CMS Open Payments and Pharmacy B Payments: How Do They Work?

Creating consumer transparency into healthcare industry-to-physician financial relationships is a hot topic. For healthcare facilities that bill Medicare or Medicaid, one of the biggest challenges is remaining compliant with the various regulations and guidelines required for participation in federal programs. In this article, we’ll explain everything you need to know about two of the biggest programs: the Open Payments Program administered by the Centers for Medicare & Medicaid Services (CMS), and the 340B Drug Pricing Program. 

But first, a little background on the two programs.

Overview of CMS Open Payments and Pharmacy B (340B Drug Pricing Program)

How CMS Open Payments works

The CMS Open Payments Program was enacted alongside the Physician Payment Sunshine Act, which was part of the 2010 Affordable Care Act. CMS Open Payments is a mandatory disclosure program that requires reporting entities—i.e., manufacturers of drugs, medical devices, biologics, and/or medical supplies covered by Medicare, Medicaid, or Children's Health Insurance Program (CHIP)—to report payments or transfers of value to covered recipients. Covered recipients are healthcare providers who are not employees of the applicable manufacturer that is reporting the payment. They include the following:

  • Physicians
  • Teaching hospitals
  • Physician assistants
  • Nurse practitioners
  • Clinical nurse specialists
  • Certified registered nurse anesthetists
  • Certified nurse-midwives

The CMS Open Payments Program was created to increase transparency and reduce conflicts of interest. Now, any patient can find out whether their provider has received any payments from a medical device manufacturer or a pharmaceutical company. And because these companies have to report their payments to CMS, there is less opportunity for quid pro quo arrangements or other potential conflicts of interest.

How Pharmacy B payments work

The 340B Drug Pricing Program, also known as “Pharmacy B payments,” is a program that allows qualifying providers—typically those serving uninsured and low-income patients—to purchase outpatient drugs at a discount (usually 20%–50%) from drug manufacturers. 

Drug manufacturers are required to participate in the 340B Drug Pricing Program to be included on the covered drug lists for Medicare and Medicaid. Qualifying providers, known as covered entities (CEs), are allowed to bill and collect the full price from patients’ insurance companies; by doing so, CEs can generate additional revenue for themselves, which in turn reduces the financial burden of medications or other care that CEs provide to other uninsured and low-income patients. 

In short, it’s an arrangement that benefits multiple parties: 

  • Pharmaceutical companies have their drugs added to the Medicare and Medicaid formularies
  • CEs have additional financial flexibility
  • More patients can get the care they need 

What are CMS Open Payments requirements?

CMS Open Payments schedule

Each year, CMS Open Payments reporting entities must collect data on any covered recipient mentioned above—or an immediate family member—who has received general payments or other transfers of value, or has ownership and/or investment interests in their companies between January 1 and December 31 of the previous year. 

Payments and transfers of value can include food and beverages, royalties, licensing or consulting fees, rental or facility fees, gifts, speaking fees, and research fees. In 2020, CMS updated the list of payment types to include debt forgiveness, long-term medical supply or device loans, and acquisitions. 

Once the data has been collected, reporting entities submit their records to the Open Payments system. Covered recipients then have 45 days to review the data and dispute any submitted data if necessary, and the reporting entities resolve the disputes. After the data has been finalized, it is published for public viewing on the Open Payments website. 

CMS Open Payments process

New covered recipients of CMS Open Payments first must register in the CMS Identity Management System (IDM) and the Open Payments system; returning recipients only need to confirm their account has not been deactivated. The process is the same for reporting entities.

To learn how to avoid or overcome the obstacles that come with enrolling providers in CMS or commercial insurance companies, take a moment to review this article for important tips and insights.

The latest data on CMS Open Payments & Pharmacy B payments

CMS Open Payments data for 2020

Since 2013, CMS has published 78.55 million records totaling over $53 billion in payments and ownership and investment interests. In 2020, the total value of records published was $9.12 billion from 1,621 companies to 487,000 total physicians and 1,216 teaching hospitals. 

Pharmacy B payments data for 2020

In May 2021, the Health Resources & Services Administration (HRSA) found six pharmaceutical manufacturers in violation of the 340B statute. According to HRSA, these drug manufacturers limited covered entities’ access to discounted drugs, either by refusing to honor the 340B ceiling price or requiring specific data submissions to limit sales. HRSA issued these manufacturers a warning form demanding that they comply with 340B requirements or face Civil Monetary Penalties (CMPs) of up to $5,000 per infraction.

How organizations can incorporate CMS Open Payments

Because non-teaching hospitals are not subject to compliance standards regarding CMS Open Payments, many healthcare organizations don’t make it a priority. However, even if the organization itself is exempt from Open Payments program requirements, the providers at that organization are likely considered covered recipients—and they could benefit from organizational support to ensure they remain compliant. 

One of the biggest concerns providers have about the Open Payments Program is that it can be unnecessarily burdensome—especially when they have such a limited window of time to review and dispute submitted data. By incorporating Open Payments into their organization’s provider data management system, healthcare leaders can reduce that burden and give providers a central hub to view and keep up on all compliance-related tasks. More importantly, cutting compliance costs doesn’t just help keep providers sane, it also benefits healthcare organizations as a whole. 

Technology can also be a key difference-maker in helping organizations avoid payer enrollment errors, which can be both costly for the organization and stressful and time-consuming for physicians. 

The Open Payments program and Pharmacy B payments can be tough to navigate at times, but they are both valuable programs that offer significant benefits to healthcare organizations. Increased transparency at healthcare organizations plays a key role in improving patient trust, and Pharmacy B payments give organizations an opportunity to help more patients, identify new revenue streams, and maximize their federal funding. 

The right technology solutions can help minimize the pain points associated with these programs and minimize financial risk, allowing healthcare organizations to focus on what they do best: care for their patients. Learn how symplr can help your organization with provider data management.

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