Judge Rules 340B Cuts Unlawful, Decision Applauded by Industry Stakeholders

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A federal judge reaffirmed his view that the cuts by HHS to the discount drug program are unlawful.

KEY TAKEAWAYS

In a joint statement, three hospital plaintiffs urged HHS to follow the judge’s directive.

340B Health added their approval in a statement, asking the agency to “act quickly.”

A status report regarding HHS’ progress remedying the situation must be submitted to U.S. District Court Judge Rudolph Contreras by August 5.

U.S. District Court Judge Rudolph Contreras again ruled Monday evening that the 340B drug reimbursement rate that Health and Human Services set in the 2019 Outpatient Prospective Payment System (OPPS) rule is unlawful, a decision that earned praise from various industry stakeholders. 

Five months after first vacating the 22% cut in 340B payments that HHS Secretary Alex Azar proposed late last year, Contreras reiterated that the cuts were implemented “in contravention of the Medicare Act’s plain text.”

Medicare Part B will sell prescription drugs to hospitals participating in the program at the average selling price plus 6%, well above the average selling price minus 22.5% as HHS had proposed.

“The Court also concludes that, despite the fatal flaw in the agency’s rate adjustments, vacating HHS’ 2018 and 2019 rules is not the best course of action, given the havoc vacatur may wreck on Medicare’s administration,” Contreras wrote in the 22-page ruling.

HHS will have “first crack” at crafting appropriate remedies for the two rules, according to the ruling.

Tuesday, three hospital plaintiffs applauded the ruling as a positive development for the embattled federal program, which has been deemed wasteful and rife with abuse by critics who demand additional oversight and accountability.

“America’s 340B hospitals are pleased with the District Court’s decision and urge HHS to follow the judge’s directive to promptly resolve the harm caused by its unlawful cuts to Medicare reimbursement for certain 340B hospitals,” the American Hospital Association, Association of American Medical Colleges, and America’s Essential Hospitals said in a joint statement. “The ruling reaffirmed that the 2018 cuts were unlawful and extended that ruling to the 2019 cuts. Owing to the complexity of the Medicare program, the judge gave HHS first crack at fashioning a remedy for its unlawful actions. He also asked for a report from HHS on its progress on or before August 5, 2019. We urge HHS to promptly comply with the judge’s ruling and restore to 340B hospitals all funds that have been unlawfully withheld.”

HHS has not issued a statement regarding Monday’s ruling and did not respond to a request for comment by time of publication. 

The December ruling by Contreras did have a material impact on nonprofit hospitals, according to Moody’s Investor Service, which determined in early January that the reversion of the cuts would lead to improved operating performance.

340B Health, an advocacy group for the federal program, also issued a statement Tuesday afternoon applauding Contreras’ ruling.

“On behalf of the nearly 1,400 hospitals we represent that participate in 340B, we are pleased that the court has, once again, found that HHS exceeded its statutory authority by cutting what Medicare pays for outpatient drugs delivered to their patients,” Maureen Testoni, CEO of 340B Health, said in a statement. “The cuts made in 2018 and again in 2019 have reduced hospitals’ ability to care for those in need. The sooner this policy is reversed, the better hospitals will be able to serve the needs of patients with low incomes and those in rural communities. HHS must act quickly, as any further delay will only harm patients and the hospitals they rely on for care.”

Nearly 2,500 hospitals currently participate in the 340B Drug Pricing Program, which was created in 1992 to assist safety-net and low-income providers purchase prescription drugs.

A status report regarding HHS’ progress remedying the situation must be submitted to Judge Contreras by August 5. 

 

 

6 latest healthcare industry lawsuits

https://www.beckershospitalreview.com/legal-regulatory-issues/6-latest-healthcare-industry-lawsuits-091018.html

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From national healthcare organizations refiling a lawsuit over 340B drug pricing program cuts to a Georgia physician accused of submitting thousands of false claims to Medicare, here are the latest healthcare industry lawsuits making headlines.  

1. CHS, Quorum say investors weren’t duped into buying stock at inflated prices
Franklin, Tenn.-based Community Health Systems and Brentwood, Tenn.-based Quorum Health urged a federal judge not to grant class certification in a shareholder lawsuit alleging Quorum’s stock was trading at an inflated price after its spinoff from CHS.

2. Georgia physician allegedly submitted 4,500 false claims for unnecessary lead poisoning treatments
Federal investigators allege Charles Adams, MD, a physician in Fort Oglethorpe, Ga., injected thousands of patients with a lead poisoning treatment they didn’t need, and billed the government $1.5 million for medically unnecessary treatments.

3. Premera Blue Cross accused of destroying evidence in data breach case
The plaintiffs in a class-action lawsuit against Premera Blue Cross, which involves a 2014 data security incident, claim the payer “willfully” destroyed evidence that would have provided details of the breach.

4. Hospitals refile lawsuit against CMS over $1.6B in 340B cuts
The American Hospital Association, along with several other national healthcare organizations and hospitals, refiled their lawsuit against HHS to reverse Medicare payment cuts for drugs purchased through CMS’ 340B drug pricing program, the AHA announced Sept. 5.

