Teaching Hospitals of Texas Issues Public Comment on Centers for Medicare & Medicaid Services Rule

WASHINGTON, Feb. 2 -- Maureen Milligan, president and CEO of Teaching Hospitals of Texas, Austin, has issued a public comment on the Centers for Medicare and Medicaid Services rule entitled "Most Favored Nation Model". The comment was written on Jan. 25, 2021, and posted on Feb. 1, 2021:

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Thank you for the opportunity to submit comments on the most favored nation (MFN) model interim final rule. For background, the Teaching Hospitals of Texas (THOT) is a state association of public and affiliated non-profit hospitals and health systems that share three commitments:

1) Supporting access to care for all in our communities, with a special focus on vulnerable populations;

2) Providing and coordinating essential community health services, such as trauma and disaster management; and

3) Preparing for the future by training tomorrow's healthcare providers and supporting health research and healthcare transformation.

Our members include Texas' large urban public hospitals and health systems, four University of Texas health systems, three children's hospitals and an affiliated non-profit health system and several rural hospital districts. A key part of our collective mission includes providing care to those without insurance; and we do a disproportionate amount of that care in Texas. While our membership from a Texas perspective seems relatively small (6 percent of Texas hospitals and 16 percent of hospital beds) our impact in Texas is significant. For example, just six large urban hospitals systems in Texas represent nearly one-third (30%) of the uninsured costs for all Texas hospitals ($5.2Billion total)./1

THOT members had an average of 47% of patients who were uninsured or on Medicaid; with the majority in the 20 percent to 60 percent range and the payer mix worsens as the pandemic and other factors have increased the number of Texans without health insurance. . as shown on the right.

Our hospitals are essential hospitals, providing services and care that is typically underfunded, but that is critical to our communities and to our state's and nation's health. As a group, our members:

* Provide about 21 percent of Medicaid days in Texas hospitals;

* Provide 30 percent of Medicaid outpatient services;

* Include nearly two-thirds of the state's level one trauma centers;

* Provide about 50 percent of the state's unfunded trauma care;

* Collectively provide nearly two - thirds of the state's GME residency positions, helping to maintain support for GME and to offset unfunded GME costs statewide of more than $400 million.

As you can see, as a group, THOT members are committed to providing critical (and cost-effective) healthcare in our communities. The 340B program is an important resource for our members to provide care consistent with the Congressional intent of the 340B program.

THOT appreciates the Centers for Medicare & Medicaid Services' (CMS') work to make drugs more affordable. The high costs of prescriptions underscore the importance of programs like the 340B program nationally, and in Texas, as it helps support patients' access to lifesaving drugs and treatment.

Because this program is so critical to supporting care to vulnerable patients, we are concerned about the proposed MFN model particularly as hospitals work so hard to respond to the COVID-19 pandemic and record-breaking numbers of hospitalizations and cases. Based on the substantive and procedural issues with this MFN model, we recommend that CMS withdraw the interim final rule.

Our concerns include:

* CMS did not provide the required opportunity for provider input on a program with significant and potentially damaging consequences.

CMS did not follow the Administrative Procedure Act's notice-and-comment requirements. CMS did not provide the opportunity for public comment and rushed the implementation of the MFN rule giving only 30 days from publication to effective date for a mandatory seven-year payment model that will implement a sweeping overhaul of the current drug reimbursement system for Medicare providers.

* The MFN model would undermine Congressional intent for 340B providers, harm essential hospitals and their vulnerable patients; and could cause changes in manufacturer drug prices, affecting 340B ceiling prices and possibly changing 340B discounts.

The final rule significantly reduces payment rates to providers for 50 of the highest volume drugs, from 106 percent of average sales price (ASP) to an estimated 45 percent of ASP in a retroactive program while providers are into the budget year already stressed by the pandemic. The rule also would change existing system and financing to the detriment of 340B programs.

These proposed changes will create significant burdens on hospitals in the 340B Drug Pricing Program. As you know, Congress' intent for the 340B program is to allow covered entities to "stretch scarce federal resources as far as possible, reaching more eligible patients and providing more comprehensive services."/2

In other words, Congress' intent allows qualifying hospitals to retain 340B savings so they can serve vulnerable communities. Savings from the 340B program are critical to providing access not just to prescriptions, but for hospitals operating on narrow margins, other programs made possible by those savings.

CMS acknowledges in the rule, the MFN model could further burden 340B hospitals and restrict patient access to lifesaving drugs. CMS should withdraw this rule.

The MFN model does not address the root causes of rising drug prices.

CMS does not know what the implications of its proposed rule will be on the marketplace, introducing unknown regulatory mechanisms into a system and, for 340B hospitals, a program that is critical to provide access to care. CMS did not describe how lowering reimbursement to hospitals would address the trend of increasing pharmacy costs, focused on rates only, and failed to address and create policies that incentivize manufacturers to reduce their prices. CMS acknowledges there is a high degree of uncertainty about the behavioral responses of stakeholders, including manufacturers, in response to the rule and indicated that providers could lose money on drugs. This would restrict beneficiary access to drugs, causing beneficiaries to find other providers that offer those drugs or forgo access altogether. Even more troubling is the fact CMS notes manufacturers could increase their international drug prices to protect their profits on drugs worldwide.

We therefor urge CMS to consider the consequences of the MFN model on access to care, on patients needing access to affordable prescriptions and on providers treating the nation's vulnerable patients and withdraw the rule.

Sincerely,

Maureen Milligan

President & CEO

Teaching Hospitals of Texas

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Footnotes:

1/ Texas health and Human Services Commission, "Hospital Uncompensated Care Report," December 2020, p. 11: see data on large public hospitals.

2/ H.R. Rep. No. 102-384, pt. 2 (1992).

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The rule can be viewed at: https://www.regulations.gov/document?D=CMS-2018-0132-2750

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