Hospital groups to appeal lawsuit dismissal that permits $1.6B in Medicare payment cuts

The American Hospital Association, Association of American Medical Colleges and America's Essential Hospitals formally notified the court Tuesday of their intent to appeal a federal judge's dismissal of the groups' lawsuit that sought to halt a $1.6 billion reduction to Medicare payments made under 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 three associations 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. (These health system plaintiffs joined the associations in the declaration of intent to appeal filed Jan. 9.)

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.

"Making cuts to the program, like those CMS has put forward, will dramatically threaten access to healthcare for many communities with vulnerable patients," Rick Pollack, president and CEO of the AHA, said in a statement upon news of the judge's Dec. 29 decision to dismiss the lawsuit. "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."

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