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September 7, 2018

Back in court: Hospital groups refile lawsuit to overturn 340B payment cuts

Daily Briefing

    A trio of hospital groups led by the American Hospital Association (AHA) have refiled a lawsuit to reverse CMS' cut to Medicare Part B reimbursements for drugs purchased via the 340B program, Modern Healthcare reports.

    Download our one-page cheat sheet on Hospital Outpatient Prospective Payment System (HOPPS)

    About the 340B cuts

    The 340B program requires drug manufacturers to provide outpatient drugs to eligible health care providers at discounts ranging from 20% to 50%. About 40% of U.S. hospitals are eligible to participate in the program.

    On Jan. 1, a final rule took effect that changes that way CMS reimburses hospitals for drugs purchased under the program. Previously, hospitals purchased drugs at a discounted rate and were reimbursed at 6% on top of a drug's average sales price, but as of Jan. 1, hospitals are reimbursed at average sales price minus 22.5%, a change CMS estimated will cut payments by $1.6 billion. The agency said those cuts will be budget-neutral, as it will redistribute the savings by raising Medicare payments to hospitals for non-drug items and services under the Hospital Outpatient Prospective Payment System (OPPS) in calendar year (CY) 2018.

    AHA, Association of American Medical Colleges, and America's Essential Hospitals sued CMS over the cuts in November 2017, arguing the agency lacked the authority to lower the payments. But the U.S. District Court for the District of Columbia earlier this year dismissed the lawsuit, ruling it was premature because the hospitals had not yet filed claims with CMS. That ruling was upheld by an appeals court in July.

    Latest lawsuit

    In the latest suit, the three organizations, joined by Eastern Maine Healthcare Systems, Henry Ford Health System in Detroit, and Park Ridge Health, Hendersonville, North Carolina, argued that the courts' previous rulings no longer apply because hospitals have now filed claims that have gone through the Medicare appeals process.

    In a statement AHA said, "Having filed claims that have progressed through the appeals process, the hospital plaintiffs have now addressed the court's procedural concern, and with the hospital associations, have refiled the lawsuit asking for expedited relief."

    The lawsuit asks the federal D.C. court to strike down the payment change, stating that "(a) no adjudicator within CMS has authority to invalidate a CMS regulation, and (b) CMS has taken the position that there is no administrative review of 340B Program reimbursement disputes." The groups argue the provision implementing the change violates both the Social Security Act and section 340B of the Public Health Service Act and ask the court to have CMS reimburse hospitals for the difference between what they were paid for under the 2018 rule and what they would have been paid without the cut (Luthi, Modern Healthcare, 9/5; Stein, InsideHealthPolicy, 9/5 [subscription required]; Diamond, "Pulse," Politico, 9/6).

    What you should know about the 2019 HOPPS proposed rule

    To learn more about Medicare Part B reimbursements and other provisions in the 2019 Hospital Outpatient Prospective Payment System (OPPS) proposed rule, watch the on-demand presentation and download our cheat sheet for a refresher on HOPPS.

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