Supreme Court to Consider Case 340B, Which May Affect All Hospitals

Next week, the Supreme Court will hear the case for overturning cuts in the 340B drug program, and the result could have implications for all providers, even those without access to discounted drugs.

Plaintiffs, including the American Hospital Association and participating providers, are asking the Supreme Court to reverse the nearly 30% 340B reimbursement cut that Medicaid Centers initiated under President Donald Trump and continued under President Joe Biden … Oral presentations are scheduled for November 30th.

“If the final CMS rule is kept in place, 340B providers will be forced to cancel or drastically reduce some important programs that treat a wide range of diseases, from cancer to mental disorders and opioid dependence,” wrote 37 state and regional hospital associations. in court in September.

The consequences of this decision may affect more than 340 billion providers. Nonprofit hospitals and rural service providers benefit from higher payments, funded by savings generated from a $ 340 billion reduction in payments. Children’s hospitals and rural health facilities participating in the 340B program are exempt from layoffs. Commercial suppliers are not eligible for 340B.

“Non-340B hospitals bore the financial burden of prepayment policies despite serving the same levels of uninsured or otherwise vulnerable patients as 340B hospitals, often in the same or demographically similar communities,” lawyers say for the Federation of American Hospitals , which represents the interests of investors. own health systems, wrote in brief to court this month. “The removal of the current payment policy will eliminate reallocated savings of $ 1.6 billion, impose fines on non-340B hospitals, and restore surplus payments for 340B hospitals caused by the ineffectiveness of the previous payment policy,” wrote the outside lawyer of the federation.

Likewise, the Rural Hospitals Coalition, made up of nearly 200 facilities in 33 states, wrote The court was told this month that the higher payments received by its members helped them stay in business. “Removing the secretary’s authority to finalize this rule, not to mention disrupting the implementation of the adjustment that took effect almost four years ago, is unusually burdensome, especially during the ongoing public health emergency,” the memo said.

The 340B program allows nonprofit hospitals and clinics to purchase outpatient drugs at significant discounts from manufacturers and then charge Medicare and commercial payers higher prices for their vacation. These “savings” are channeled towards providing services to the population or used to compensate for uncompensated care and low compensation under government programs.

In 2018, the Trump administration cut 340 billion hospital payments for covered outpatient drugs to the median selling price of minus 22.5%, well below the previous figure when the median selling price was plus 6%. Non-340B providers continue to be reimbursed for drugs under the old formula.

For 340B service providers, excluding some rural and social networking hospitals, this is a 30% reduction, or a $ 1.6 billion loss. This money was reallocated to all providers receiving Medicare Intended Outpatient Payments in the form of a 3.2% increase in reimbursement.

The AHA and other service provider associations filed a lawsuit in 2018 alleging that CMS exceeded its mandate under the Medicare charter by revising reimbursement rates without collecting hospital acquisition cost survey data. Plaintiffs argue that current law only allows HHS to make minor changes.

“There is no hidden purpose built into [the law] that could justify giving the agency unlimited authority to reimburse 340B hospitals – and only 340B hospitals – based on acquisition costs without explicitly complying with statutory requirements, ”wrote an AHA lawyer in a court briefing last month.

The Justice Department under Trump and Biden counters that HHS has sufficient legal authority and that the cost data provided by the plaintiffs was not available when the CMS wrote the ruling. The Justice Department also argues that judicial review is prohibited by the law that created the outpatient payment system, so the court can dismiss the case without ruling on the merits.

“If the court comes to the merits of the case, it should uphold the rate adjustment,” the Justice Department wrote. brief filed last month. “HHS should set reimbursement rates equal to the cost of purchasing a drug if it has specified survey data or is not available based on average price…. There is no doubt that survey data were not available here. ” HHS “has calculated a reimbursement rate based on the average price and” adjusted “it to reflect the significant discounts that 340B hospitals are receiving,” the government said.

Last year, the appellate court ruled that judicial review is not out of the question, but did side with HHS after a lower court ruled in favor of the plaintiffs in 2019.

A key question is how far agencies, including the Department of Health and Human Services, can go to interpret vague statutes and whether courts should respect the agency’s interpretation, said Andrew Ruskin, a partner at K&L Gates and a member of the Health and Food Administration. … practice group.

If the Supreme Court ruled on the hospitals, they could be reimbursed retroactively for the lower payments they received in the two years that the reductions were in effect, writes Allison Hoffman, a professor at the University of Pennsylvania School of Law. blog post for the Commonwealth Foundation.

HHS began collecting the data needed to amend 340B after a federal district court ruled in favor of the plaintiffs, Hoffman writes. The latest data from the Department of Outpatient Payments Regulation signals HHS’s intention to maintain the 340B cut without court intervention.

If the court sides with HHS and upholds the appellate ruling, the cuts will remain and other changes may occur in the future, possibly in programs outside 340B.

The AHA has raised concerns about this possibility when requested The Supreme Court is reviewing the ruling of the appellate court.

“It is important that this court does not allow the appellate court to effect such a massive transfer of power from national legislators to unaccountable administrators,” the AHA report said. The association argues that allowing HHS to maintain the 340B abbreviation in these circumstances would be “a license for agencies to pursue virtually any policy goal they wish.”

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