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AHA v. Becerra

AHA v. Becerra

Supreme Court of the United States

November 30, 2021, Argued; June 15, 2022, Decided

No. 20-1114.

Opinion

 [*1899]  Justice Kavanaugh delivered the opinion of the Court.

] Under the Medicare statute, the Department of Health and Human Services must reimburse hospitals for certain outpatient prescription drugs that the hospitals provide to Medicare patients. HHS’s total reimbursements to hospitals for prescription drugs add up to tens of billions of dollars every year.

To set the reimbursement rates for the prescription drugs, HHS has two options under the statute. First, if HHS has conducted a survey of hospitals’ acquisition costs for the drugs, HHS may set the reimbursement rates based on the hospitals’ average acquisition costs—that is, the amount that hospitals pay to acquire the prescription drugs—and may vary the reimbursement rates for different groups of hospitals. Second and alternatively, if HHS has not conducted such a survey, HHS must instead set  [**257]  the reimbursement rates based on the average sales price charged by manufacturers [***6]  for the drugs (with certain adjustments), and HHS may not vary the reimbursement rates for different groups of hospitals.

For 2018 and 2019, HHS did not conduct a survey of hospitals’ acquisition costs for outpatient prescription drugs. But HHS nonetheless substantially reduced the reimbursement rates for one group of hospitals—Section 340B hospitals, which generally serve low-income or rural communities. For those 340B hospitals, this case has immense economic consequences, about $1.6 billion annually.

The question is whether the statute affords HHS discretion to vary the reimbursement rates for that one group of hospitals when, as here, HHS has not conducted the required survey of hospitals’ acquisition costs. The answer is no. We therefore reverse the judgment of the U. S. Court of Appeals for the D. C. Circuit.

In 2003, Congress passed and President George W. Bush signed landmark legislation expanding Medicare to cover prescription drugs. See Medicare Prescription Drug, Improvement, and Modernization Act of 2003, 117 Stat. 2066, 42 U. S. C. §1395. ] Under that 2003 law, HHS must annually set reimbursement rates for certain outpatient prescription drugs provided by hospitals. §1395l(t)(14).

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142 S. Ct. 1896 *; 213 L. Ed. 2d 251 **; 2022 U.S. LEXIS 2943 ***; 29 Fla. L. Weekly Fed. S 355; 2022 WL 2135490

AMERICAN HOSPITAL ASSOCIATION, ET AL., PETITIONERS v. XAVIER BECERRA, SECRETARY OF HEALTH AND HUMAN SERVICES, ET AL.

Notice: The pagination of this document is subject to change pending release of the final published version.

Prior History:  [***1] ON WRIT OF CERTIORARI TO THE UNITED STATES COURT OF APPEALS FOR THE DISTRICT OF COLUMBIA CIRCUIT

AHA v. Azar, 967 F.3d 818, 448 U.S. App. D.C. 425, 2020 U.S. App. LEXIS 24220, 2020 WL 4378021 (July 31, 2020)

Disposition: 967 F. 3d 818, 448 U.S. App. D.C. 425, reversed and remanded.

CORE TERMS

reimbursement rate, acquisition costs, prescription drug, judicial review, average price, adjust, outpatient, reimbursement, rates, manufacturers, varying, sale price, authorize, purposes, statutory provisions, slip opinion, low-income, percent, surveys, rural

Public Health & Welfare Law, Healthcare, Services for Disabled & Elderly Persons, Costs, Providers, Reimbursement, Reasonable Cost Standard, Types of Providers, Hospitals, Social Security, Medicare, Medicare Act Interpretation, Administrative Law, Judicial Review, Reviewability, Preclusion, Reviewable Agency Action, Judicial Review, Payments & Reimbursements