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Supreme Court Sides With Hospitals on Medicare Reimbursement (1)

June 15, 2022, 2:20 PM

The U.S. Supreme Court said the federal government improperly cut more than $1 billion a year in Medicare reimbursements to hospitals in a ruling that limits regulators’ power to control what the program pays for some drugs.

The justices on Wednesday unanimously sided with the American Hospital Association in a clash over drug reimbursement rates for facilities that serve low-income communities.

Writing for the court, Justice Brett Kavanaugh said the Department of Health and Human Services improperly calculated reimbursement rates using a methodology Congress authorized only in limited circumstances.

The federal government said the rate cuts, which started in 2018, were designed to more closely track the cost to hospitals of acquiring the drugs.

But Kavanaugh said that under the 2003 law that expanded Medicare to cover prescription drugs, HHS generally must tie the reimbursement rate to each drug’s average sales price. The law lets HHS use a drug’s acquisition cost only if regulators have conducted a survey to determine what hospitals are paying, Kavanaugh said.

The government argued that HHS could rely on a separate provision that says regulators can make “adjustments” to rates.

The justices declined the Biden administration’s call to apply a legal doctrine known as Chevron deference. Under that approach, which some conservative justices have questioned, courts defer to federal agencies on the meaning of ambiguous statutes.

The case is American Hospital Association v. Becerra, 20-1114.

(Updates with explanation of ruling starting in fourth paragraph.)

To contact the reporter on this story:
Greg Stohr in Washington at

To contact the editor responsible for this story:
Elizabeth Wasserman at

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