5. Medical center owners allegedly double billed insurers, altered patient records as part of $80M scheme
Four people were charged in an $80 million Medicare fraud scheme that involved providing unnecessary medical treatment to patients.

6. Physician imposter allegedly diagnosed patient at California hospital
A 23-year-old man is accused of impersonating a physician at California hospitals.

 

 

A Little-Known Windfall for Some Hospitals, Now Facing Big Cuts

A Little-Known Windfall for Some Hospitals, Now Facing Big Cuts

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Most hospitals are nonprofit and justify their exemption from taxation with community service and charity care. But the Trump administration could require some of them to do more to help the poor, and the hospitals that are in the cross-hairs are those benefiting from an obscure drug discount program known as 340B.

The 340B program requires pharmaceutical manufactures to sell drugs at steep discounts to certain hospitals serving larger proportions of low-income and vulnerable people, such as children or cancer patients. The participating hospitals may charge insurers and public programs like Medicare and Medicaid more for those drugs than they paid for them and keep the difference.

By one estimate, the program saved hospitals $6 billion in 2015 alone. The original intent of the program, enacted in 1992, was for hospitals to use the revenue to provide more low-income patients a broader range of services.

Many institutions that serve mostly low-income and uninsured populations say they need the program. “Most nonprofit hospitals have very slim profit margins, and they’ve come to rely on this revenue,” said Melinda Buntin, chairwoman of the Department of Health Policy at Vanderbilt School of Medicine. A hospital lobbying group said that for some rural hospitals, the funding cut “could actually be the difference between staying open and closing.”

But there is concern that 340B has come to include hospitals that don’t need the extra help and are not using its windfall as originally intended.

The program has grown considerably, most recently as a result of an expansion included in the Affordable Care Act. As of 2004, about 200 hospitals benefited from the 340B program; by 2015, over 1,000 were participating. The program now encompasses 40 percent of all hospitals and an even larger number of hospital-affiliated clinics and pharmacies.

It might seem odd to give discounts on drugs to help hospitals offer care to low-income patients. How can we be sure they’ll use the money for that?

An increasing number of hospitals are not.

A study published in JAMA Internal Medicine found that the early participating hospitals were more likely to be located in poor communities with higher levels of uninsured people, to spend more of their budget on uncompensated care, and to offer more low-profit services than hospitals that started participating later.

“The 340B program may produce the results intended at some hospitals,” said Sayeh Nikpay, an assistant professor at Vanderbilt University and a co-author on the study. “But as the program grew, it benefited many hospitals with less need for assistance in serving low-income populations.”

Other research corroborates that hospitals aren’t using the 340B program as intendedA study in The New England Journal of Medicine was unable to find any evidence that profits from 340B have led to more access to care for low-income patients, or reductions in mortality rates among them. Another study in Health Affairs found that 340B hospitals have increasingly expanded into more affluent communities with higher rates of insurance.

The 340B program may have also inadvertently raised costs — for example, by encouraging care in 340B-eligible hospitals that could have been provided less expensively elsewhere. A study in Health Services Research found that hospital participation in 340B is associated with a shift of cancer care from lower-cost physician offices to higher-cost hospital settings.

The program may also encourage providers to use more expensive drugs. The more hospitals can charge insurers and public programs for a drug — relative to how much they have to pay for it under the program — the greater the revenue they receive. They also receive more revenue when the drugs are prescribed more often.

In January, Medicare lowered the prices it pays for 340B drugs by 27 percent. Although this move chips away at how much hospitals can benefit financially, it does little to address how much insurers and individuals pay for prescription drugs or the value they obtain from them. In addition, the move does nothing to increase hospital spending that could help the poor.

It may even harm some health care organizations, leading to lower-quality care at those institutions that are helping the poor. Studies have shown that, by and large, when hospitals lose financial resources, they make cuts that could harm some patients.

This can happen if cuts lead to reductions in workers who perform important clinical functions. A study in Health Services Research found that hospitals cut nursing staff in response to Medicare payment cuts in the late 1990s. Heart attack mortality rates improved less at hospitals that had larger cuts.

Another response to reduced revenue is cuts to specific services, which would harm patients who rely on them. A study by economists from Northwestern’s Kellogg School of Management found that some hospitals that endured financial setbacks during the Great Recession cut less profitable services like trauma centers and alcohol- and drug-treatment facilities.

Another study looked at a 1998 California law that required hospitals to comply with seismic safety standards — imposing a large cost on those institutions, without providing additional funding. Hospitals that were hit harder financially by this law were more likely to close; government hospitals responded by reducing charity care.

Hospitals could absorb cuts without harming care if they could become more productive — by doing more with less. Historically, there is very little evidence they have been able to do that.

Two powerful lobbies are now battling each other, with the pharmaceutical industry arguing that 340B has grown well beyond its original intent. Hospital lobbying groups are fighting back and also squaring off against the government, suing over the planned federal cuts.

Those are big clashes over a program that began modestly a quarter of a century ago to help the poor, albeit in a most convoluted way.