HHS must correct Medicare payments to 340B hospitals for remainder of 2022 | Foley Hoag LLP – Medicaid and the Law

[ author: Michelle Youngmin Choi]

We previously noted the link between the Medicaid prescription drug reimbursement program and the 340B program. As we wrote in a previous Customer Alert, in June 2022, the U.S. Supreme Court struck down HHS Medicare payment reductions to 340B hospitals for separately payable outpatient medications. The Court then remanded to the District Court to determine the appropriate remedy. 340B-specific Medicare payments began in 2018, and reversing the payment reductions poses significant challenges for the agency and the courts.

District court ruling

In the referred case, the hospitals filed motions to: (1) block HHS from applying Medicare’s reduced rate to 340B hospitals for the remainder of 2022; and (2) retroactively remedy all Medicare payment reductions at 340B hospitals for calendar years 2018-2022.

On September 28, 2022, the U.S. District Court for the District of Columbia ordered HHS to stop its 340B-specific payment rate and immediately begin paying 340B hospitals at the generally applicable average selling price (ASP) rate plus 6% for the rest. of 2022. Although the court recognized that HHS is generally subject to a requirement of budget neutrality with respect to inpatient payments, and that the prospective payment correction could disrupt budget neutrality for this year, the court held estimated that the disruption would be minimal.


340B hospitals should generally expect an increase in their Medicare payments for covered outpatient medications immediately, although the impact varies by hospital.

Although the court has delayed its decision on the plaintiffs’ request for retroactive payments, we expect such a decision to be issued soon. The American Hospital Association, one of the plaintiffs in the case, called for retroactive reimbursements to be applied to all affected hospitals without penalizing other hospitals. However, it will ultimately be up to the court to fashion an appropriate remedy.

Finally, 340B hospitals should also note that reinstating generally applicable Medicare rates may be a temporary change. Although HHS noted that it would be necessary to reinstate Medicare payment rates for 340B hospitals under the CY2023 Ambulatory Prospective Payment System (OPPS) proposed rule, by law, HHS may change the Medicare payment by group of hospitals after conducting the required survey of hospitals. acquisition costs.


UPDATE 06/10/22: HHS announced that CMS will correct payment to hospitals for 340B drugs in two weeks, much sooner than anticipated. The agency, however, did not mention how it plans to address the budget neutrality requirement for the remainder of CY2022.

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