Humana sued over alleged Medicare Advantage 340B underpayments
The hospital claims that reimbursements for the drugs were determined by a payment model that is no longer valid.
Photo: Blanchi Costela/Getty Images
Montgomery, Alabama-based Baptist Health is suing major insurer Humana over alleged Medicare Advantage underpayments for outpatient drugs purchased through the 340B program.
The hospital claims that reimbursements for the drugs were determined by a payment model that is no longer valid, and that the mounting underpayments amount to a "windfall" for the insurer.
In 2022, the Supreme Court ruled that it was illegal for the Centers for Medicare and Medicaid Services to cut reimbursement rates for outpatient drugs purchased by safety net hospitals. In response, CMS said it would pay out $9 million in a lump sum as recompense to the 340B hospitals.
Baptist Health said Humana owes it money that aligns with the rectified rates.
WHAT'S THE IMPACT?
CMS' $9 million lump sum payment drew both praise and criticism from hospital groups, sometimes from the same group. Last fall the American Hospital Association said it was pleased that 340B hospitals would finally be reimbursed in full, but AHA president and CEO Rick Pollack decried other aspects of the proposed rule.
"[The Department of Health and Human Services] made a grievous mistake in choosing to claw back billions of dollars from America's hospitals, especially those that serve rural, low-income and other vulnerable communities," he said. "HHS decided to ignore hundreds of comments from hospitals and other providers explaining why this Medicare cut is both illegal and unwise. The AHA will continue to review this rule and consider all available options going forward."
Premier echoed this sentiment, specifically singling out CMS for "giving with one hand and taking away with the other."
"Premier strongly supports CMS' decision to make a one-time lump sum payment to 340B hospitals for the amounts they are owed based on past shortfalls, and appreciates CMS committing to doing so swiftly," said Soumi Saha, senior vice president for government affairs at Premier. "However, Premier had hoped CMS would own up to the fact that clawing back these payments over 16 years is inconsistent with the law and CMS' long-standing past precedent regarding application of budget neutrality adjustments."
Baptist said in the lawsuit that it had repeatedly contacted Humana regarding retroactive adjustments and remedy payments, but the insurer denied an obligation to make those payments. Healthcare Finance News reached out to Humana for comment.
THE LARGER TREND
Section 340B of the Public Health Service Act allows participating hospitals and other providers to purchase certain covered outpatient drugs or biologicals from manufacturers at discounted prices.
Prior to 2018, the Medicare payment rate for Part B covered outpatient drugs provided in outpatient hospitals was generally the statutory default of average sales price, plus 6%.
In the payment rule finalized in 2017, CMS adjusted the payment rate for 340B drugs to the average sales price minus 22.5% to more accurately reflect the actual costs incurred by 340B hospitals when acquiring 340B drugs, CMS said. This rate applied from 2018 through approximately the third quarter of 2022.
To comply with statutory budget neutrality requirements, CMS made a corresponding increase to payments to all hospitals (340B hospitals and non-340B hospitals) for nondrug items and services, which was also in effect from 2018 through 2022.
On June 15, 2022, the U.S. Supreme Court unanimously ruled that the differential payment rates for 340B-acquired drugs were unlawful, because, prior to implementing the rates, HHS failed to conduct a survey of hospitals' acquisition costs under the relevant statute.
On September 28, 2022, the District Court for the District of Columbia vacated the differential payment rates for 340B-acquired drugs going forward. As a result, all CY 2022 claims for 340B-acquired drugs paid on or after September 28, 2022, were paid at the default rate of ASP plus 6%.
In the 2023 final rule, CMS finalized a general payment rate of ASP plus 6% for drugs acquired through the 340B Program, which is consistent with the agency's policy for drugs not acquired through the 340B program.
As required by statute, CMS implemented a 3.09% reduction to the payment rates for nondrug items and services to achieve budget neutrality for the 340B drug payment rate change for 2023. This budget neutrality change ensured the conversion factor was equivalent to the conversion factor that would have been in place had the 340B drug payment policy never been implemented.
Jeff Lagasse is editor of Healthcare Finance News.
Email: jlagasse@himss.org
Healthcare Finance News is a HIMSS Media publication.
