SCOTUS To Hear Hospitals’ 340B Reimbursement Cuts Suit

Inside Health Policy

July 2, 2021 7:46 pm

The Supreme Court on Friday (July 2) agreed to hear arguments on hospitals’ lawsuit over cuts to Medicare reimbursement for 340B drugs — but on top of the question that hospitals asked it to look at, the court also wants to hear arguments on whether the issue is one that the judges could review or if such review is precluded by statute.

CMS cut Medicare pay for 340B drugs by almost 30% starting in 2018, but the district court had said the agency lacked authority to do so. The government appealed that ruling and the appeals court upheld the cuts last summer. Hospitals in February asked the high court to take up the case, along with a case on site-neutral pay cuts. The providers said the appeals court gave too much weight to HHS’ interpretation of the statute in each situation. As both cases are based on the so-called Chevron defense, which addresses how much flexibility agencies have to interpret laws, the American Hospital Association said the cases are complementary.

The Association of American Medical Colleges also asked the Supreme Court to look at both lawsuits, and America’s Essential Hospitals joined AHA and AAMC in asking the Supreme Court to take up the lawsuit over 340B drug pay cuts in Medicare.

The Supreme Court declined to hear the site-neutral pay cuts lawsuit, but on Friday agreed to hear the lawsuit over the 340B drug reimbursement cuts. AHA and AAMC were both pleased with the high court’s decision to take up the case.

340B Health also said it was pleased that the Supreme Court would take up the case, but the group also urged the Biden administration to abandon the cuts in 2022 and beyond.

But in addition to the question that hospitals put before the court on CMS’ authority, the Supreme Court wants to hear arguments on whether the case is precluded by judicial review. The statute says that certain aspects of the hospital outpatient payment system are not subject to review by the courts, and the court points to that section of statute in its order list.

There are many aspects of Medicare payment and policy that aren’t subject to judicial review, and there’s a whole separate body of case law surrounding those provisions and the circumstances where such prohibitions may apply, noted Emily Cook, a partner with McDermott Will & Emery. The district and appeals courts also looked at the judicial review aspect of these cases. However, Cook said it appears this is an issue that the Supreme Court wants to revisit.

A hospital stakeholder involved with the case said the issue of judicial review had been part of the government’s argument from the beginning, and since it affects the court’s ability to hear the case, it’s of interest to someone to have the issue fully briefed. As such, the Supreme Court’s request isn’t surprising.

Cook said it will be interesting to see who files amicus curiae briefs in this case, particularly as the cuts were made on a budget neutral basis so hospitals that don’t participate in 340B — as well as some that did — benefited from the redistribution of funds. The Federation of American Hospitals had asked lower courts not to take funds away from their hospitals, which didn’t participate in 340B, even if the courts ultimately sided with the providers that brought the suit. — Michelle M. Stein (© 2021 BGOV LLCAll Rights Reserved.