Hospitals Ask Supreme Court to Take Up 340B, Site-Neutral Payments

The American Hospital Association (AHA), joined by member hospitals and other national organizations, have filed petitions asking the Supreme Court to reverse two appeals court decisions impacting hospital payments.

The first case involves a lawsuit brought on by the AHA and other organizations challenging the nearly 30 percent cut to Medicare outpatient prospective payment system drug payments for hospitals participating in the federal 340B Drug Pricing Program.

A district court had sided with the hospital groups, ruling that the payment reduction was unlawful. However, an appeals court overturned the decision in July 2020, finding HHS to be within its statutory boundaries with the rate reductions.

The second case hospitals are asking the Supreme Court to consider again involves reductions to Medicare outpatient prospective system payments. This time, AHA and others are challenging a 2019 site-neutral payment policy that reduced rates for clinic visits delivered at off-campus provider-based departments.

A lower court had found twice that HHS exceeded its statutory authority by reducing the rates since Congress had made exceptions for certain off-campus provider-based departments in 2015. But, again in July 2020, an appeals court reversed the decision and upheld the rule.

The US Appeals Court also denied a request from hospital groups for the judges to rehear both cases.

AHA and other groups maintain that the decisions “conflict with Congress’ clear intent and defer to the government’s inaccurate interpretation of the law.”

“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,” Rick Pollack, AHA president and CEO, said in a statement emailed to RevCycleIntelligence.

“Many of the important programs and services that the 340B program allows eligible hospitals to provide would otherwise be unavailable. These cuts have resulted in the continued loss of resources during this pandemic, which comes at the worst possible time for patients and communities,” Pollack continued.

Additionally, Pollack decried the site-neutral payment policy, stating that it undermines “the clear intent of Congress to protect” hospital outpatient off-campus provider-based departments “because of the many real and crucial differences between them and other sites of care.”

The hospital departments are held to higher regulatory standards and they treat poorer, sicker Medicare patients compared to similar care sites, AHA has argued.

“We will continue to fight for our patients and communities and have put forward compelling arguments that these cases should be taken up by the Supreme Court. We are hopeful that these unlawful cuts will be overturned so that hospitals and health systems can continue to provide the services people need the most,” Pollack stated.

The petitions call on the Supreme Court to review the two cases on “the basis of the excessive deference the appeals court gave to the government’s misbegotten interpretation” of the hospital payment policies, AHA explained.

“It is known as ‘Chevron’ deference, in reference to the line of cases on which it is based. Such deference appears misplaced in these cases, particularly considering the solid opinions in favor of the hospital field in the district courts which first heard the cases. The two petitions are complementary and persuasive,” the hospital group said.

Other groups filing alongside the AHA in the 340B case include the Association of American Medical Colleges (AAMC), America’s Essential Hospitals, and hospital plaintiffs, Northern Light Health in Brewer, Maine; Henry Ford Health System, in Detroit; and AdventHealth Hendersonville, in Hendersonville, North Carolina.

For the site-neutral payment policy case, AHA is joined by the AAMC and hospital plaintiffs, Olympic Medical Center in Port Angeles, Washington; Mercy Health in Muskegon, Michigan; and York Hospital in York, Maine.

The Supreme Court is currently reviewing a major healthcare case involving the Affordable Care Act. The case will determine whether the landmark healthcare law’s individual mandate is constitutional and, if so, whether the portion of the law can be severed from the rest of the Act to uphold the rest of the law.

This case may make it difficult for hospitals to convince the Supreme Court to take on more healthcare policy and regulation.

“The AHA can certainly petition the Supreme Court, but the Supreme Court is not required to hear the petition and it’s unlikely that this would be considered a priority above other cases petitioned to be heard, including the Affordable Care Act,” Caroline Znaniec, a managing director at CohnReznick Advisory, told RevCycleIntelligence last fall.

The Supreme Court, however, did take up and side with hospitals in a 7-1 decision in 2019 regarding changes to the Medicare disproportionate share hospital payment calculations that resulted in lower reimbursements for hospitals.