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Health care and the law: winds of change buffet community oncology

September 14, 2016
From the September 2016 issue of HealthCare Business News magazine

If the Omnibus Guidance is enacted as proposed, all of the hospitals in certain states (like Texas, California and Illinois) would be ineligible for any 340B drug discounts. This is because these states strictly prohibit the corporate practice of medicine, and hospitals in those states are precluded, as a matter of law, from billing for professional component services as a hospital service under the hospital’s provider numbers. Thus, it would leave whole states out of the 340B program. Many public comments have been submitted in response to the proposed Guidance, and it can be expected that some revisions will be made by HRSA in the final Guidance to address industry concerns.

Until then, the combined effect of the site neutrality provisions of BBA and the uncertainty surrounding the proposed changes to the 340B program may hinder some planned oncologist-alignment transactions. One recent survey suggests that about 25 percent of off-campus, provider-based transactions that were in the pipeline at the time of enactment of BBA will not go forward. Most will still proceed because the Medicare payment differentials between hospital and physician rates are relatively modest compared to the differentials paid by commercial insurers. The bigger question, therefore, is whether and to what extent commercial insurers will follow suit by beginning to level site-of-service payments. The answer to this question will depend, in part, on the duration of existing commercial contracts with hospitals, and the relative bargaining power of the parties. Consequently, changes in commercial insurance site-of-service payment policy and rates should be closely monitored, as should HRSA’s response to comments on the proposed Omnibus Guidance for the 340B program.

About the author: Michael L. Blau is a partner and health transactional lawyer at Foley & Lardner LLP. He focuses on advising clients on health care corporate and regulatory matters. He is co-founder of the Cancer Center Business Summit, a research organization and think tank dedicated to advancing best business models and practices in community oncology care.

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