Michigan hospitals will recoup millions after Supreme Court decision

Undoing one of the Trump healthcare reforms.

Crains Business Grand Rapids breaks the story of SCOTUS decision on the tug-of-war between hospitals and 340Bs, a "back door" reimbursement program. 

Michigan hospitals will recoup millions after Supreme Court decision

September 20, 2023

 

The U.S. Supreme Court ruled in July that the Department of Health and Human Services illegally cut drug reimbursement under its 340B discount drug program.

University of Michigan Health is expecting a $73.7 million lump sum payment from the U.S. government related to a federal drug pricing program that has been reversed by the High Court.

The U.S. Supreme Court ruled in July that the Department of Health and Human Services illegally cut drug reimbursement under its 340B discount drug program. The agency slashed reimbursement for hospitals receiving 304B discounts by nearly 30% in 2018.

The feds are now going to be required to repay roughly $9 billion to hospitals that participate in the program. The Supreme Court ruled the agency didn’t have authority to make the cuts to those hospitals.

UM Health is expected to receive the largest repayment in the state, followed by $33 million to Ascension St. John in Detroit and $28.8 million to Henry Ford Hospital in Detroit, according to a list of the top 100 hospitals owed provided to Crain’s by Community Oncology Alliance.

The 340B Drug Pricing Program was created with the enactment of the updated Public Health Service Act of 1992, designed to require drug manufacturers to provide drugs to safety net hospitals and community care organizations that support the Medicaid population at a discounted price.

The U.S. Health Resources and Services Administration sets the ceiling pricing on the drugs. The feds made the cuts to hospitals in the 340B program because, under their view, if these hospitals were receiving cheaper drugs for Medicaid patients, they would have cheaper overhead and therefore could receive less overall reimbursement from the government.

The American Hospital Association sued the government and the case made it to the Supreme Court in July, leading to the ruling.

The U.S. Centers for Medicare and Medicaid Services estimated some 1,600 hospitals received $10.5 billion less due to the cuts between 2018 and 2022.

It’s unclear when the hospitals will receive the lump-sum payments from the government, but they would relieve financial pressures, Mary Masson, director of public relations for UM Health, told Crain’s in an emailed statement.

“Michigan Medicine still awaits final word from CMS on repayment of 340B payment cuts,” Masson wrote. “Once finalized, we anticipate a lump sum payment overdue to us from a five-year period in which we experienced unwarranted underpayments that placed financial pressure on our whole system. Should we receive these funds, we will use them to fund our overall mission, which includes ensuring patients have affordable and timely access to the medications they need; addressing social determinants of health and improving access to health care for our Ypsilanti community as we invest in a new facility; covering the cost of our M-Support program to offer patients discount cards to pay for their prescriptions with just a $4 copay; and investing in our tremendous caregiving teams that serve patients and communities across the state of Michigan and beyond.”

UM Health is constructing a $920 million new 12-story tower on its Ann Arbor campus, slated to open in the fall of 2025.

Financials for health systems have been precarious in recent years. The COVID-19 pandemic sank earnings, followed by refilled coffers thanks to government stimulus spending to mostly negative results over the last 12 months as federal spending subsided.

Michigan Medicine, which includes the UM Health system and, 125 clinics and its medical group, reported an operating income of $39.8 million on revenue of $5.9 billion for its fiscal 2023 that ended on June 30.

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