By Rebecca Mayo, J.D.
The Medicare statute does not preclude HHS from approving prescription drug plans that reimburse FQHCs less than they reimburse other healthcare providers.
The Medicare statute requires that private Medicare insurance plans reimbursements to a Federally Qualified Health Center (FQHC) for government-subsidized medical services be "not less than" what the insurers pay other healthcare providers not receiving such subsidies. However, a circuit court found that this provision does not prevent private Medicare prescription drug plans from reimbursing an FQHC less for dispensing pharmaceuticals than they would reimburse a non-FQHC for dispensing the same drugs (Cares Community Health v. HHS, December 20, 2019, Pillard, C.).
Agreement. Cares Community Health executed a Pharmacy Provider Agreement with Humana to provide prescription drug services under Humana’s Medicare Advantage Part D plan. A few years later, Cares became a FQHC and Humana sent Cares an amendment to the agreement that set reimbursement rates for what Human referred to as "340B pharmacy services" at about two-thirds the rate Humana pays other types of providers for "Retail pharmacy services." As a result, Cares recovered nearly $5,000 per working day less than it would have recovered absent the amendment, for a total of $3 million.
Cares filed a lawsuit claiming that Humana’s differential reimbursement rates resulted from HHS’ unlawful failure to enforce the Not Less Than Provision against Humana, in violation of the Medicare statue and the Administrative Procedure Act. According to Cares, HHS unlawfully withheld required agency action by failing to apply the Not Less Than Provision’s FQHC payment requirement to Humana’s Pharmacy Provider Agreement with Cares and this inaction was arbitrary and capricious. The district court held that Cares failed to state a claim because the proposition that the Not Less Than Provision’s payment requirement must be included in Part D contracts or that they payment requirement applies to Part D drugs was wrong as a matter of law. Cares appealed.
Payment mandates. The Medicare Modernization Act includes Wraparound Payment and Written Agreement provisions that mandate and spell out implementation of subsidies for FQHCs providing services to Medicare Advantage beneficiaries. The Wraparound Payment provision references "FQHC services," which Medicare defines as outpatient services provided under Medicare Part B, not including prescription drugs. The Not Less Than provision is applied through the Written Agreement provision and mandates that CMS contracts with Medicare Advantage organizations to stipulate that payments to the FQHC for "services provided by such" FQHC are not less than the level and amount of payment that the Medicare Advantage plan would make for such services if the services had been furnished by a non-FQHC.
The Medicare Part D prescription drug contract provision applies the Not Less Than provision to CMS contracts with insurers offering prescription drug coverage. The Rewording provision dictates how to read the Not Less Than provision in the Part D context. The 340B drug discount program requires manufacturers of covered outpatient drugs to provide these drugs at a discounted rate to certain types of healthcare providers, including FQHCs, which supply safety-net services to the poor.
Decision. Cares argued that the statute’s plain meaning requires HHS to ensure that Part D prescription drug plans reimburse FQHCs for dispensing drugs at a rate not less than those plans reimburse other providers for the same drugs. According to Cares, the Not Less Than provision applied to prescription drug plans’ reimbursement of FQHC pharmacy services because the Medicare defined "FQHC services" could be distinguished from the "services provided by such" FQHC to which the Not Less Than provision applied and could include pharmacy services. Further the Part D Rewording provision rewrites the Not Less Than provision to apply to prescription drug plans.
The court found that based on textual clues, it was not readily apparent that the services provided by such FQHC subject to the Not Less Than mandate necessarily included prescription drugs. However, the court held that Cares failed to establish that the Not Less Than Provision necessarily applies to Part D prescription drug plans’ reimbursement to FQHCs. According to the court, Cares failed to explain how the "written agreement described in" Part C’s Written Agreement provision covered Part D prescription drugs or even existed between prescription drug plans and FQHCs. Although the Pharmacy Provider Agreement could be the agreement referenced in the Written Agreement provision between a Medicare Advantage organization and an FQHC for FQHC services, Cares failed to contend or identify any other agreement between insurers and providers through which the Note Less Than FQHC payment requirement applied in the Part D context.
The case is No. 18-5319.
Attorneys: James L. Feldesman (Feldesman Tucker Leifer Fidell LLP) for Cares Community Health. Karen Schoen, U.S. Department of Justice, for U.S. Department of Health and Human Services.
Companies: Cares Community Health; U.S. Department of Health and Human Services
MainStory: TopStory CMSNews DrugBiologicNews PartBNews PartCNews PartDNews OPPSNews PrescriptionDrugNews ProviderNews DistrictofColumbiaNews
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