Understanding the Supreme Court Ruling on 340B

The Supreme Court ruling strikes down Medicare payment cuts.

On June 15, the U.S. Supreme Court sided with hospital groups in a case challenging the 340B payment cuts by the U.S. Department of Health and Human Services (HHS) over the past several years. 

The American Hospital Association (AHA) and other interested parties challenged the 2018 and 2019 reimbursement rates in federal court in the case of AHA v. Becerra.

The case centered around whether the Centers for Medicare & Medicaid Services (CMS) has the authority to make cuts to the program under its Medicare Outpatient Prospective Payment System (OPPS). Under the payment rule, HHS cut the reimbursement rate for covered drugs by 28.5 percent in 2018, but it later lowered the reimbursement rate cut to 22.5 percent, which was essentially $1.6 billion annually.  

Associate Justice Brett Kavanaugh, writing the opinion for the Court’s unanimous decision, said that absent a survey of hospitals’ acquisition costs, HHS may not vary the reimbursement rate for 340B hospitals. “HHS’s 2018 and 2019 reimbursement rates for 340B hospitals were therefore contrary to the statute and unlawful,” he wrote. He also stated that “340B hospitals perform valuable services for low-income and rural communities, but have to rely on limited federal funding for support.”

Maureen Testoni, head of 340B Health, a group representing 1,400 hospitals across the country, applauded the Supreme Court for making the correct decision in striking down these Medicare cuts. Some safety-net hospitals have reported being forced to eliminate or scale back services to patients in need because of the reductions, she said in a statement.

“As Justice Kavanaugh wrote for the court, we look forward to the next stage of the process involving remedies for hospitals that have been affected by these unlawful cuts,” the statement read. “We also renew our call for the Centers for Medicare & Medicaid Services (CMS) to abandon its policy of targeting 340B drugs for lower payment rates as it works to propose Medicare rates for 2023.”

Here is some background for those of you who may not be aware of what the 340B program is. Congress created it in 1992 to protect safety-net hospitals from escalating drug prices by allowing them to purchase outpatient drugs at a discount from manufacturers. In 2019, more than 2,500 hospitals participated in the program. The 340B program enables covered entities to stretch scarce federal resources as far as possible, reaching more eligible patients and providing more comprehensive services. A hospital typically pays 20 to 50 percent below the average sales price for the drugs, through the program. 

In summary, here are some quick facts:

  1. This does not affect critical access hospitals (CAHs);
  2. This does affect OPPS facilities;
  3. This reverses a decision by CMS to cut reimbursement to OPPS facilities for medications that were purchased under the 340b program and administered/billed;
  4. The original action cut margins on those medications, and this will restore those margins moving forward; and
  5. Testoni’s statement says they will look at how OPPS facilities can be reimbursed for historical transactions that were deemed a part of this unlawful act by CMS. 

Going forward, the American Hospital Association, Association of American Medical Colleges, and America’s Essential Hospitals say they look forward to working with HHS and the courts to develop a plan to reimburse 340B hospitals affected by the cuts while ensuring other hospitals are not disadvantaged as they also continue to serve their communities.

Programming Note: Listen to Dr. John Zelem and his segment, “Journaling John MD,” today on Talk Ten Tuesdays, 10 Eastern.

Facebook
Twitter
LinkedIn

John Zelem, MD, FACS

John Zelem, MD, is principal owner and chief executive officer of Streamline Solutions Consulting, Inc. providing technology-enabled, expert physician advisor services. A board-certified general surgeon with more than 26 years of clinical experience, Dr. Zelem managed quality assessment and improvement as a former executive medical director in the past. He developed expertise in compliance, contracts and regulations, utilization review, case management, client relations, physician advisor programs, and physician education. Dr. Zelem is a member of the RACmonitor editorial board.

Related Stories

You Down with CfC?

You Down with CfC?

Anyone who has worked within the scope of hospital case/utilization management for any period of time has heard of the Centers for Medicare & Medicaid

Read More

Leave a Reply

Please log in to your account to comment on this article.

Featured Webcasts

Inpatient Ulcers and Gangrene: Avoid FY 2027 ICD-10-CM Coding, Sequencing, and Documentation Errors

Avoid costly inpatient coding errors involving ulcers and gangrene. This practical FY 2027 ICD-10-CM webcast clarifies pressure injury staging, non-pressure ulcer severity, diagnosis sequencing, documentation requirements, and POA reporting. Through real-world cases, gain the confidence to make defensible coding decisions, reduce denials, strengthen compliance, and support accurate reimbursement.

