Am. Hosp. Ass'n v. Becerra

• Docket Number: Civil Action 18-2084 (RC)
• Decision Date: 10 January 2023
• Parties: AMERICAN HOSPITAL ASSOCIATION, et al., Plaintiffs, v. XAVIER BECERRA, in his official capacity as the Secretary of Health and Human Services, et al.,Defendants.
• Court: U.S. District Court — District of Columbia

AMERICAN HOSPITAL ASSOCIATION, et al., Plaintiffs,
v.
XAVIER BECERRA, in his official capacity as the Secretary of Health and Human Services, et al.,Defendants.

Civil Action No. 18-2084 (RC)

United States District Court, District of Columbia

January 10, 2023

Re Document No.: 69

MEMORANDUM OPINION

RUDOLPH CONTRERAS UNITED STATES DISTRICT JUDGE

GRANTING IN PART AND DENYING IN PART PLAINTIFFS' MOTION TO HOLD UNLAWFUL AND REMEDY DEFENDANTS' PAST UNDERPAYMENTS OF 340B DRUGS

I. INTRODUCTION

As part of its duty to administer the Medicare statute, the Department of Health and Human Services (“HHS”) establishes annual rates reimbursing hospitals for outpatient services and drugs through the Outpatient Prospective Payment System (“OPPS”). In American Hospital Association v. Becerra, 142 S.Ct. 1896 (2022), the Supreme Court unanimously held that HHS exceeded its statutory authority by varying its 2018 and 2019 OPPS reimbursement rates for a particular group of hospitals “340B hospitals” without having first conducted a statutorily mandated survey of hospitals' acquisition costs. Id. at 1899. Upon return to this Court to decide the issue of remedies, Plaintiffs, a group of hospital associations and non-profit hospitals, filed two separate motions. On September 28, 2022, the Court granted Plaintiffs' first motion and vacated the prospective portion of the 340B reimbursement rate in the 2022 OPPS Rule. Am. Hosp. Ass'n v. Becerra (“AHA IV”), No. 18-cv-2084, 2022 WL 4534617, at *5 (D.D.C. Sept. 28,

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2022). Now before the Court is Plaintiffs' second motion, which looks backwards and seeks to remedy all of HHS's underpayments to 340B hospitals under the unlawful reimbursement rates in OPPS Rules 2018-2022. Pls.' Mot. to Hold Unlawful & Remedy Defs.' Past Underpayment of 340B Drugs (“Mot.”), ECF No. 69.^[1] For the reasons described below, the Court concludes that HHS's 340B reimbursement rates in the 2018-2022 OPPS Rules are unlawful. But rather that vacate those rules, it will remand without vacatur to give the agency the opportunity to remediate its underpayments.

II. BACKGROUND

This is the Court's fifth opinion in this case, so it will assume familiarity with the facts and provide only an overview of the litigation's posture. This Court previously held that HHS exceeded its statutory authority by reducing the 2018 Medicare reimbursement rate for 340B hospitals without having first conducted a statutorily mandated survey. See Am. Hosp. Ass'n v. Azar (“AHA I”), 348 F.Supp.3d 62, 67-72 (D.D.C. 2018). After considering supplemental briefing on the issue of remedies, the Court decided to remand the 2018 and 2019 OPPS Rules to HHS without vacatur for the agency to take a “first crack at crafting appropriate remedial measures.” Am. Hosp. Ass'n v. Azar (“AHA II”), 385 F.Supp.3d 1, 3-4 (D.D.C. 2019). The Court reasoned that although vacatur was a possibility, remand was the better option given the “potentially serious administrative problems” and disruption that could result from vacatur. Id. at 13.

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The Court then entered final judgment to facilitate expeditious review of the case on the merits in the D.C. Circuit. Am. Hosp. Ass'n v. Azar (“AHA III”), No. 18-cv-2084, 2019 WL 3037306, at *1 (D.D.C. July 10, 2019). The D.C. Circuit reversed. Am. Hosp. Ass'n v. Azar, 967 F.3d 818, 820 (D.C. Cir. 2020). A divided panel held that “HHS's decision to lower drug reimbursement rates for 340B hospitals rests on a reasonable interpretation of the Medicare statute.” Id. The D.C. Circuit first found that HHS was entitled to Chevron deference on its interpretation of the Medicare provision. Id. at 828. It then held that the Secretary was authorized to vary the 340B reimbursement rate under his “general adjustment authority.” Id. at 834. Unsatisfied with this result, Plaintiffs sought review by the Supreme Court, which granted certiorari. Am. Hosp. Ass'n v. Becerra, 141 S.Ct. 2883 (2021).

The Supreme Court reversed. In a unanimous opinion, the Supreme Court agreed with Plaintiffs' slightly revised version of their argument that HHS had no authority to fix a different reimbursement rate for 340B hospitals without first conducting a statutorily mandated survey. Becerra, 142 S.Ct. at 1906; see 42 U.S.C. § 1395l(t)(14)(A)(iii)(I) (giving the Secretary authority to “vary” reimbursement rates “by hospital group” only if he relies on “hospital acquisition cost survey data”). The Supreme Court chose not to “address potential remedies,” Becerra, 142 S.Ct. at 1903, instead remanding the case to the D.C. Circuit, which in turn remanded it to this Court, Am. Hosp. Ass'n v. Becerra, No. 19-5048, 2022 WL 3061709, at *1 (D.C. Cir. Aug. 3, 2022).

On remand to this Court, Plaintiffs moved to supplement their complaint to challenge the 340B reimbursement rates in the 2020, 2021, and 2022 OPPS Rules, and the Court granted this request. See Pls.' Mot. for Leave to File 2d Suppl. Compl., ECF No. 66; Min. Order (Aug. 4,

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2022).^[2] At the same time, Plaintiffs filed two motions. The first motion sought to vacate the portion of the 340B reimbursement rate in the 2022 OPPS Rule that was still in effect for the remainder of this year. See Pls.' Mot. Vacate Unlawful Portion of 2022 OPS Rule, ECF No. 67. The Court granted this motion in AHA IV. See AHA IV, 2022 WL 4534617, at *5. The Court began with the observation that “HHS admit[ted] that the 340B reimbursement rate in the 2022 OPPS Rule is unlawful.” Id. at *2. Turning to the question of remedies, the Court found that the Allied-Signal factors both weighed in favor of vacatur because “[t]he deficiency in the 2022 Rule is serious” and “disruption would be minimal.” Id. at *3-4. The Court emphasized that unlike AHA II's finding of significant disruption associated with “relief for past underpayments,” vacatur of a reimbursement rate with only “prospective effect” would not upset settled transactions and would have a relatively minimal impact on budget neutrality. Id. at *3 (emphases in original); see also id. (“[A] quintessential disruptive consequence arises when an agency cannot easily unravel a past transaction in order to impose a new outcome.” (emphasis in original) (quoting Am. Great Lakes Ports Ass'n v. Schultz (“Am. Great Lakes II”), 962 F.3d 510, 519 (D.C. Cir. 2020))).

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