Marjorie T. Scher, Associate in the Health Care & Life Sciences practice, in the firms New York office, was quoted in the 340 B Report, in “Citing U.S. Supreme Court Decision, Health System Sues Medicare Advantage Plan for Past 340B Payments,” by Rich Daly. (Read the full version - subscription required.)

Following is an excerpt:

Baptist Health of Alabama sued Humana in federal court over the lack of repayment by the company’s Medicare Advantage (MA) plans for nearly five years of what the system considers to be underpayments for 340B drugs.

The lawsuit, originally filed Jan. 9 in state court and moved Feb. 9 to the U.S. District Court for the Middle District of Alabama, sought “damages in excess of $75,000” for alleged 340B underpayments for two of the health system’s hospitals. The actual amount sought was not specified and the named figure likely refers to the minimum financial threshold for such suits, said an attorney.

The alleged underpayments stem from Humana MA plans’ allegedly mirroring reduced Medicare fee-for-service payments for 340B drugs, which were instituted from 2018 to 2022 by the Centers for Medicare & Medicaid Services (CMS). The reduced Part B drug payments for 340B DSH and non-rural sole community hospitals, which cut Medicare payment from average sales price plus 6% to ASP minus 22.5%, were deemed unlawful by the U.S. Supreme Court in June 2022. To repay those cuts, CMS approved a $9 billion lump sum repayment in November to about 1,700 340B hospitals. Medicare administrative contractors issued the funds from Jan. 8 and Feb. 7.

However, CMS explicitly rejected hospital requests to require the same repayment by MA plans, which frequently base their contracted rates on a percentage of Medicare FFS rates. CMS, in the November repayment rule, deemed MA 340B rates “out of the scope of this final rule.” 

Baptist Health, which is based in Montgomery, Alabama and has three acute care hospitals, said its two 340B hospitals were under contract with Humana MA plans during the period and the contracts agreed to pay Baptist an undisclosed percentage of Medicare’s allowable amount.

“Humana’s failure to adjust its reimbursement amounts based on those retroactively adjusted rates resulted in significant underpayment of the amounts required by the agreement,” the lawsuit said.

Neither Baptist not Humana officials responded to request for comment.

Baptist officials repeatedly and unsuccessfully asked Humana for the difference in the 340B underpayment from the time of the Supreme Court’s decision to when CMS issued the November repayment final rule, according to the lawsuit.

“To date, Humana continues to enjoy this windfall and has not taken steps to compensate Baptist Health for its underpayment,” the lawsuit said. “Baptist Health’s claims arise from Humana’s failure to remedy this unlawful underpayment.”

Baptist Health, the largest medical provider in Montgomery County, Alabama, is an affiliate of UAB Health.

In addition to the underpayments, Baptist is seeking “consequential, compensatory and punitive damages; costs; [and] interest,” as well as a jury trial. …

Similar issues could arise for hospitals out of network with MA plans, said Marjorie Scher, an attorney for Epstein Becker Green.

“When a hospital is out-of-network with a health plan, no contract exists between the two parties,” Scher said. “Therefore, the out-of-network hospital wouldn’t sue for breach of contract as Baptist is in the current case.”

Sher said a 2022 CMS memorandum “reminds MA plans that they ‘must pay non-contract providers or facilities for services an items at least the amount they would have received under original Medicare payment rules.’”

Jump to Page

Privacy Preference Center

When you visit any website, it may store or retrieve information on your browser, mostly in the form of cookies. This information might be about you, your preferences or your device and is mostly used to make the site work as you expect it to. The information does not usually directly identify you, but it can give you a more personalized web experience. Because we respect your right to privacy, you can choose not to allow some types of cookies. Click on the different category headings to find out more and change our default settings. However, blocking some types of cookies may impact your experience of the site and the services we are able to offer.

Strictly Necessary Cookies

These cookies are necessary for the website to function and cannot be switched off in our systems. They are usually only set in response to actions made by you which amount to a request for services, such as setting your privacy preferences, logging in or filling in forms. You can set your browser to block or alert you about these cookies, but some parts of the site will not then work. These cookies do not store any personally identifiable information.

Performance Cookies

These cookies allow us to count visits and traffic sources so we can measure and improve the performance of our site. They help us to know which pages are the most and least popular and see how visitors move around the site. All information these cookies collect is aggregated and therefore anonymous. If you do not allow these cookies we will not know when you have visited our site, and will not be able to monitor its performance.