Supreme Court rules against Biden admin in hospital reimbursement case

The Supreme Court ruled on Wednesday in favor of a group of nonprofit hospitals trying to recover billions of dollars in Medicare reimbursements that had been slashed by the government since 2018.

The Court Found the U.S Court of Appeals for the District of Columbia Circuit erred in 2020 when it allowed the Department of HHS to reduce yearly Medicare payments for outpatient drugs by $1.6 billion, which aided in subsidizing hospitals that cater to poor and uninsured patients, in a unanimous ruling authored by Justice Brett Kavanaugh.

As per a 2019 report from Adam Fein, the CEO of the Drug Channels Institute, the decision was narrowly tailored and did not go so far as to undermine HHS authority, only stating how the agency acted unlawfully in accordance with its varying rates for hospitals under the 340B Drug Pricing Program, which covers more than 2,500 hospitals and 25,000 pharmacies.

Kavanaugh observed, “The text and structure of the statute make this an easy case.” “Because HHS did not conduct a survey of hospitals’ acquisition costs, HHS acted unlawfully by reducing the reimbursement rates for 340B hospitals.”

The lawsuit revolved around how the HHS determined Medicare reimbursement rates for specific prescription drugs under the 340B program, prompting the hospital alliance to sue over a rule enacted by President Donald Trump that reduced the prices.

The decision is a “big victory” for not-for-profit hospitals that participate in the 340B program, as well as “Trump’s most dedicated base — white, working-class, rural voters who disproportionately rely on 340B providers,” according to Liz Mair, a Republican consultant who works on a variety of drug pricing issues.

Mair added, “from a raw political perspective, I think it’s interesting that the opinion was authored by the Supreme Court justice that Trump fought hardest to confirm: Kavanaugh.”

Beginning in 2018, the Department of Health and Human Services lowered reimbursement rates for hospitals participating in the 340B program by about a third of the cost, while paying higher rates to hospitals not participating in the program.

“In short, the statute allows HHS to set reimbursement rates based on average price and affords the agency discretion to ‘adjust’ the price up or down. But unless HHS conducts a survey of hospitals’ acquisition costs, HHS may not vary the reimbursement rates by hospital group,” Kavanaugh wrote.