November 4, 2026

One Chart, Five Truths: How CDI Prevents the Same Diagnosis from Becoming Five Different Outcomes

What happens when everyone reviews the same chart, but reaches a different conclusion? In this case-based clinical documentation integrity (CDI) webcast, Penny Jefferson examines how documentation involving clinical support, timing, causation, linkage, and terminology can produce very different outcomes for ICD-10 coding, reimbursement, quality, risk adjustment, medical necessity, denials, and compliance. Using cases involving postoperative respiratory failure, severe malnutrition, and encephalopathy, you’ll learn the practical CLEAR framework to help attendees learn to evaluate whether a diagnosis is codeable, consistent, specific, reportable, and ultimately defensible across the different teams and systems that rely on the medical record.

September 30, 2026

Mastering Spinal Fusion Coding for Inpatient Facilities: ICD-10-PCS Precision, Documentation, and MS-DRG Impact

Spinal fusion cases are among the most complex inpatient procedures to code, where even minor ICD-10-PCS errors can affect MS-DRG assignment, reimbursement, compliance, and audit outcomes. This practical webcast provides a step-by-step framework for interpreting operative reports, assigning accurate ICD-10-PCS codes, recognizing documentation gaps, and confidently coding complex fusion procedures. You’ll leave with practical tools that improve coding accuracy, reduce denials and audit risk, and strengthen documentation-driven reimbursement decisions.

July 29, 2026

AI, Audits, and the Future of the Revenue Cycle

Artificial intelligence is rapidly transforming healthcare revenue cycle operations, from coding and auditing to compliance and denials. Join industry leaders Pam Warren (MaineHealth) and Raemarie Jimenez (AAPC) for a live fireside chat exploring how AI is changing workflows, workforce roles, payer-provider dynamics, and compliance risk—and what organizations should be doing now to prepare.

Webcast Only Available On ICD10monitor Subscription – Subscribe Below

June 17, 2026

Trending News

Featured Webcasts

Radiation Oncology Fundamentals: Coding, Billing & Compliance for Hospital Outpatient & Professional Services

Join Michael Calahan, PA, MBA for this radiation oncology coding and compliance webcast as he explains the fundamentals of coding, billing, reporting, and documentation for hospital outpatient and professional services. Learn how the 2026 radiation therapy coding changes affect current practices, how to distinguish technical and professional services, and how to address bundling, units, frequency, modifiers, and documentation requirements. Michael will also help you identify radiation oncology coding and billing vulnerabilities that could lead to denials, overpayments, repayment demands, or federal audit exposure.

October 20, 2026

Preparing for 2027: Inpatient & Outpatient Policy Changes for Case Management and Utilization Review

The 2027 CMS policy changes will impact case management, utilization review, reimbursement, and patient status decision-making long before they officially take effect. Join nationally recognized physician advisor Dr. Ronald Hirsch as he explains the finalized and proposed inpatient and outpatient rule changes, expanding bundled payment initiatives, payment updates, and evolving payer expectations. Gain practical guidance to help your organization prepare early, strengthen compliance, reduce reimbursement risk, and confidently navigate the transition to 2027.

September 17, 2026

The Two-Midnight Rule: Strengthening Compliance Through the Fundamentals, 2026 Updates, & 2027 Proposed Changes.

The Two-Midnight Rule continues to be one of Medicare’s most closely monitored compliance areas and now the rules are changing again. Join compliance expert Michael Calahan for a practical review of the latest 2026 policy updates, the proposed 2027 OPPS changes affecting inpatient-only procedures, and the best practices hospitals need to reduce audit risk, strengthen admission decisions, and protect reimbursement. Leave with actionable strategies you can immediately apply to improve compliance and confidently prepare for increased federal and Medicare Advantage scrutiny.

August 11, 2026

Trending News

Prepare for the 2025 CMS IPPS Final Rule with ICD10monitor’s IPPSPalooza! Click HERE to learn more

Get 15% OFF on all educational webcasts at ICD10monitor with code JULYFOURTH24 until July 4, 2024—start learning today!

This Memorial Day, we honor those who gave all for our freedom. Take 20% off sitewide through May 29 with code MEMORIAL26 at checkout

CYBER WEEK IS HERE! Don’t miss your chance to get 20% off now until Dec. 1 with code CYBER25

CYBER WEEK IS HERE! Don’t miss your chance to get 20% off now until Dec. 2 with code CYBER24