U.S. Supreme Court rules in favor of 340B hospitals

June 22, 2022

On June 15, the U.S. Supreme Court ruled that the Centers for Medicare and Medicaid Services did not follow the necessary procedure for cuts to hospital payment for 340B hospitals. In American Hospital Association v. Becerra the AHA sued the Department of Health and Human Services (HHS) arguing the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (Medicare statute) does not allow HHS discretion to vary the reimbursement rates in the 340B program for one group of hospitals when it has not conducted the survey of hospital acquisition costs required by statute. WSHA joined more than 30 other state hospital associations in an amicus brief that described the impacts of the HHS policy position on hospitals. The brief was quoted by the court in its decision. WSHA estimates aggregate net payment reductions of more than $45 million to Washington hospitals have occurred since the cut was implemented in 2018. The cut reduced Medicare payment for drugs administered in hospital outpatient departments of 340B hospitals by thirty percent. The CMS policy and the Supreme Court ruling applies to hospitals paid under the outpatient prospective payment system (OPPS) and does not affect critical access hospitals.

The Supreme Court remanded without addressing the appropriate remedy for HHS’s unlawful imposition of lower rates. It is unclear whether this will take the form of recoupment or will be purely prospective. While WSHA supported the AHA lawsuit, we understand this change has implications and challenges in implementation for both 340B and non-340B hospitals. WSHA will be working with the American Hospital Association on the next steps. (Andrew Busz, AndrewB@wsha.org).


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