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Humana sued over alleged Medicare Advantage 340B overpayments

Baptist Health, based in Montgomery, Ala., is suing large insurer Humana over alleged underpayments by Medicare Advantage for outpatient drugs purchased through the 340B program.

The hospital claims that the drug reimbursements were determined by a payment model that is no longer valid, and that the increasing underpayments represent a “windfall” for the insurer.

In 2022, the Supreme Court ruled that it was illegal for the Centers for Medicare and Medicaid Services to reduce reimbursement rates for outpatient drugs purchased by safety-net hospitals. In response, CMS said it would pay $9 million in lump sum compensation to 340B hospitals.

Baptist Health said Humana owes it money that aligns with the corrected rates.


CMS’ $9 million global payment drew both praise and criticism from hospital groups, sometimes from the same group. Last fall, the American Hospital Association said it was pleased that 340B hospitals would finally be fully reimbursed, but AHA President and CEO Rick Pollack decried other aspects of the proposed rule.

“[The Department of Health and Human Services] made a serious mistake by choosing to recover billions of dollars from America’s hospitals, particularly those serving rural, low-income and other vulnerable communities,” he said. “HHS chose to ignore hundreds of comments from hospitals and other providers explaining why this Medicare cut is illegal and unwise. The AHA will continue to review this rule and consider all available options going forward.”

Premier echoed this sentiment, specifically highlighting CMS for “giving with one hand and taking with the other.”

“Premier strongly supports CMS’ decision to make a one-time payment to 340B for amounts owed to them based on past shortfalls, and appreciates CMS’ commitment to do so quickly,” said Soumi Saha, vice president senior in government affairs. in Premier “However, Premier expected CMS to recognize the fact that clawing back these payments over 16 years is inconsistent with the law and with CMS’ past precedent in applying budget neutrality adjustments.”

Baptist said in the lawsuit that it had repeatedly contacted Humana about retroactive adjustments and remedy payments, but the insurer denied an obligation to make those payments. Healthcare Finance News has reached out to Humana for comment.


Section 340B of the Public Health Service Act allows participating hospitals and other providers to purchase certain covered outpatient drugs or biologics from manufacturers at discounted prices.

Before 2018, the Medicare payment rate for Part B-covered outpatient drugs provided in outpatient hospitals was generally the statutory default value of the average retail price plus 6%.

In the payment rule finalized in 2017, CMS adjusted the payment rate for 340B drugs to the average retail price minus 22.5% to more accurately reflect 340B hospitals’ actual costs in acquiring 340B drugs, CMS said. This rate applies from 2018 until approximately the third quarter of 2022.

To meet statutory budget neutrality requirements, CMS made a corresponding increase in payments to all hospitals (340B hospitals and non-340B hospitals) for nonpharmaceutical items and services, which was also in effect from 2018 through 2022.

On June 15, 2022, the Supreme Court unanimously ruled that the differential payment rates for drugs purchased under 340B were illegal because, before implementing the rates, HHS did not conduct a cost survey acquisition of hospitals according to the corresponding statute.

On September 28, 2022, the District Court for the District of Columbia struck down differential payment rates for drugs purchased under 340B going forward. As a result, all CY 2022 claims for drugs purchased under 340B paid on or after September 28, 2022 were paid at the ASP default rate plus 6%.

In the 2023 final rule, CMS finalized a general ASP plus 6% payment rate for drugs acquired through the 340B program, which is consistent with the agency’s policy for drugs not acquired through the 340B program .

As required by statute, CMS implemented a 3.09% reduction in payment rates for non-drug items and services to achieve budget neutrality for the 340B drug payment rate change for the 2023. This change in budget neutrality ensured that the conversion factor was equivalent to the conversion factor. this would have been in place if the 340B drug payment policy had never been implemented.

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