35 hospital groups urge court to halt $1.6B in Medicare payment cuts

Thirty-five state and regional hospital associations have filed a friend of the court brief urging the U.S. Court of Appeals for the District of Columbia to reverse a lower court decision and grant a preliminary injunction to stop a Medicare payment reduction for many hospitals in the 340B Drug Pricing Program.

In November, CMS released its 2018 Medicare Outpatient Prospective Payment System rule, which finalized a proposal to pay hospitals 22.5 percent less than the average sales price for drugs purchased through the 340B program.

This change would reduce Medicare payments to hospitals by $1.6 billion. CMS said it would implement this policy in a budget-neutral manner by offsetting the projected $1.6 billion decrease in drug payments by redistributing an equal amount for non-drug items and services within the OPPS.

The American Hospital Association, Association of American Medical Colleges and America's Essential Hospitals sued HHS Nov. 13 in the U.S. District Court for the District of Columbia to halt the 340B payment reductions from taking effect Jan. 1, 2018. Three health system plaintiffs joined the associations in the suit: Eastern Maine Healthcare Systems in Brewer; Henry Ford Health System in Detroit; and Park Ridge Health in Hendersonville, N.C.

U.S. District Judge Rudolph Contreras dismissed the lawsuit Dec. 29, allowing CMS to proceed with the cuts. The judge said the associations' lawsuit was brought prematurely, but he did not rule on the merits of the case. The three associations appealed the court's decision in January.

"In evaluating the district court's denial of a preliminary injunction, this court must consider the extent to which an injunction is necessary to avert irreparable harm, the balance of the equities, and whether an injunction will serve the public interest," the 35 hospital associations wrote in the friend of the court brief. "It is difficult to imagine a case that more obviously satisfies those criteria. The new [CMS] rule will hobble the ability of hospitals throughout the United States to provide healthcare to vulnerable populations and, in turn, will jeopardize the lives and health of countless needy patients."

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