December 28, 2018— A federal court has found the Department of Health & Human Services (HHS) exceeded its authority by making deep cuts to Medicare Part B drug payments to many 340B hospitals. The decision marks a major victory for hospitals and their patients.
Ruling on Dec. 27, the U.S. District Court for the District of Columbia issued a permanent injunction against the cuts of nearly 30 percent, saying that the Secretary of Health & Human Services (HHS) “did not have statutory authority” to make the reductions. However, U.S. District Judge Rudolph Contreras did not reverse the cuts that already took effect in 2018. Instead he ordered further hearings on the matter of a “proper remedy” for the $1.6 billion in cuts made this year.
“This is welcome news for hospitals serving low-income patients in need,” said Maureen Testoni, Interim President and Chief Executive Officer of 340B Health. “These steep cuts inflicted harm on safety-net hospitals and the patients they serve. We applaud the Court’s decision and look forward to additional information about the process for restoring the cuts made in 2018.”
The Trump administration ordered the cuts in Medicare Part B payments under the Outpatient Prospective Payment System (OPPS) in late 2017, reducing payments from the average sales price (ASP) plus 6 percent that is paid to all hospitals to ASP minus 22.5 percent. Shortly after the cuts were announced, a lawsuit was filed to block the change. The lawsuit was brought by the American Hospital Association, the Association of American Medical Colleges, America’s Essential Hospitals, the Henry Ford Health System, Northern Light Health, and Park Ridge Health.
The cuts also drew the attention of Congress, where 57 senators and 228 House members sent letters to HHS urging it not to go ahead with the pay reductions. After the cuts went into effect, bipartisan legislation (H.R.4392) was introduced by Reps. David McKinley (R-W.V.) and Mike Thompson (D-Calif.). 340B Health and our members strongly advocated for the legislation through dozens of face-to-face meetings with legislators and their staff. The bipartisan legislation eventually gained 200 sponsors. In November, HHS published final rules continuing the cuts into 2019 while broadening their reach to previously exempt sites.
Hospitals have asked the court to reverse the cuts made in 2018. The question of the 2018 cuts is complicated by the fact that HHS was required to implement them in a “budget-neutral” manner. That means for every dollar they cut from 340B hospitals for outpatient drugs, Medicare increased payments to other providers for services and items other than drugs. Judge Contreras described the situation as a “quagmire that may be impossible to navigate.” He asked both sides to submit their written arguments within 30 days for how to resolve the situation.