules and Regulations 

by a hospital with a CMS certification 

number (CCN) effective date of January 

2, 2018, or later. This reduction and 

associated exception to the reduction 

will be in effect until the estimated 

payment reduction reaches $7.769 

billion, as further described in each 

calendar year’s rule. 

* * * * * 

Dated: October 31, 2023. 

Xavier Becerra, 

Secretary, Department of Health and Human 

Services. 

[FR Doc. 2023–24407 Filed 11–2–23; 4:15 pm] 

BILLING CODE 4120–01–P 


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