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October 4, 2022

Health Headlines– October 4, 2022


Court Rules HHS Must Pay 340B Hospitals the Correct Outpatient Drug Reimbursement Rate for the Remainder of the Year – The United States District Court for the District of Columbia granted plaintiffs’ motion to vacate the 2022 OPPS Rule’s 340B rates on a prospective basis, meaning that HHS will pay 340B hospitals the drug’s average sales price (ASP) plus six percent for the remainder of the year. Previously, the Supreme Court decided that HHS had unlawfully changed 340B hospitals’ reimbursement for outpatient drugs by varying the methodology between different groups of hospitals without conducting a statutorily mandated survey.

To determine whether or not to vacate the OPPS Rule’s reimbursement rate, the Court considered two factors: (1) “the seriousness of the [action’s] deficiencies,” and (2) the likelihood that the decision will cause disruption. In this action, HHS admitted that the 340B reimbursement rate cut was unlawful. The Court found that HHS’s implementation of an unlawful reimbursement methodology was serious enough to satisfy the first factor.

Under the second factor, the Court found that vacating the rule on a prospective basis would not cause substantial disruption because, in part, vacatur would not force HHS to retrospectively unravel past payments under the defective reimbursement methodology. The ruling would only be applied on a prospective basis. The Court did not find HHS’s argument that vacatur would disrupt budget neutrality persuasive stating that HHS cannot “use budget neutrality now as a shield to justify ongoing and continuing application of an unlawful reimbursement rate that no amount of reasoning can rehabilitate on remand.” HHS’s promise to fix the problem later if it was permitted to continue using its unlawful reimbursement methodology for the remainder of the years was similarly rejected by the Court. The Court also noted that paying 340B hospitals the proper reimbursement amount for the remainder of the year would only represent a small portion of the time period that was being challenged by the action and underscored that HHS had agreed to go back to its previous reimbursement methodology in 2023. The Court also held that injunctive relief was unnecessary because the reimbursement rate would automatically default to the ASP plus six percent rate as mandated by the statute.

The Supreme Court’s decision of American Hospital Association v. Becerra held that HHS could not vary rates of reimbursement for 340B drugs between different groups of hospitals using its most recent methodology without conducting a survey of hospitals’ acquisition costs. Previously, Medicare reimbursed outpatient drugs provided by 340B hospitals at the drug’s ASP plus six percent as mandated by statute. In the 2018 OPPS rule, CMS reduced the reimbursement rate for drugs to the ASP minus 22.5 percent. The Supreme Court remanded the case to the D.C. Circuit Court “to address potential remedies,” who remanded it to the D.C. District Court..

Plaintiffs’ second motion to retrospectively remedy the 340B underpayments to hospitals under the defective OPPS rules will be addressed at a later date by the D.C. District Court.

The D.C. District Court’s decision is available here.

Reporter, Taylor Whitten, Sacramento, +1 916 321 4815, twhitten@kslaw.com

Federal Judge Reinstates Georgia Section 1115 Waiver – On August 19, 2022, the United States District Court for the Southern District of Georgia reinstated “Georgia Pathways,” a Section 1115 demonstration waiver which requires individuals, among other conditions, to complete 80 hours per month of qualifying activities like work or education in order to be eligible for Medicaid. CMS has sixty days to file an appeal, with a deadline of October 18, 2022. Should CMS choose not to go forward with an appeal, Georgia will then have a new Medicaid expansion population created by the work requirements in Georgia Pathways.

CMS initially approved Georgia Pathways in October 2020 under the Trump Administration. CMS’s position at that time was that the demonstration would increase Medicaid coverage, that the conditions of coverage were attainable, and that the resulting expansion in healthcare coverage would be beneficial during the pandemic. Specifically, the demonstration requires that applicants earn less than a hundred percent of the federal poverty line, complete and report a minimum of eighty hours of “qualifying activities” – meaning employment, job training, community service, or certain kinds of education – in the previous month, and then maintain that pace each month to maintain eligibility. Lastly, the demonstration requires that applicants earning above 50 percent of the federal poverty line must pay a small monthly premium. A few months later, CMS under the Biden Administration made a preliminary announcement that it was considering withdrawing its approval for Georgia Pathways. The Agency stated that it had determined that allowing the work and community engagement requirements to take effect in Georgia would not promote the objectives of the Medicaid program because of the ongoing COVID-19 pandemic. CMS then formally rescinded its approval of Georgia Pathways in December 2021.

