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June 16, 2022

Supreme Court Rules Medicare Cuts to 340B Hospitals Unlawful

The Supreme Court issued a unanimous opinion in American Hospital Association v. Becerra on June 15, 2022, concluding in a “straightforward” decision that the Medicare reimbursement cuts for certain separately-payable outpatient drugs implemented in the 2018 and 2019 Medicare Outpatient Prospective Payment System (OPPS) rules were unlawful because they applied only to hospitals participating the 340B Drug Pricing Program. If the Centers for Medicare and Medicaid Services (CMS) wants to set different reimbursement rates for different hospital groups, the statute requires the agency to conduct a survey of hospitals’ acquisition costs, which CMS did not complete. While not weighing in on the policy debate over the cuts, the decision does state that Congress understood that 340B hospitals paid less for these drugs when it implemented the Medicare statutory requirement that hospital groups be paid the same rates, and acknowledges the role that Medicare resources plays in enabling 340B hospitals to serve their missions. The case has been remanded to the D.C. Court of Appeals for further proceedings, and likely to the D.C. District Court from there.