Jun 16, 2022 - Health

Hospitals' big Supreme Court win

Illustration of the supreme court with an asterisk made of the ambulance symbol.
Illustration: Shoshana Gordon/Axios

A unanimous U.S. Supreme Court sided with hospital groups on Wednesday in a closely watched dispute over whether the federal government had the authority to cut facilities' payments for outpatient drugs.

Why it matters: The case, brought by the American Hospital Association and other hospitals, involved billions of dollars in payments and tested how much deference courts should give federal agencies when laws are vague.

Details: Hospitals can pocket large savings when acquiring certain drugs through a federal discount drug program called 340B.

  • Medicare, under the Trump administration, instituted a 28.5% cut to those drug payments starting in 2018. Research indicated some hospitals were profiting excessively from the program.
  • But the justices ruled the rate adjustment ran afoul of the law, because HHS didn't conduct a survey of hospitals' acquisition costs.

What they're saying: "HHS will now have to more carefully follow the text and structure of statutes rather than relying on assumed court deference to the agency," wrote Raymond James analyst Chris Meekins in a note.

Between the lines: The unanimous opinion written by Justice Brett Kavanaugh didn't directly address the so-called Chevron doctrine, which says federal agencies like Medicare have some leeway to interpret ambiguous laws, and courts should defer to them.

The bottom line: The ruling leaves unresolved the bigger policy question of how to tailor federal support for hospitals that disproportionately care for underserved populations, said University of Pennsylvania law professor Allison Hoffman.

Go deeper