District Court Vacates HHS’s 340B Reimbursement Rate Cuts for the Remainder of 2022 and Demands Restoration of Default Reimbursement Rates

On September 28, 2022 a U.S. District Court ruled that the Department of Health and Human Services (HHS) must immediately cease unlawful reimbursement cuts for the remainder of 2022 and restore default reimbursement rates for hospitals participating in the 340B Program. In this ruling in favor of the American Hospital Association (AHA), district court Judge Contreras granted AHA’s motion to vacate the prospective portion of the 2022 reimbursement rate.

As a result, CMS plans to issue guidance to restore pricing to 340B hospitals ‘within the next two weeks’ (as of September 29th). HHS has indicated that adjusting the 2022 OPPS rates will take approximately two weeks because of the data file revisions and tests to confirm the updated information functions before being used to calculate OPPS reimbursement rates prospectively. Furthermore, the district court rejected HHS’ argument that this decision would violate the 340B Program’s budget neutrality requirements, and did not require HHS to implement the corresponding decrease in payments to other items paid under OPPS; yet HHS could appeal that aspect of the determination.

Earlier this year, the U.S. Supreme Court’s unanimous ruling in American Hospital Association v. Becerra declared that HHS’ 2018 and 2019 reimbursement cuts were unlawful and “patently violated the Medicare Act’s texts” because HSS did not conduct a survey of hospitals’ acquisition costs. However, this ruling did not address the legality of reimbursement cuts during and after 2020. Building on the Supreme Court’s reasoning, the district court ruling found the entire 2022 OPPS rule to be seriously deficient and prohibit HHS from underpaying 340B claims for the rest of 2022.

The Supreme Court has confirmed that “[f]or more than a decade,” HHS did “use[] the same reimbursement rates for all hospitals” and “never varied the reimbursement rates by hospital group.” This district court ruling indicated that HHS plans to adopt this past regulatory scheme going forward in light of the Supreme Court ruling.

HHS announced in its 2023 OPPS rulemaking that it intends to pay 340B hospitals the proper reimbursement rate. Although the district court ruling does not address previous rate cuts, the AHA continues to urge the Supreme Court to find the 2018 and 2019 reimbursement 340B rate cuts unlawful. Advis continues to closely monitor this.

This district court ruling highlighted the impact of underpaying for 340B drugs pursuant to the unlawful policy and that “HHS should not be allowed to continue its unlawful 340B reimbursements for the remainder of the year just because it promises to fix the problem later.” Halting these reimbursement cuts will enable 340B hospitals to provide the comprehensive health services to their patient population and communities and alleviate some of the financial impact caused by the COVID-19 public health emergency and the recent manufacturer restrictions on 340B pricing for contract pharmacies.

Advis is tracking this ruling and the timeline of reimbursement rate adjustments closely. Advis is well equipped to assist covered entities ensure they receive their entitled reimbursement rate and analyze the financial impact of underpayments. For any questions regarding this ruling on reimbursement rates for 340B hospitals, or any other 340B related matters, please contact Advis, or call 708.478.7030.

UPDATE- October 17, 2022

Late last week, CMS formally announced that it has complied with the court order and had uploaded a revised drug files for the Medicare outpatient prospective payment system (OPPS) to adjust the payment rates for 340B-acquired drugs.  As a result, CMS will revert to paying the default rate (ASP + 6%) under the Medicare statute for 340B-acquired drugs. CMS has also indicated that it will reprocess claims contractors paid on or after September 28, 2022, using the default rate (ASP + 6%); but have not yet released guidance on how claims will be reprocessed. CMS has not yet indicated whether they will continue to require the -JG modifier, Advis therefore recommends that covered entities continue to be appended the JG and TB modifiers until further clarity is provided. Advis is happy to work with your team to validate pricing on all applicable drugs since September 28th.

Published: October 7, 2022