Supreme Court Rules that HHS’s Reimbursement Rates for 340B Covered Entities in 2018 and 2019 are Unlawful – Covered Entities May Be Entitled to Additional Reimbursement
On June 15, 2022, the United States Supreme Court ruled that the Health and Human Services Department (HHS) does not have the discretion to vary reimbursement rates for 340B hospitals. This ruling brings welcome news to 340B hospitals that are currently experiencing significant loss of 340B savings due to manufacturer restrictions on 340B pricing for contract pharmacies. As a result of this ruling, covered entities may be entitled to additional reimbursement due to underpayment in 2018 and 2019.
Under the Medicare Statute, HHS cannot vary or reduce reimbursement rates for specific hospital types or groups without surveying the hospitals’ acquisition costs. In 2018 and 2019 HHS did not conduct any surveys of hospitals’ acquisition costs. Nonetheless, in 2018, CMS established a separate reimbursement rate for 340B hospitals and cut reimbursement rates for 340B hospitals by almost 30%. HHS utilized a similar, reduced reimbursement rate for 340B hospitals in 2019 as well.
The Supreme Court, in a unanimous opinion, ruled that the HHS cannot vary the reimbursement rates for 340B hospitals without surveying the hospitals’ acquisition costs. The Court emphasized that HHS’s 2018 and 2019 reimbursement rates for 340B hospitals are unlawful.
Impact of Supreme Court Ruling
Due to the ruling, CMS may be required to eliminate the reduced reimbursement rate for 340B hospitals and revert to the standard reimbursement rate of ASP + 6% that is offered to all other hospitals. CMS may also be required to retroactively apply the ASP + 6% rate for reimbursement made to 340B hospitals in 2018 and 2019.
If CMS is required to retroactively apply the standard reimbursement rate for 2018 and 2019 reimbursements, covered entities should consider developing strategies to obtain underpayments for 2018 and 2019. Covered entities should analyze the financial impact of the Medicare reimbursement reductions from 2018 and 2019 to calculate total underpayments. Advis continues to closely monitor the impact of the ruling and is prepared to assist covered entities analyze the financial impact of underpayments and develop strategies for obtaining additional reimbursement.
Even if the ruling does not require CMS provide additional reimbursement for 2018 and 2019, the ruling may require CMS provide 340B hospitals with the standard reimbursement rate moving forward, or otherwise adjust payment rates in some manner. Any additional reimbursement will certainly help 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.
For any questions regarding the Supreme Court ruling on reimbursement rates for 340B hospitals, or any other 340B related matters, please contact Advis, or call 708.478.7030.