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New Mexico hospitals benefit from recent Medicare changes, analysis shows

The study contradicts assertions by some hospitals that the new payment system and changes to the 340B drug discount program would bring drastic cuts
By Jeff Lagasse , Editor
Medicare changes benefit New Mexico hospitals

Hospitals in New Mexico, especially those in rural areas, will benefit from recent changes to Medicare prescription drug payments, including changes to the federal program known as the 340B drug discount program.

On average, New Mexico hospitals will see a 2 percent increase in Medicare payments, adding up to about $6.3 million.

These findings are included in new research released by Avalere Health, a nonpartisan Washington D.C.-based firm that analyzes the impact of health policies. 

The study contradicts assertions by some hospitals that the new payment system and changes to the 340B drug discount program would bring drastic cuts to hospital reimbursement and threaten their operations. New Mexico hospitals are estimated to receive more than $318 million in net Medicare payments as a result of the changes in 2018.

Started by Congress in 1992, the 340B program gives certain hospitals and clinics that treat high numbers of uninsured or underinsured patients steep discounts on drugs purchased. The program has grown substantially, morphing into a profit-generating program for most hospitals who can make upward of 50 percent profit selling drugs purchased at a discount to insured patients. 

Today, nearly half of all acute care hospitals participate in the 340B program. As the program was allegedly being abused by some hospitals, the government sought to reduce the profit motivation by adjusting the payment rate for drugs purchased through 340B beginning this year.

Experts from the Centers for Medicare and Medicaid Services predict that the changes to 340B payments will save seniors an estimated $320 million in drug copayments nationally in 2018 alone.

Many 340B hospitals have predicted that reductions to the program, which took effect on Jan. 1, would cause them to lose revenue. The Avalere research shows that increases in Medicare Part B payments have more than offset the 340B cuts, with 42 states, including New Mexico, seeing overall payment increases.

According to the most recent Community Oncology Alliance Practice Impact Report, New Mexico has seen 12 community oncology clinics close or merge into the hospital setting since 2008. This results in less choice in local cancer care providers and significantly higher costs to patients undergoing the same cancer care.

The Avalere analysis comes on the heels of an independent study released last week in the New England Journal of Medicine, which found the 340B program is driving consolidation of the nation's cancer care system into the much more expensive hospital system; is associated with hospitals administering more cancer drugs; and has not resulted in any clear expansion of care or lower mortality for needy patients.

Twitter: @JELagasse
Email the writer: jeff.lagasse@himssmedia.com