The federal judge in the Southern District of Georgia found the Agency’s decision to rescind approval of Georgia Pathways to be arbitrary and capricious under the Administrative Procedure Act. The Court outlined six critical errors committed by the Agency which resulted in the arbitrary and capricious finding.  First, the Court notes that CMS failed to consider or weigh the likely possibility that rescinding would mean less Medicaid coverage in Georgia. Second, CMS measured Georgia Pathways against a baseline of full Medicaid expansion, rather than taking the demonstration on its own terms—as the statute and regulations require. Third, the Court stated that CMS doubled down on that error by judging Georgia Pathways according to fundamentally inapt comparisons.  For example, comparing Georgia Pathways to demonstrations which deployed work requirements that could only be coverage reducing. Fourth, CMS relied on “health equity,” which the Court emphasized as not being mentioned in the relevant statute as a factor for determining a demonstration’s approval. Fifth, the Court notes that CMS ignored its obligation to consider and weigh potential reliance interests when changing its mind. Finally, CMS ultimately failed to explain the Agency’s reasons for changing its mind about the key issues underlying the approval.

Thus, in finding that the Agency’s decision to rescind its approval of Georgia Pathways was arbitrary and capricious on numerous, independent grounds, the Court held the recission unlawful and set it aside. Whether CMS chooses to move forward with an appeal may provide insight into the Agency’s evolving position on Medicaid work requirements, and other states’ decisions to pursue similar demonstration projects.

The decision is available here.

Reporter, Sophie Munroe, Washington D.C., +1 202 626 5412, smunroe@kslaw.com

ALSO IN THE NEWS

Supreme Court Allows the Healthcare Vaccine Mandate to Continue – The Supreme Court rejected a challenge by 10 states to the Biden administration’s COVID-19 vaccine requirement for employees who work for employers who receive federal healthcare funds.  This supports the Court’s previous decision to authorize the mandate with the goal of making sure that healthcare providers take the steps necessary to avoid transmitting the virus.  We previously examined the mandate in the January 3, 2022 issue of Health Headlines available here.

HHS Approves New Medicaid Initiatives in Massachusetts and Oregon – On September 28, 2022, CMS approved Medicaid section 1115 demonstration initiatives in Massachusetts and Oregon.  These updates are aimed at improving enrollment and continuity of coverage. For additional information about the Massachusetts’ MassHealth Section 1115 Demonstration, see here. For additional information about the Oregon Health Plan Section 1115 Demonstration, see here

HHS Makes More Medicare Nursing Home Ownership Data Publicly Available – On September 26, 2022, HHS, through CMS, began making additional data publicly available that provides more information about the ownership of Medicare-certified nursing homes, including approximately 15,000 nursing homes certified as a Medicare Skilled Nursing Facility (SNF). This will give the public and state officials a greater ability to identify common owners of nursing homes and identify facility performance under common ownership. This release is part of HHS and CMS’s efforts to implement President Biden’s Executive Order on Promoting Competition, which can be found here, and comes after CMS, in April, released data publicly for the first time ever on Medicare-enrolled hospital and nursing home mergers, acquisitions, consolidations, and changes of ownership from 2016–2022. The data file on nursing home ownership is posted at data.cms.gov and is updated monthly. More information on this data release can be found here.

King & Spalding Webinar: The Updated OIG Model CIAs – What All Healthcare Organizations Need to Know – The webinar will cover the recent OIG revisions to its Integrity Agreement (IA) and Corporate Integrity Agreement (CIA) model language, which impact CIA-obligated providers and reflect the agency’s evolving expectations concerning compliance program design. The panel will explore OIG’s recent changes to its model language, including changes related to the Compliance Committee’s role, extrapolation in Independent Review Organization (IRO) reviews, exclusion screening obligations, and focus on Stark and Anti-Kickback Statute compliance controls. The panel will also cover practical strategies to manage risk and promote compliance with federal healthcare program requirements.

The webinar takes place on Tuesday, October 25, 2022, at 12:00 P.M. EST. Registration is free. Additional information can be found here.