On December 11, 2020, five hospital groups, including the American Hospital Association (“AHA”), and an organization of hospital pharmacists representing participants in the 340B drug pricing program (“340B Program”), filed a federal lawsuit (the “340B Program Litigation”) against the U.S. Department of Health and Human Services (“HHS”) over HHS’ alleged failure to enforce 340B Program requirements that obligate pharmaceutical manufacturers to provide 340B Program prescription drug discounts to pharmacies contracted by 340B Program-participating hospitals to dispense 340B Program drugs.[1]
Continue Reading Contract Pharmacies and the 340B Drug Discount Program: New Litigation and an Advisory Opinion Point to Ongoing Skirmishes on the 340B Battlefield

In a December 12, 2017 Advisory Board article, “The 340B drug pricing controversy, explained,” Scott Orwig wrote, “the 340B Drug Pricing Program is one of the most contentious issues in health care: Its critics say it ‘hurts patients’ and is being ‘abused’ by hospitals. Its defenders say it’s ‘vital’ to the health of low-income patients and essential to helping safety net hospitals care for their communities.”
Continue Reading Maneuvers on the 340B Drug Pricing Program Battlefield: Duplicate Discounts and Contract Pharmacies

On November 15, 2019, CMS issued a final rule that requires hospitals to disclose to patients the hospital’s “standard charges,” which include the reimbursement rates the hospitals negotiate privately with insurers.  This rule is in line with President Trump’s Executive Order, dated June 24, 2019, which focused on increasing price and quality transparency for American healthcare consumers.  The Final Rule goes into effect as of January 1, 2021, at which time hospitals will have to post their standard charges online.  Any hospital that refuses to do so will be subject to a fine of up to $300 per day.  While CMS believes that the Final Rule will lower healthcare costs by allowing customers to compare prices and proactively shop for care, the Final Rule has been met with strong resistance from hospitals that claim that it is beyond the scope of CMS’ power to promulgate.
Continue Reading Balancing Provider Pricing Transparency and Anti-Competitive Behavior

On Friday, April 10, 2020, the Department of Health and Human Services (“HHS”) began distributing $30B of the $100B appropriated in the Coronavirus Aid, Relief, and Economic Security (“CARES”) Act to the Public Health and Social Services Emergency Fund (“PHSSEF”), also called the “CARES Act Provider Relief Fund”.  HHS distributed the funds to providers based on their 2019 Medicare fee-for-service (“FFS”) reimbursement.  We understand that $26B of this $30B have already been directly deposited into providers’ accounts. Many providers have questions about what happens next.  We address the top ten questions here.
Continue Reading HHS Distributes First $30B of CARES Act Provider Relief Fund – What Providers Need to Know and Do Next

Information Collection Request. On November 27, 2019, 340B Health, a nonprofit membership organization comprised of hospitals and health systems that participate in the federal 340B drug pricing program (“340B Program”), submitted comments (“340B Comments”) to Seema Verma, the Administrator of the Centers for Medicare & Medicaid Services (“CMS”), objecting to an announcement by CMS on September 30, 2019, which proposed an information collection request (“ICR”) to survey the drug acquisition cost data for hospitals participating in the 340B Program.
Continue Reading 340B Program-Participating Hospitals Object to CMS’s Proposed Cuts to 340B Program Reimbursement: CMS’s Recent Information Collection Request

On July 31, 2019, the U.S. Court of Appeals for the Eleventh Circuit affirmed a lower court’s decision to grant summary judgment to hospital operator HCA and dismiss relator Thomas Bingham’s allegations. Bingham v. HCA (S.D. Fla. July 31, 2019) (“Op.”). In a well-reasoned opinion, the Court affirmed several key holdings:

  • There is no “remuneration”, for Federal health care program anti-kickback statute (“AKS”) purposes, unless a benefit is conferred for less than fair market value. In other words, as long as compensation to or from a referral source is consistent with fair market value, the AKS is not implicated.
  • With respect to the Stark Law, showing that a space lease arrangement effectuates an “indirect compensation arrangement” between a hospital and a referring physician requires a showing that the space, rental rates, or benefits under the lease correlate with the volume of the physician’s referrals to the hospital.
  • It may be appropriate for a court to strike allegations from an amended False Claims Act complaint if they are based on information uncovered by a relator during discovery.

These holdings should be welcomed by defendants of alleged AKS, Stark Law, and False Claims Act violations.
Continue Reading Eleventh Circuit Affirms Key Kickback Statute, Stark Law, and False Claims Act Principles in Dismissing Allegations Against HCA

Earlier this week, the Supreme Court upheld a D.C. Circuit Court decision vacating a policy of the Centers for Medicare and Medicaid Services (“CMS”) that would have “dramatically – and retroactively – reduced payments to hospitals serving low-income patients.” Azar v. Allina Health Services, 587 U.S. __ at 1 (2019). The Supreme Court’s Allina opinion (“Op.” or the “Decision”) is critically important for hospitals that rely on Medicare disproportionate share (“DSH”) payments and has broader implications for the way that CMS issues the voluminous guidance that the agency applies to Medicare-participating providers and suppliers and other CMS-contracted entities.
Continue Reading SCOTUS Rejects CMS DSH Policy, Calls CMS Guidance Practices Into Question

On January 9, 2019, California Attorney General Xavier Becerra filed a motion with the U.S. Bankruptcy Court for the Central District of California – Los Angeles Division (the “Court”), requesting that the court stay its December 27th Sale Order, which approved Santa Clara County’s $235 million bid to purchase two hospitals from Verity Health System of California (“Verity”).[1] The Sale Order authorized Santa Clara County’s (the “County”) acquisition of O’Connor Hospital in San Jose and St. Louise Regional Hospital in Gilroy (including the DePaul Health Center in Morgan Hill) as part of Verity’s ongoing Chapter 11 Bankruptcy reorganization.[2]
Continue Reading California AG Aims to Block County’s Purchase of Two San Jose-Area Hospitals

On December 27, 2018, the U.S. District Court for the District of Columbia issued an opinion that ruled against the Trump Administration in its plan to cut funding from the 340B Drug Pricing Program (“340B Program”).[1]

Background

As discussed in a November 17, 2018 posting on this blog, the reimbursement rates for the 340B Program were significantly reduced when the Centers for Medicare & Medicaid Services (“CMS”) promulgated the “Medicare Program: Hospital Outpatient Prospective Payment and Ambulatory Surgical Center Payment Systems and Quality Reporting Programs” (the “Final Rule”). The Final Rule decreased the reimbursement rates for participating hospitals purchasing medicine through the 340B Program from 6% above the average sales price to 22.5% below the average sales price.[2]

After the Final Rule was published on November 13, 2017, the American Hospital Association, America’s Essential Hospitals and the Association of American Medical Colleges (the “Plaintiffs”) sued the Department of Health and Human Services (“HHS”) and sought a preliminary injunction to stop the enforcement of the Final Rule.[3] The motion for the preliminary injunction was denied, so the Final Rule’s reimbursement cuts went into effect on January 1, 2018.
Continue Reading 340B Drug Pricing Program Litigation Update: Court Rejects CMS Drug Pricing Cuts