American Hospital Association v. Becerra
Issues
Is the Department of Health and Human Services entitled to deference in its interpretation of a statute that enabled it to reduce drug reimbursement rates for hospitals; alternatively, is the Department of Health and Human Services’ action unreviewable because of 42 U.S.C. § 1395l(t)(12)?
This case asks the Supreme Court to determine the scope of authority granted to the Department of Health and Human Services (“HHS”) in setting hospital Medicare reimbursement rates for outpatient drugs. The Medicare Modernization Act (“MMA”) prescribes two alternative reimbursement rate methodologies for outpatient drugs—hospital acquisition cost or average drug price—and conditions HHS’s choice on whether HHS collects hospital drug cost-acquisition data. American Hospital Association et al. argue that MMA prevents HHS from tailoring rates to hospital acquisition costs and varying rates by group unless HHS has the requisite data. Xavier Becerra responds that MMA gives HHS the authority to “adjust” reimbursement rates as necessary, and therefore deference under Chevron permits HHS discretion to set reasonable rates. The outcome of this case has significant implications for the financial health of 340B hospitals, and the Medicare system more broadly, as well as the scope of the administrative state and judicial deference under Chevron.
Questions as Framed for the Court by the Parties
(1) Whether deference under Chevron U.S.A. v. Natural Resources Defense Council permits the Department of Health and Human Services to set reimbursement rates based on acquisition cost and very such rates by hospital group if it has not collected adequate hospital acquisition cost survey data; and (2) whether petitioners’ suit challenging HHS’s adjustments is precluded by 42 U.S.C. § 1395l(t)(12).
The Medicare program consists of Part A and Part B. Am. Hosp. Ass’n v. Azar at 820. Under Medicare Part B, which provides coverage for certain hospital-administered drugs, the Department of Health and Human Services (“HHS”) sets hospital reimbursement rates. Id. The “Outpatient Prospective Payment System” (“OPPS”) regulates the establishment of these rates.
Additional Resources
- Robert King, Supreme Court Agrees to Hear Hospital Lawsuit Challenging HHS’ 340B Cuts, FierceHealthcare (July 2, 2021).
- Andrew D. Ruskin et al., 340B Update: Supreme Court Accepts Certiorari in 340B Payment Reduction Case, The National Law Review (July 8, 2021).
- Lydia Wheeler, Chevron Deference Scope Tested in Supreme Court Medicare Case, Bloomberg Law (May 21, 2021).
- Supreme Court to Review Application of Hospital Medicare Drug Reimbursement Statute, The Council of State Governments (July 7, 2021).