North Carolina Hospitals Sue Medicare Advantage Plans for 340B Underpayments

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Earlier this month, several hospitals affiliated with the University of North Carolina health system against a group of Medicare Advantage (MA) plans regarding their reimbursement for claims associated with drugs purchased under the 340B drug discount program.   

At issue in these cases is a now invalidated CMS policy decision relating to Medicare reimbursement to hospitals for 340B drugs. In 2018, CMS issued a rule changing the Medicare payment rate for drugs purchased under the 340B program—decreasing the reimbursement rate from average sales price (ASP) plus 6 percent to ASP minus 22.5 percent.  

CMS’ 340B payment reduction directly impacted payment rates under the Medicare fee-for-service (FFS) program. Because agreements between MA plans and hospitals typically require MA plans to reimburse hospitals at a rate that is tied to the amount paid under the Medicare FFS program, MA plans used this updated payment formula as well.  

However, in 2022, the Supreme Court CMS’ 340B payment reduction, finding that the agency did not follow certain procedural requirements outlined in the underlying statute. Following that decision, CMS issued rulemaking to compensate affected hospitals for the difference between what they were paid for 340B drugs (ASP minus 22.5 percent) and what they should have been paid (ASP plus 6 percent) during 2018–2022, the years in which the invalidated policy was in place. However, this specific remedy only impacted claims paid under the FFS program, and CMS declined to address how MA plans should approach this issue. In a December 2022 to MA plans, CMS stated that the agency “cannot interfere in the payment rates that [MA plans] set in contracts with providers and facilities.” 

With these lawsuits, the plaintiff hospitals are asking the courts to require the MA plans to make them whole for the difference in 340B payment during 2018–2022.

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