American Hospital Assn. v. Becerra
Headline: Medicare drug payment change blocked as Court rules HHS cannot cut reimbursements only for 340B safety‑net hospitals without first conducting the required acquisition‑cost survey, keeping higher payments for those hospitals while rulemaking or Congress acts.
Holding: Absent a statutory survey of hospitals’ acquisition costs, HHS may not vary Medicare outpatient drug reimbursement rates by hospital group, so the agency’s 2018 and 2019 reductions for 340B hospitals were unlawful.
- Prevents HHS from targeting lower drug payments at 340B hospitals without survey.
- Protects revenue for safety‑net hospitals serving low‑income, rural patients.
- Pushes HHS to conduct surveys or seek Congress to change the law.
Summary
Background
A group of hospitals and their trade association challenged HHS’s 2018 and 2019 decision to pay substantially lower Medicare rates for outpatient drugs when those drugs were supplied by hospitals in the 340B program. The 340B hospitals receive discounted drug prices under federal law and HHS set one lower rate for them (about 77.5% of average sales price) while keeping a higher rate (about 106%) for other hospitals. HHS had not conducted the statutory survey of hospitals’ acquisition costs before making the change and defended the cuts as an allowable “adjustment.”
Reasoning
The central question was whether HHS may treat different hospital groups differently when it has not done the required survey. The Court explained that the statute gives HHS two distinct paths: if HHS conducts an acquisition‑cost survey, it may set rates based on those costs and vary rates by hospital group; if no survey exists, HHS must use the manufacturers’ average price (with limited adjustments) and may not vary rates by group. Letting HHS vary rates without a survey would nullify the survey requirement and the statute’s structure. The Court therefore held the 2018 and 2019 cuts for 340B hospitals unlawful and reversed the appeals court.
Real world impact
The ruling protects the prior, uniform Medicare drug payments for 340B hospitals unless HHS first gathers the required survey data or Congress changes the law. The decision affects federal payments that amount to roughly $1.6 billion annually for those hospitals and was remanded for further proceedings to determine remedies. The Court did not resolve the policy debate over whether the payments should subsidize safety‑net care; that is left to agency rulemaking or Congress.
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