Hospitals may have to wait to recoup 340B payments after Supreme Court ruling, attorneys say

Hospitals scored a major victory last week when the Supreme Court ruled nearly 30% in cuts to 340B payments were unlawful.

Now, experts and attorneys say, comes the hard part: recouping the money. 

The Supreme Court ruled unanimously that the Department of Health and Human Services (HHS) does not have the authority to cut payments to 340B covered entities and remanded the case back to a lower court to decide on a potential remedy as the cuts have been in effect since 2018. But attorneys say any potential remedy won’t happen anytime soon.

“I think there are a number of different directions that this could go in and some take more time than others,” said Jeff Davis, a member with the law firm Bass, Berry & Sims who has delivered counsel to hospitals on 340B issues.

Currently, the case is sent back to the U.S. Circuit Court of Appeals for the District of Columbia, which could either send it back to the district court or the Centers for Medicare & Medicaid Services (CMS) to create a remedy. 

But experts say whatever decision CMS may make could create future litigation itself over 340B, which requires drugmakers to offer discounts to safety net providers in exchange for Medicare and Medicaid participation.

“Whatever remedy the agency chooses may itself be challenged and become the subject of litigation—particularly if it seeks to offset past underpayments with cuts elsewhere in the program—so final resolution of the 340B reimbursement rates may still be a long way off,” wrote attorneys with the law firm Akin Gump in a blog post on the decision.

CMS could either reimburse hospitals for the difference between the cuts, which started in 2018, or adjust hospital payments in the coming years. 

The agency and the courts have been in this situation before. Back in 2019 when a lower court ruled in favor of hospitals "it was stumped by the remedy section and requested additional briefing from the parties," said Anil Shankar, a partner with the law firm Foley & Lardner. 

The American Hospital Association (AHA), which sued HHS over the cuts, is already demanding that any repayments not be subject to a statutory budget neutral requirement for hospital payment rules, thus ensuring that any repayments would result in cuts to other programs.

When a district court ruled in 2019 the cuts were unlawful, the Trump administration at the time opposed AHA’s request for a fast remedy and instead called for repayments on a hospital-by-hospital basis. The Trump administration also argued that any appropriate remedy must be budget neutral. 

“As you know that position would mean that some hospitals will be forced to pay back money spent years ago—including during the COVID-19 pandemic—because the federal government made a legal error,” AHA’s letter said. “Hospitals should not have to pay for the agency’s mistakes.”

The group believes that budget neutrality is not required when a court rules the agency violated the law, which occurred in this case. 

HHS did not return a request for comment as of press time on its plans for a remedy. 

CMS may offer a clue to the agency’s next steps on the issue in the coming weeks. The Outpatient Prospective Payment System proposed rule is expected to be released sometime in July, and the agency could address payment rates in that regulation.