Baptist Health has filed a lawsuit against Humana for allegedly underpaying it for outpatient drugs purchased through the 340B drug discount program and given to Medicare Advantage patients.
The lawsuit may hinge on whether federal regulations on the 340B drug discount program apply to commercial insurers that manage Medicare Advantage contracts. The 340B program offers estimated 25%-50% discounts on outpatient prescription medicines to safety-net hospitals and other providers that treat low-income and uninsured patients.
Related: Feds underestimate 340B 'clawbacks,' lawyers say
Baptist, which has a Medicare Advantage contract with Humana, alleges the insurer should retroactively adjust Medicare Advantage reimbursement rates based on federal policy changes following a 2022 Supreme Court decision that undid 340B reimbursement rate cuts from 2018 to 2022. Humana based its reimbursement rates for 340B drugs used to treat Medicare Advantage patients on the invalidated payment cuts and has refused to increase those payments, the suit alleges.
The Montgomery, Alabama-based nonprofit system seeks unspecified damages. The suit was filed last month in an Alabama state court and transferred Friday to the U.S. District Court for the Middle District of Alabama.
Baptist and Humana did not immediately respond to requests for comment.
"Because Humana reimbursed Baptist Health an amount based on the ‘Medicare allowable amount,’ which included the illegal CMS rates in effect from 2018 to 2022, and has refused to reimburse Baptist Health according to CMS' repayment model, it has breached its obligations to pay Baptist Health the proper, legal amount, for its services,” the complaint alleges. “To date, Humana continues to enjoy this windfall and has not taken steps to compensate Baptist Health for its underpayment.”
As a result of the Supreme Court ruling, the federal government paid a $9 billion lump sum last month to providers participating in the 340B drug discount program to compensate them for reimbursement reductions implemented from 2018 to Sept. 27, 2022.
The American Hospital Association, among other provider lobbying groups, said in comments to the Centers for Medicare and Medicaid Services and the Health and Human Services Department that the remedy payment didn’t adequately factor in any related effects to commercial insurers that manage Medicare Advantage contracts. Medicare Advantage contractors use traditional Medicare rates to set reimbursement levels.
CMS and HHS acknowledged hospitals’ concerns about the remedy payment policy's impact on Medicare Advantage contracts. But the agencies said the contracts between providers and Medicare Advantage organizations fall outside the scope of the regulation, citing federal law that prevents CMS from "requiring Medicare Advantage organizations to contract with a particular healthcare provider or use particular pricing structures with their contracted providers."