November 30, 2022

Volume XII, Number 334


November 29, 2022

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November 28, 2022

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SCOTUS Sides with 340B Hospitals and Denies CMS’s Attempt to Cut Reimbursement for 340B Drugs

Yesterday, the United States Supreme Court handed down a highly anticipated, unanimous opinion, AHA v. Becerra, confirming that CMS exceeded its statutory authority when it implemented a discriminatory reimbursement structure in 2018 and 2019 that resulted in certain 340B hospitals receiving lower Part B drug reimbursement than non-340B hospitals. The opinion is welcome news for 340B hospitals that continue to face financial pressures related to the 340B Program and contract pharmacies. Now, CMS and potentially the lower court must sort through difficult matters involving payment of damages for 2018 and 2019 underpaid claims, but the opinion does confirm that CMS must operate within a specific set of parameters if it intends to setup up a Part B payment structure that varies by hospital group. Namely, CMS may only vary Part B reimbursement by hospital group if it conducts a statistically valid survey pursuant to 42 U.S.C. § 1395l(t)(14)(D). Absent survey data, CMS must reimburse all hospitals at the same rate.

We have already received several questions about the immediate and long-term impacts that the decision will have on reimbursement for 340B drugs. While Polsinelli’s 340B team is still assessing these issues in light of yesterday’s opinion, the short answer is nothing changes in the near term. Key issues include how CMS will fund and pay underpaid claims to 340B hospitals for payment years 2018 and 2019, how will the Supreme Court’s decision impact payments in 2020-2022, and how will CMS change its payment policy on a go-forward basis, if at all. There are a number of sub-issues to assess within these areas.

As we continue to unpack the long list of legal issues, one key item to watch closely is CMS’s upcoming CY 2023 Outpatient Prospective Payment System proposed rule (Proposed Rule). CMS’s payment policy in the Proposed Rule could shed some light into its approach to not only payment going forward, but also into its approach to remedying past underpayments.  For example, it’s possible that the Supreme Court’s unanimous decision influences CMS to revisit its 340B drug payment policy in its upcoming CY 2023 Outpatient Prospective Payment System proposed rule (Proposed Rule) and reinstate its ASP plus 6% payment rate. We believe that if CMS took this step, it could shed light into CMS’s approach to payment years 2021 and 2022 where it relied, in part, on its flawed 2020 acquisition cost survey to continue its ASP minus 22.5% payment policy. Alternatively, CMS may attempt to rely on acquisition cost data obtained in its 2020 acquisition cost survey to continue its ASP minus 22.5%. If it does, we would anticipate litigation challenging the validity of the survey itself and any resulting payment rules that vary reimbursement by hospital group. When CMS conducted its survey, it did not seek acquisition cost data from non-340B hospitals, and the data collection methods presented challenges with reporting consistent data.

SCOTUS’s opinion is a much needed and clear win for 340B hospitals.  As we continue to watch these developments unfold, we recommend that impacted 340B hospitals assess claims from 2018 and 2019 for separately payable, non-pass through Part B drugs that were paid at the lower ASP minus 22.5% rate and calculate what overall reimbursement should have been had the claims been paid at the standard ASP plus 6% rate.  Impacted hospitals may need to conduct a similar review for 2020-present claims at some point soon. Again, CMS’s upcoming Proposed Rule could answer several unanswered questions.

© Polsinelli PC, Polsinelli LLP in CaliforniaNational Law Review, Volume XII, Number 167

About this Author

Kyle A. Vasquez, Polsinelli, Compliance Support Lawyer, Health Care Reform Attorney

Kyle Vasquez provides pragmatic legal and compliance support to a wide range of health care clients. He utilizes his background in health law and his prior experience as a health care consultant to develop creative approaches that address the unique challenges that health care providers face. Kyle works collaboratively with health care stakeholders to assist in identifying forward-thinking models that meet their financial and operational needs. Kyle represents a broad set of health care entities including multi-hospital health systems, community hospitals, FQHCs,...

Mary H. Canavan Attorney Healthcare Operations Polsinelli Law Firm Chicago

Mary Canavan is an associate in the Health Care Operations practice. She is committed to delivering clients with strategic solutions tailored to their specific needs. Mary focuses her practice on providing transactional, operational and regulatory counsel on a variety of complex matters that impact the healthcare industry.

Prior to joining Polsinelli, Mary was a consultant at a nationwide healthcare consulting firm specializing in provider enrollment services, 340B auditing and compliance, certificate of need, micro hospital consulting, IDTF and...

Jessica Andrade Commercial Litigation Lawyer Polsinelli Law Firm

Jessica is a commercial litigator and investigations attorney with Polsinelli, where she is chiefly associated with the firm’s Government Investigations practice group.  Jessica has significant experience defending clients facing government investigations and enforcement proceedings, as well as in False Claims Act, Anti-Kickback, and Stark litigation.  This experience includes working with clients in both the healthcare and government contracting industries.  In addition, Jessica provides compliance advice to help clients avoid government inquiries.

Jessica has significant complex...