Hospitals ‘disappointed’ in delay of remedy over billions in 340B payments

A court ruling has given the Department of Health and Human Services the chance to craft a solution over underpayments from the federal program. Hospitals sought faster relief after a Supreme Court ruling last year.

When hospitals gained a victory in the U.S. Supreme Court regarding payments from a federal program, they hoped they wouldn’t be waiting for relief months later.

However, the American Hospital Association is dismayed by a federal judge’s ruling that gives the Department of Health and Human Services the opportunity to come up with a remedy.

The case centers around a long-running dispute over Medicare reimbursements in the 340B drug pricing program. The program offers discounts on some outpatient drugs for hospitals that serve a high percentage of patients in underserved communities.

The U.S. Supreme Court unanimously struck down the Medicare cuts to hospitals and health systems in the 340B program in a June decision. The case revolved around $1.6 billion in annual Medicare payments. Former President Trump’s administration implemented cuts of nearly 30% in drug payment rates in 2018, and President Biden’s administration aimed to continue the policy.

Hospitals have been anxious to see repayment in light of the ruling from the nation’s highest court. However, the U.S. District Court for the District of Columbia issued an opinion Tuesday allowing the health department to propose a remedy for the payments in the 340B program.

Melinda Hatton, general counsel for the American Hospital Association, said the judge’s ruling was unfortunate.

“For more than five years, the Department of Health and Human Services has unlawfully withheld vital funding from 340B hospitals that helps them provide a range of important benefits to their patients and communities,” Hatton said in a statement. “We are disappointed that the district court elected to extend this delay by remanding this case back to the department to determine the appropriate remedy.”

U.S. District Judge Rudolph Contreras said that while the court declined to retain jurisdiction in crafting the remedy, the court “expects that HHS will act promptly to remediate its underpayments.”

In his order, the judge noted the “staggering value and number of transactions at issue” as a factor in referring the issue back to the health department for a remedy.

“By some estimates, nearly $10 billion dollars of underpayments are at stake,” the judge noted.

While hospitals argued that the issue shouldn’t go back to HHS due to the delays in the case, the court disagreed. The judge wrote that the health department was entitled to pursue avenues through the court. And he noted that since the Supreme Court ruling last June, the district court had yet to give the health department a chance to remediate the issue.

In her statement, Hatton noted that the health department has indicated it would propose a remedy by April, and the hospital association expects that the agency will come up with a solution soon.

“We look forward to continuing to work with the Administration to develop a plan to swiftly repay 340B hospitals, with interest, while ensuring the remainder of the hospital field is not penalized as they too continue to serve and care for their patients and communities,” Hatton said in a statement.

Hospitals have said the reduction in the 340B payments have hurt their ability to provide care in underserved communities in urban and rural areas. Health systems have said the lower reimbursements come at a particularly difficult time, as many hospitals have struggled financially during the COVID-19 pandemic.

Bruce Siegel, president of America’s Essential Hospitals, pointed to the financial difficulties of hospitals in expressing his frustration with the judge’s ruling.

“We are disappointed the district court gave the Department of Health and Human Services discretion in how to remediate the department’s unlawful payment cuts for 340B hospitals,” Siegel said in a statement Tuesday. “These steep reductions have undermined essential hospitals and have come at the worst possible time, as providers struggle with the heavy financial pressures of COVID-19.”

However, the 340B program has its critics, who contend the program has grown far beyond its stated mission of aiding hospitals that serve a large number of vulnerable patients. The program has grown from $9 billion in 2014 to $38 billion in 2020.

Hospitals in the 340B program have faced another challenge, as some major pharmaceutical companies have said they are restricting some discounts.