Ruling on 340B drug price cuts a credit positive for nonprofit hospitals, says Moody's

A federal judge's ruling that blocked a Trump administration reduction in payments to hospitals under the 340B drug discount program is a credit positive for nonprofit hospitals, according to Moody's Investors Service.

In December, Judge Rudolph Contreras, a district  judge in Washington, D.C, blocked cutting the drug payments, ruling that the federal government overstepped its authority to address high prescription medication costs.

Moody's said the ruling is a credit positive for nonprofit hospitals participating in the program "because reimbursements will immediately revert to levels before the cuts, improving operating performance."

In November 2017, CMS finalized a proposal to pay hospitals 22.5 percent less than the average sales price for drugs purchased through 340B. The change, representing roughly $1.6 billion in 340B cuts to participating hospitals, took effect last year.

The December ruling by Judge Contreras requires hospitals and the Trump administration to determine together if covered entities can recoup some or all of the money lost due to the cuts, according to Moody's.

 

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