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Association Prevails at Supreme Court on OPPS Cuts to 340B Hospitals

In a resounding victory for essential hospitals, the U.S. Supreme Court unanimously ruled in favor of America’s Essential Hospitals in its years-long legal challenge to restore full Medicare payment rates for 340B Drug Pricing Program hospitals.

The Supreme Court held that the Department of Health and Human Services (HHS) violated the Medicare statute when it reduced Part B drug payments under the Outpatient Prospective Payment System (OPPS) by nearly 30 percent in 2018 and 2019. The court remanded the case to lower courts for next steps, including determining a remedy for the years in question. America’s Essential Hospitals and other association plaintiffs in the case issued a joint statement welcoming the decisive victory.

Background

In the calendar year 2018 OPPS final rule, HHS through the Centers for Medicare & Medicaid Services (CMS) finalized a policy to reduce payments to 340B hospitals for Medicare Part B drugs, a policy the association has vigorously opposed since its inception. In late 2017, shortly after CMS issued the rule, America’s Essential Hospitals, the American Hospital Association, the Association of American Medical Colleges, and three individual hospital plaintiffs, including association member Henry Ford Health, filed the lawsuit in the U.S. District Court for the District of Columbia. Specifically, the lawsuit challenged HHS’ authority to reduce payment rates to 340B hospitals under the OPPS; the policy has been in place since 2018. After a district court decision found the cuts unlawful, the Trump administration appealed the case, and the Court of Appeals ruled in favor of the administration.

Supreme Court Ruling

After the unfavorable Court of Appeals decision, the association and the other plaintiffs asked the Supreme Court to review the case. In November 2021, counsel for the association and other plaintiffs presented oral arguments questioning the legality of HHS’ policy. After consideration of oral arguments and written briefing, the Supreme Court issued its unanimous decision on June 15. In the opinion, the court was unequivocal in its holding, stating that, “under the text and structure of the statute, this case is therefore straightforward,” and that “HHS acted unlawfully by reducing reimbursement rates for 340B hospitals.”

Next Steps

The Supreme Court remanded the decision to the lower courts. The lower courts will determine a specific remedy for the years in question, after which HHS will be responsible for implementation of the remedy. America’s Essential Hospitals will advocate for HHS to compensate hospitals fully for the losses incurred during the five years this policy has been in place.

Contact Senior Director of Policy Erin O’Malley at eomalley@essentialhospitals.org or 202.585.0127 with questions.

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About the Author

Shahid Zaman is a senior policy analyst at America's Essential Hospitals.

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