News Briefs: A second appeals court rules against providers in the 340B contract-pharmacy dispute

A decision issued by an appeals court represents the latest setback for 340B providers seeking to secure price discounts on Medicare Part B drugs. The D.C. Circuit Court of Appeals on May 21 upheld a district-court ruling that drug manufacturers can impose restrictions on the 340B discounts they provide for drugs dispensed at contract pharmacies.

The prevailing parties were the plaintiffs, Novartis and United Therapeutics, both of which were among various manufacturers that placed conditions on contract-pharmacy discounts beginning in 2020. HHS and the Health Resources and Services Administration (HRSA), the listed defendants, then issued 2021 guidance directing manufacturers to ensure discounted drugs are available through 340B regardless of where the products are distributed.

“We reject HRSA’s position that Section 340B prohibits drug manufacturers from imposing any conditions on the distribution of discounted drugs to covered entities,” wrote the appeals-court panel consisting of two Trump-nominated judges and one Biden nominee.

The decision was the second of two appellate rulings on the matter, and both have favored manufacturers. The first came in January 2023 in the Third Circuit regarding a case brought by the manufacturer Sanofi.

Hospital payments have been substantially affected by the Change Healthcare cyberattack, report finds

Newly published data reflect the extent of the payment loss experienced by hospitals and health systems during roughly the first month after the Feb. 21 Change Healthcare cyberattack.

A report published in mid-May by Strata finds that gaps in expected revenue ranged from 16.5% to 17.9% per hospital for Q1. The insights were culled from a database of more than 1,600 hospitals.

The shortfall was 17.1% for the smallest hospitals, including 20.4% in March. Those hospitals — defined as having annual operating expenses of less than $500 million — may struggle to make up for even a short-term deficit.

Larger hospitals — those with $2.5 billion or more in operating expense — also took a bigger-than-average hit, at 17.9% for the quarter and 21.1%
in March.

Strata conducted the analysis of Medicare and commercial payments by examining a six-month period, comparing Q1 2024 with the final quarter of 2023. The analysis incorporated adjustments to account for typical claims-processing delays.

Noncompete regulations will affect hospitals’ physician staffing agreements, unless a court intervenes

Hospitals are likely to feel the reverberations of a new federal prohibition on noncompete clauses in employment agreements.

Although tax-exempt hospitals largely fall outside the jurisdiction of the Federal Trade Commission, which will enforce the regulations, the newly issued final rule stands to affect clinical staffing. Workers will be covered by the new protections if they perform their duties at a tax-exempt organization but are employed by a for-profit entity such as a staffing agency or physician group.

At for-profit hospitals, the regulations will be farther-reaching, affecting all future hires and most current employees. For existing noncompete agreements, only those with senior executives can remain in force after the rule’s Sept. 4 effective date.

Barely 24 hours after the draft of the final rule was released, however, the U.S. Chamber of Commerce filed suit against the regulations in a Texas federal court that has a business-friendly reputation.

Annual report on Medicare financing could reduce the immediate impetus to address longstanding issues

New data on the state of Medicare funding shows short-term improvement while keeping the stakes high for ensuing years.

The annual report from Medicare’s trustees shows the Hospital Insurance Trust Fund (i.e., Medicare Part A) has enough money to keep beneficiaries covered and providers paid through 2036. That’s an increase of five years from the 2023 report and eight years from the 2022 projection. The improved short-term outlook is based on higher income stemming from increases in the number of covered workers and in taxable wages.

But Medicare’s burden on the economy is unlikely to ease much. Costs are projected to constitute 3.9% of GDP in 2025, up from 2.19% in 2000, although the 2025 number is down from a previously estimated 4.13%. Within a decade, the figure is set to reach 5.3%.

Much of the projected increase can be traced to the Supplementary Medical Insurance Trust Fund, which subsidizes Medicare Part B. That funding is estimated to account for 1.85% of GDP this year and reach 2.82% in 2035.

HHS issues regulations to strengthen healthcare anti-discriminatory protections

Providers should be aware of the compliance requirements in sweeping new federal regulations intended to improve health equity and reduce healthcare disparities.

An HHS final rule expands upon Affordable Care Act Section 1557 language that prohibits discrimination on the basis of race, color, national origin (including English proficiency), age, disability and sex.

The rule was drafted, in part, to reverse the scaled-back provisions implemented by a 2020 rule, including the latter rule’s reduction of patient notification requirements. By early November — 120 days after the July 5 effective date of the new rule — covered entities must assign someone to the role of Section 1557 coordinator to guide compliance.

Although Section 1557 has always applied to providers and health plans that receive federal financial assistance, the new rule expands the definition of covered entity to include additional entities in both stakeholder categories.

For example, the requirements apply to commercial insurers and short-term, limited-duration plans if the parent company receives federal funds. And starting in May 2025, the regulations will apply to any provider that receives Medicare Part B payment even if that is the provider’s only form of federal financial assistance.

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Seeking to bolster Medicaid, CMS publishes a flurry of regulatory updates

CMS since late March has published a trio of Medicaid-related final rules.

The first rule addresses administrative barriers in an effort to simplify enrollment processes and reduce coverage disruptions.

Among many other provisions of note in the second rule, providers may face greater scrutiny of home- and community-based services as part of new requirements pertaining to medical-loss ratio.

For state-directed payments made by Medicaid managed care organizations, the third rule limits amounts to the state’s average commercial rate for inpatient and outpatient hospital services, nursing facility services and professional services at an academic medical center.