Judges mull reviving hospitals' challenge to 340B Medicare cuts

A panel of federal appellate judges on Friday considered reviving the American Hospital Association's challenge to Medicare 340B reimbursement cuts, questioning whether the changes were made properly.

Although the Trump administration claimed that the CMS has the authority to adjust Medicare drug reimbursements for 340B hospitals through rulemaking, the three judges for the U.S. Court of Appeals for the District of Columbia Circuit found inconsistencies in the government's argument.

In particular, Judges Sri Srinivasan and Gregory Katsas probed the Justice Department's claims over when the agency's authority is immune from outside challenge, homing in on what Katsas suggested were arbitrary rules about the HHS secretary's authority.

"It's rich," Katsas said during Friday's oral arguments when the Justice Department invoked only certain authorities but not others under the immunity claimed for the HHS secretary.

Judge Patricia Millett also questioned whether the Justice Department claim that hospitals cannot appeal the adjustment actually strengthens AHA's case.

The association sued the federal government in November 2017 over the CMS' nearly 30% cut to Medicare Part B reimbursements for 340B hospitals that went into effect in January 2018. The affected hospitals project that the cut will cost them $1.6 billion annually.

But a U.S. District Court tossed the case in late December 2017, days before the cuts were due to start, because they had yet to go into effect and the complaint was premature. The AHA argued that wasn't true, since they used the comment period to oppose the rule. In addition, hospitals are experiencing the cuts now and have filed claims to HHS that have been denied.

HHS argued on Friday that the cut is simply an adjustment to account for expansion of the 340B drug discount program that now includes about 40% of all U.S. hospitals. The federal government also argued the adjustment corrected the reimbursements so 340B hospitals couldn't profit off the system by receiving 6% above the average sales price of a given drug.

The AHA has requested expedited review of the case, as the money involved makes any delay complicated since hospitals will continue seeing the cuts.

The D.C. Circuit judges could resurrect AHA's suit and either send it back to a district judge to weigh the merits or rule on the overall case themselves.

Hospitals claim that the scope of the cuts mandated by the rule "fundamentally distorted the congressionally created system" to advance its "questionable policy agenda" of cutting reimbursements to 340B providers, according to the brief.

Katsas pushed back against the AHA, saying the rule was simply a pay adjustment, and HHS has the discretion to make those changes.

As the case is under review, Congress appears stalled on its attempts to freeze or halt the reimbursement cuts.

A growing group of Republican House lawmakers slowly are releasing bills to tighten 340B hospitals' reporting requirements and enhance transparency, with a hearing anticipated this spring.

Rep. Doris Matsui (D-Calif.) is preparing to release legislation of her own that, according to House aides, would "clarify the intent" of 340B.