Lawsuits from 151 Hospitals Claim HHS Illegally Reduced Medicare Reimbursements

151 hospitals filed lawsuits against Xavier Becerra, the Secretary of the Department of Health and Human Services, over perceived violations of the Social Security Act and the Administrative Procedure Act. 

The plaintiffs filed the claims over rules recently issued and implemented by the Centers for Medicare and Medicaid Services that revolve around the hospital outpatient prospective payment system, the ambulatory surgical center payments systems and the quality reporting programs for calendar years. The challenged rules have allegedly reduced, by 30%, “Medicare reimbursements to certain public and not-for-profit hospitals and clinics for prescription drugs purchased by those institutions on a discounted basis.”

In 1992, Congress started a program known as the 340B program which was intended to lower the cost of drugs purchased by designated hospitals that typically serve large numbers of low-income patients. This was reportedly designed to allow the hospitals to “stretch scarce Federal resources as far as possible, reaching more eligible patients and providing more comprehensive resources.”

Beginning in 2018, CMS began reimbursing the designated hospitals at a rate of 22.5% less than previous years. The new provisions have eliminated “nearly all of the differential between national Medicare reimbursement rates and discounted purchase costs mandated for 340B hospitals.” This has resulted in a reported damage of $3.2 billion, according to the lawsuits. Additionally, the plaintiffs asserted that the new provisions specifically target hospitals that serve low income populations. The affected hospitals and patients “have suffered, and will continue to suffer, harm from the negotiation of the cost-reimbursement differential,” the lawsuits said

The plaintiffs contended that the implementation of the new rates is an abuse of the Secretary’s authority. This alleged abuse under the Medicare Act supplements the perceived infringement on the Plaintiff’s effort to care for vulnerable patients by providing them discounted rates for drugs using the 340B program. The violations of the Social Security Act and the Public Health Service Act have prompted the plaintiffs to seek declaratory and injunctive relief. They are also seeking reimbursement and a declaration requiring the defendant to conform to the previous payment methodology.The plaintiffs are represented by Hall Render.