Health systems sue over 340B policy reversal

A group of health systems from across the country is seeking to block the Health Resources and Services Administration from reinstating a registration policy for offsite clinics of 340B-eligible hospitals they allege will cost billions if left unchecked. 

The HRSA notice filed in late October states that offsite, outpatient facilities must be listed as reimbursable on the hospital's Medicare cost report prior to participating in the 340B program. It also states that they must be registered and listed in the 340B Office of Pharmacy Affairs Information System prior to participation. The policy was waived during the COVID-19 public health emergency. 

"Pandemic conditions are no longer rapidly evolving in a manner that requires significant unplanned activities or changes by hospital covered entities to accommodate these exigencies," the HRSA said in the notice. "Additionally, HRSA program integrity efforts have demonstrated that the waiver has added risk and complexity to HRSA's ability to effectively oversee compliance in the 340B Program."

The health system argued in an Oct. 31 lawsuit filed in Washington, D.C., federal court that the policy change will substantially injure 340B covered-entity healthcare organizations by "causing them to wait roughly eight to 23 months before new, outpatient offsite facilities owned and operated by the entity are eligible for discounts as part of the federal 340B program."

"HRSA's new rule is costing covered entities hundreds of millions of dollars — and if left unchecked, the losses will quickly be measured by the billions," the systems argued in the lawsuit.

They argued the rule is an "abrupt about-face from former policy," fails to comply with the Administrative Procedure Act requirement of notice-and-comment ruling, exceeds HRSA's authority, conflicts with the statutory language and is "arbitrary and capricious several times over."   

The health systems that filed the suit include Los Angeles-based Keck Medicine of USC; Chesterfield, Mo.-based Mercy Health; Chicago-based Northwestern Medicine; Yale New Haven (Conn.) Health and Baltimore-based University of Maryland Medical System. 

"HRSA believes program integrity is critically important to the long-term viability of the 340B program for all participants," an agency spokesperson told Becker's in an emailed statement.  

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