Hospitals ask Supreme Court to toss 340B, site-neutral pay cuts

Hospitals on Wednesday asked the Supreme Court to overturn two appeals court decisions upholding Medicare payment cuts for 340B drugs and off-campus hospital outpatient office visits.

The American Hospital Association and other hospital groups appealed the U.S. Court of Appeals for the District of Columbia Circuit’s July ruling that upheld HHS’ decision to lower some Medicare outpatient drug payments by 28.5% at 340B hospitals—a policy that dates back to 2017. Hospitals argued that the Supreme Court must revisit the case because the D.C. Circuit allowed HHS “to make wholesale changes” to reimbursement rates for 340B hospitals, claiming that Congress only gave HHS the power to make small adjustments. The Supreme Court needs to “ensure (the D.C. Circuit) does not give cover to federal agencies when they supplant Congress’s policy judgments with their own,” the petition said.

“In an era of skyrocketing drug prices, the 340B program has been critical in helping hospitals expand access to comprehensive health services to vulnerable communities, including lifesaving prescription drugs. Many of the important programs and services that the 340B program allows eligible hospitals to provide would otherwise be unavailable,” AHA CEO Rick Pollack said in a statement.

Hospitals also want the high court to throw out a decision by a three-judge panel for D.C. Circuit to uphold HHS’ site-neutral payment policy, which lowered payments for office visits delivered at off-campus outpatient departments. A lower court twice ruled that HHS overstepped its authority when it cut those rates, noting that Congress created exceptions for some visits in 2015.

But D.C. Circuit Judge Sri Srinivasan wrote in the court’s July opinion that HHS could legally make the pay cuts under its authority to control unnecessary increases in the volume of covered outpatient services, overturning the lower court’s 2019 decision.

The AHA and Association of American Medical Colleges argued in their petition that the Supreme Court needs to review the issue because “the courts of appeals are deeply divided,” pointing to several conflicting appeals court decisions that have resulted in a 4-5 split.

“Given this clear circuit split, the (Supreme Court’s) intervention is plainly warranted,” the petition said.

The hospital groups added that the D.C. Circuit’s decision was wrong because it gave HHS too much power to interpret the law. They argued that it’s essential for the Supreme Court to settle whether federal courts should “defer to an agency’s interpretation of a statutory provision.”

Hospitals had appealed both decisions to the full D.C. Circuit, but the court declined to hear either case, allowing both rulings to stand.


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