American Hospital Assn. v. Becerra

"[U]nless HHS conducts a survey of hospitals’ acquisition costs, HHS may not vary the reimbursement rates by hospital group."

Under the 2003 Medicare Prescription Drug, Improvement, and Modernization Act, the Department of Health and Human Services (HHS) must set reimbursement rates for certain prescription drugs that hospitals provide to Medicare patients, by either conducting a survey of hospitals’ acquisition costs and varying rates by hospital group accordingly or, when it does not conduct such surveys, HHS may set standard rates across groups. In 2018 and 2019, HHS set two reimbursement rates, 77.6% for 340B Hospitals, which provided services to certain impoverished and rural areas, and 106% for all others, without conducting any acquisition cost surveys. The American Hospital Association challenged the rate schedule in District Court, arguing the statute only allowed for different rates by group when a survey was conducted. The court sided with the hospitals. The Court of Appeals for the D.C. Circuit reversed. On appeal, the Supreme Court held that HHS is not empowered to vary reimbursement rates as provided by the statue, without first satisfying the “important procedural prerequisite.” Of the two reimbursement options afforded HHS by statute, if the department does not complete acquisition cost surveys, it may not vary rates by hospital group and must reimburse at standard rates. Reversed and remanded.