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A U.S. Supreme Court decision about the Medicare DSH adjustment percentage calculation is expected to have little effect on hospitals currently in the 340B drug pricing program.

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Supreme Court DSH Calculation Ruling Leaves 340B Status Quo in Place, Experts Say

A U.S. Supreme Court decision last week about the Medicare disproportionate share adjustment percentage calculation will have little effect on hospitals currently in the 340B drug pricing program, experts say. It could mean, though, that some on the cusp of eligibility might not get the bump they need to qualify for 340B pricing.

Five of the six types of hospitals that may participate in 340B qualify in part based on their Medicare DSH adjustment percentage. Disproportionate share, children’s, and free-standing cancer hospitals must have a Medicare DSH adjustment percentage greater than 11.75%, and rural referral centers and sole community hospitals a percentage equal to or greater than 8.0%.

The case the Supreme Court decided, Becerra v. Empire Health Foundation, revolved around how to count inpatient days attributable to patients entitled to Medicare Part A in the DSH calculation formula.

The Medicare DSH adjustment percentage is the sum of two calculations: the Medicare fraction and the Medicaid fraction. A 2004 federal regulation said, no matter whether Medicare actually paid for all or part of a patient’s hospitalization, if a patient is eligible for Medicare Part A (age 65 or older), then the patient counts in the denominator of the Medicare fraction. If the patient qualifies for Supplemental Security Income (is age 65 or older, is blind or disabled, and has limited income or resources), her or she counts in the numerator of the fraction.

The Supreme Court upheld the regulation by a 5-4 vote, overturning an appeals court’s decision.

“From a practical perspective, this will have little to no impact on current 340B participating hospitals. The disproportionate share percentage will continue to be calculated in the same manner,” attorneys Brenda Maloney Shafer, Richard B. Davis, Michael French, Madison T. Hartman of Quarles & Brady law firm wrote last week. Had the decision gone the other way, potentially more hospitals would have qualified for 340B, they said. Barbara Straub Williams of Powers law firm offered a similar analysis of the decision.

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