Arkansas hospitals in line for $93 million in payments under federal proposal

The University of Arkansas for Medical Sciences' Little Rock campus is shown in this file photo.

Arkansas hospitals would receive more than $93 million in lump sum payments from the federal government under a proposal by a federal agency to compensate them for a cut in what Medicare paid them for prescription drugs from 2018 to 2022.

The payments are part of $9 billion that would go to hospitals nationwide under the proposal to make up for the cut, which the U.S. Supreme Court ruled in June 2022 was unlawful.

In Arkansas, more than a third of the money -- almost $33.4 million -- would go to UAMS Medical Center in Little Rock.

The proposal, however, would also reduce what Medicare pays hospitals for "non-drug items and services" by 0.5% starting in 2025.

That's because, at the time it reduced what it pays certain hospitals for prescription drugs, Medicare increased what it pays hospitals for other types of care.

The proposal, contained in a proposed rule published in last month by the Centers for Medicare and Medicaid Services, is designed to correct for both that increase and the cut in drug reimbursement.

Described as a "budget neutrality adjustment," the cut in what Medicare pays hospitals for care other than drugs is meant to recoup $7.8 billion over an estimated 16 years.

"UAMS was very pleased to hear that CMS has finally provided a solution to how they will repay hospitals for the underpayment that has occurred since 2018," Amanda George, the University of Arkansas for Medical Sciences' vice chancellor for finance and administration, said in a statement.

"A lump sum payment was the ideal solution. However, the budget neutrality requirement definitely counteracts the impact," she added.

George said a large portion of the payment that would got to UAMS is related to infusion therapy, primarily associated with the cancer treatment it provides.

UAMS and other hospitals are in line for the potential payments because of their participation in the federal 340B drug pricing program.

Named for a section of the Public Health Service Act and administered by the federal Health Resources and Services Administration, the program requires drug manufacturers that participate in Medicaid to offer discounts to participating hospitals and other providers.

Small rural hospitals known as critical access hospitals and those that serve large numbers of uninsured and low-income patients are among providers eligible to participate.

Because of the discounted prices the 340B hospitals were receiving from the drug manufacturers, Medicare in 2018 reduced their drug reimbursement rate in 2018 by 22.5%.

Certain types of hospitals, including critical access hospitals and children's hospitals, were exempt from the cut.

The American Hospital Association, among other groups, challenged the cut in court, saying the Centers for Medicare and Medicaid Services hadn't conducted a survey of hospitals' acquisition costs that was required before it could reduce its reimbursement rate for some hospitals but not others.

The Supreme Court agreed, sending the case back to a lower court for further proceedings.

In a September ruling in the case, a federal judge in Washington, D.C., reversed the cut in the drug reimbursement rate for the 340B hospitals.

The judge in January left it up to the Centers for Medicare and Medicaid Services to decide how to compensate hospitals for the money they lost due to the cut.

In Arkansas, the second-largest payment under the proposed rule would got to St. Bernards Medical Center in Jonesboro, which would receive $16.8 million.

"We, at St. Bernards, appreciate the proposal to remedy five years' worth of underpayments to participating hospitals in the 340B Drug Pricing Program," Mitchell Nail, media relations manager of St. Bernards, said.

"This vital program continues to help Arkansans afford needed prescription medications, while hospitals and partnering community pharmacies steward program resources, providing community benefits nationwide for every dollar in the 340B program," he said.

Other proposed payments include $16.5 million for Mercy Hospital Fort Smith, $9.6 million for NEA Baptist Memorial Hospital in Jonesboro, $6.3 million for Baptist Health-Fort Smith and $6.1 million for CHI St Vincent Infirmary in Little Rock.

The hospitals expect to receive the money later this year or early next year, Jodiane Tritt, executive vice president of the Arkansas Hospital Association, said.

"We're obviously super happy that, finally, our 340B hospitals that have endured these cuts for five years are going to get some of their dollars back that they lost," Tritt said.

At the same time, she said she's concerned that proposed the cut in reimbursement for types of care besides drugs would affect more hospitals than just the ones that participate in the 340B program.

"We don't want them having to foot the bill for CMS' and HRSA's mistake," Tritt said. "We don't think that you ought to recoup the dollars from other entities that are not 340B entities to try to make up for the mistake that you made in 2018."

The Centers for Medicare and Medicaid Services is accepting public comment on the proposed rule through Sept. 5 and said it expects to issue a final rule this fall.

Ly is a Report for America Corps member.