Hospitals face $1.6B in Medicare payment cuts after judge dismisses lawsuit: 6 things to know

A federal judge has dismissed an injunction requested by hospital groups and health systems to block payment cuts for drugs purchased through the 340B Drug Pricing Program.

Here are six things to know.

1. 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.

2. Less than two weeks after the OPPS rule was released, the American Hospital Association, America's Essential Hospitals and the Association of American Medical Colleges sued HHS to halt the payment cuts. The groups were joined in the lawsuit by three health systems: Brewer, Maine-based Eastern Maine Healthcare Systems; Detroit-based Henry Ford Health System; and Hendersonville, N.C.-based Park Ridge Health. 

3. In their lawsuit, the hospital groups and health systems argued the 340B provisions of the OPPS final rule violate the Social Security Act and should be set aside. The lawsuit further alleged the 340B provisions are outside of the HHS secretary's statutory authority.

4. A federal judge dismissed the lawsuit Dec. 29, meaning CMS can proceed with the cuts. The judge said the lawsuit was premature, but he did not rule on the merits of the case.

5. The hospital groups and health systems may refile their lawsuit after exploring other avenues to challenge the cuts, according to a joint statement released by the hospital groups.

"Making cuts to the program, like those CMS has put forward, will dramatically threaten access to healthcare for many communities with vulnerable patients," said Rick Pollack, president and CEO of the AHA. "We are disappointed in this decision from the court and will continue our efforts in the Courts and the Congress to reverse these significant cuts to the 340B program."

6. The Trump administration was pleased with the court's ruling. "Under President Trump, the Department of Health and Human Services has acted to lower the cost of medication for Medicare beneficiaries," an HHS spokesman told The Wall Street Journal. "This ruling allows that effort to move forward and advance President Trump's strong commitment to addressing the high cost of prescription drugs."

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