Most hospitals would gain from 340B payment correction, Avalere finds

A new Avalere Health analysis commissioned by the Community Oncology Alliance says CMS’s proposed correction to 340B drug reimbursement would raise overall Medicare Part B payments for most hospitals. The study says the change would cut drug spending for beneficiaries and redirect savings to non-drug outpatient payments under Medicare’s budget-neutral formula.

Why it matters: - Correcting Medicare overpayments for 340B-acquired drugs would shift money away from inflated drug reimbursement and toward other hospital outpatient services. - The change would lower beneficiary drug costs and could benefit many smaller hospitals more than the largest systems. - CMS estimates the proposal would save Medicare beneficiaries $1.15 billion in 2027 and reduce Medicare drug spending by another $4.55 billion.

What happened: - Avalere Health, commissioned by the Community Oncology Alliance, analyzed CMS’s proposal to reimburse hospitals for 340B-acquired drugs at Average Sales Price minus 33.4 percent, or ASP-33.4 percent. - CMS currently pays hospitals ASP+6 percent for these drugs, even when hospitals buy them at deep 340B discounts. - Avalere used 100% of CY 2025 Medicare fee-for-service claims data from the CMS Virtual Research Data Center to model the impact of the proposed correction. - The analysis found that 78 percent of hospitals would see higher overall Medicare Part B payments under the budget-neutral correction.

The details: - CMS’s survey found that in some cases a Medicare beneficiary’s cost-sharing under ASP+6 percent was greater than the hospital’s entire acquisition cost for the drug. - CMS says the proposal would be implemented in a budget-neutral way, so Medicare savings from drug reimbursement would be redistributed to increase payments for non-drug hospital outpatient services. - Avalere found the correction would have cut Medicare spending on 340B-acquired drugs by about $5.1 billion using 2025 claims data. - The study says that redistribution through the Outpatient Prospective Payment System would leave most hospitals with a net payment gain. - 69 percent of rural hospitals would receive an increase, with an average gain of about 3.4 percent. - All sole community hospitals would receive an increase averaging about 8.2 percent. - 82 percent of rural referral centers would receive an increase averaging about 4.8 percent. - 88 percent of hospitals with fewer than 100 beds would receive higher payments, with an average increase of about 7.0 percent. - 54 percent of 340B hospitals would see a net payment increase, and the average net impact across all 340B hospitals would be a 0.5 percent increase. - Hospitals with more than 500 beds would see an average payment decrease of about 1.4 percent. - Avalere says it applied the exclusions in the proposed rule and distributed the reduction in 340B drug spending among OPPS hospitals based on their shares of non-drug spending to approximate CMS’s approach. - Funding for the research came from the Community Oncology Alliance, and Avalere maintained full editorial control. - Ted Okon, executive director of the Community Oncology Alliance, called the proposal a correction of Medicare payments that exceed hospital acquisition costs and said it would save seniors money while increasing overall Medicare payments for most hospitals.

Between the lines: - The debate is less about whether Medicare spending falls and more about how the savings are redistributed across hospitals. - The results suggest the biggest gains would flow to smaller, rural, and sole community hospitals, while the largest hospitals would more likely lose revenue. - COA is framing the policy as accuracy and fairness in reimbursement, not a hospital cut.

What's next: - COA is urging CMS to finalize the survey-based reimbursement correction. - COA also wants CMS to transparently redistribute the savings through OPPS. - If finalized, the policy would change how Medicare pays for 340B drugs and reshape outpatient hospital payments.**