A federal judge late Monday blocked the Trump administration's Medicare cuts to 340B hospitals, saying the new rates aren't lawful for 2018 and 2019.
However, U.S. District Judge Rudolph Contreras did not grant hospitals the permanent injunction against the cuts that they wanted. Instead, he ordered the department to take "first crack" at a remedial measure with a status update due Aug. 5.
"The secretary's deficiencies here were substantial," the judge wrote in a decision late Monday. "He patently violated the Medicare Act's text. Unlike cases in which the agency's decision may have been lawful, but was inadequately explained … no amount of reasoning on remand will allow the secretary to re-implement the 340B rates in the same manner."
The decision follows a series of lawsuits led by the American Hospital Association against the initial rule that slashed Medicare Part B drug reimbursement rates for hospitals that receive 340B drug discounts. The legal battle started in late 2017, before the 2018 pay rule that first imposed the cuts went into place.
Contreras also rejected HHS' claims that the hospitals should have gone through the agency's administrative process rather than the courts to address their problems with the 340B cuts.
The judge said he decided not to give the hospitals injunctive relief because eliminating the rule could wreak havoc on Medicare, since the regulations first went into effect in January 2018.
Specifically, Contreras noted that HHS can't add to the department's expenses. If the department retroactively raised the 340B hospital pay rates for 2018 and 2019 it would have to retroactively lower other Medicare rates at the same time.
"And because HHS has already processed claims under the previous rates, the secretary would potentially be required to recoup certain payments made to providers; an expensive and time-consuming prospect," the judge wrote, estimating that it could lead to $25 million to $30 million in administrative costs alone.
In a joint statement, the AHA, Association of American Medical Colleges and America's Essential Hospitals said 340B hospitals welcomed the ruling.
"We urge HHS to promptly comply with the judge's ruling and restore to 340B hospitals all funds that have been unlawfully withheld," the group said.
Capitol Hill lawmakers want the 340B program to undergo more reform, and GOP members of the U.S. House of Representatives previously prioritized legislation to tighten scrutiny of 340B hospitals and how they spent the money they receive through manufacturer discounts. That policy's momentum has died since Democrats took control of the chamber in November 2018.