AHA brings site-neutral and 340B cases to the Supreme Court

The American Hospital Association (AHA) and other hospital groups are appealing two long-running court cases to the Supreme Court, the association announced February 10. The Supreme Court will be asked to consider CMS’ payment reduction for drugs acquired by hospitals under the 340B drug discount program and CMS’ reimbursement cuts to certain services provided at excepted off-campus provider-based departments (PBD). Both cases have a lengthy history and have seen lower court rulings in favor of the AHA overturned on appeal.

340B reductions

Prior to 2018, CMS reimbursed hospitals at the average sales price (ASP) plus 6% for drugs acquired through the 340B drug discount program, which is intended to allow hospitals to purchase drugs from manufacturers at a discounted rate to accommodate uninsured and low-income patients.

In the 2018 Outpatient Prospective Payment System (OPPS) final rule, CMS drastically reduced reimbursement to ASP minus 22.5%. The AHA filed a lawsuit arguing that CMS lacked the statutory authority to reduce 340B reimbursement. In December 2018, a federal judge ruled in favor of the AHA. CMS appealed and in July 2020, a three-judge panel of the U.S. Court of Appeals for D.C. overturned the lower court decision and determined that CMS did have the authority to implement the cuts. In October 2020, the full court declined to reconsider the panel’s ruling.

Site-neutral payments

Under Section 603 of the Bipartisan Budget Act of 2015, CMS was required to implement a site-neutral payment policy that reduced reimbursement to most off-campus PBDs. Certain off-campus PBDs were excepted under Section 603 and exempt from the reimbursement reductions.

In the 2019 OPPS final rule, CMS finalized a policy to extend reimbursement reductions to grandfathered off-campus PBDs, citing “unnecessary increases” in volume. CMS applied a 50% total reduction in payment to excepted off-campus PBDs as if these sites were paid the Medicare Physician Fee Schedule (MPFS) rate for services described by HCPCS code G0463 (hospital outpatient clinic visit for assessment and management of a patient). This effectively paid providers 70% of the OPPS rate for 2019. For 2020 and subsequent years, CMS planned to reimburse the grandfathered PBDs at the MPFS rate, which would equal 40% of the OPPS rate. Notably, the reductions were not budget-neutral, meaning the savings were not redistributed within the OPPS.

The AHA filed a lawsuit, contended that CMS lacked the statutory authority to enforce the cuts. In 2019, a federal court ruled in the AHA’s favor. However, the district court ruling affected only the policy contained in the 2019 OPPS final rule. CMS was ordered to reprocess affected 2019 claims and repay them at 100% of the OPPS rate.

In July 2020, a three-judge panel of the U.S. Court of Appeals overturned the ruling. The full court also declined to reconsider the ruling in October 2020.

Under the 2019 ruling, CMS had already begun reprocessing affected claims to pay them at the full OPPS rate. In January 2021, the agency announced that it would begin reprocessing the affected claims again to pay them at the reduced rate.