On January 10, the United States District Court for the District of Columbia issued a long-awaited opinion which will allow the U.S. Department of Health and Human Services (HHS) to determine the means by which it will repay inappropriate cuts it levied against 340B participating hospitals’ Medicare reimbursement.[i] The District Court’s decision comes on the heels of the United States Supreme Court’s unanimous decision in American Hospital Association v. Becerra, 142 S. Ct. 1896 (2022).[ii] It held that HHS overstepped its statutory authority when the agency unexpectedly cut its 2018 and 2019 Outpatient Prospective Payment Systems (OPPS) reimbursement rates for 340B hospitals without conducting a mandatory survey of hospitals’ acquisitions costs. While the Supreme Court ruling was a win for 340B hospitals, it left many questions. The most important? How will HHS go about repaying these hospitals? This District Court ruling provides a bit more clarity.

Plaintiffs—American Hospital Association, and others—filed two motions after the Supreme Court ruling with the District Court. The first, which was granted in September of 2022, vacated the prospective relevant portion of the 2022 OPPS reimbursement rates. [iii] The second motion, which was discussed in this most recent opinion, sought to remedy all of HHS’s underpayments to 340B hospitals for the unlawful reimbursement rate in the OPPS Rules from 2018 to 2022.

The District Court held they will not vacate the OPPS rules due to “quintessential disruptive consequences,” and instead, the Court will “remand without vacatur to give the agency the opportunity to remediate its underpayments.” This comes as a blow to 340B hospitals throughout the country since they wanted the District Court to vacate the OPPS rules and also decide the terms HHS will have to repay the 340B hospitals. Melinda Hatton, general counsel for the American Hospital Association (AHA) stated:

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. 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. HHS recently indicated that it expects to propose a remedy by April, and like the district court said in its opinion, the AHA “expects that HHS will act promptly to remediate its underpayments.” 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.[iv]

It is yet to be seen how HHS will go about remedying the unlawful underpayments. As mentioned in Melinda Hatton’s statement, HHS has indicated that Centers for Medicare and Medicaid Services will have a proposal on how 340B drug payments from 2018-2022 will be remedied prior to the CY 2024 OPPS proposed rule.[v]  While we are still some time away from seeing how HHS decides to implement repayment, it does look like this long legal battle will be coming to an end and 340B hospitals will soon recoup the money they were wrongfully denied over the past 5 years.

If you have any questions about this recent opinion, the 340B Drug Discount Program in general, or how your organization can monitor HHS’s repayment process, please contact your Dinsmore attorney.