Baptist Health, an Alabama-based healthcare system, has initiated legal proceedings against Humana, alleging that the insurer’s Medicare Advantage plans have systematically underpaid for outpatient drugs procured through the 340B Drug Pricing Program. This action follows a pivotal 2022 Supreme Court ruling that revised rates determined by the federal government. The lawsuit contends that Humana’s failure to adhere to similar reimbursement standards constitutes a breach of its contractual obligations. Despite Baptist Health’s efforts to engage with Humana and seek redress following the court’s decision, the insurer has refused to compensate for the shortfall between actual payments and the amounts owed under the revised Medicare allowable rate, resulting in financial strain on the healthcare system.
Alabama’s Baptist Health System has taken legal action against insurance giant Humana, alleging that the company’s Medicare Advantage plans have significantly underpaid for outpatient drugs acquired through the 340B Drug Pricing Program. This move comes in the wake of a landmark 2022 Supreme Court decision that revised rates established by the federal government.
The Department of Health and Human Services (HHS) initiated a substantial reduction of outpatient drug payments to hospitals participating in the 340B pricing program back in 2018, slashing rates by nearly 30%. However, the Supreme Court later deemed this reduction unlawful, prompting HHS to issue a one-time lump sum repayment of approximately $9 billion to affected hospitals nationwide.
Baptist Health, headquartered in Montgomery, Alabama, contends that Medicare Advantage plans operated by Humana should adhere to similar repayment standards. According to Baptist Health’s complaint, Humana’s failure to comply with these standards constitutes a breach of its obligation to provide proper and legal payment for services rendered. The lawsuit was filed in the Circuit Court of Montgomery County, Alabama, before being transferred to the U.S. District Court for the Middle District of Alabama.
The complaint highlights Baptist Health’s long-standing relationship with Humana, dating back to 2005, during which the two entities have maintained in-network agreements. These agreements stipulate payment rates to Baptist Health based on a portion of the hospital’s Medicare allowable amount at the time services are provided. Baptist Health emphasizes that Humana’s payments for outpatient prescription drugs are entirely dependent on lawful rates set by the Centers for Medicare and Medicaid Services (CMS) for traditional Medicare.
Specifically named in the lawsuit are two Baptist Health hospitals, Baptist Medical Center South and Baptist Medical Center East, which have agreements with Humana and participate in the 340B program. Despite efforts to engage with Humana following the court’s decision and CMS’s retroactive adjustments and repayments, Baptist Health asserts that Humana has refused to compensate for the discrepancy between actual payments and the amounts owed under the amended Medicare allowable rate.
Baptist Health criticizes Humana’s stance, stating that its refusal to act has resulted in a substantial financial gain for the company, as it retains funds provided by CMS for its Medicare Advantage plans without reimbursing Baptist Health accordingly. It’s worth noting that Alabama’s Baptist Health should not be confused with the similarly named Baptist Health based in Louisville, Kentucky, which has also engaged in disputes with Humana and other insurers over Medicare Advantage plans.
Operating three hospitals and various primary and specialty care services across the state, Alabama’s Baptist Health serves as the largest medical provider in Montgomery and caters to a significant number of low-income and vulnerable patients in central Alabama.
Fierce Healthcare, a leading industry publication, has reached out to both Baptist Health and Humana for comment on the matter.
The 340B program has recently garnered attention from industry stakeholders, with pharmaceutical companies and critics expressing concerns about its significant growth in recent years and the potential for health systems to exploit the program for increased revenue. Lawmakers have echoed these concerns and initiated investigations into the spending practices of certain hospital systems benefiting from the program.
Last year, the Health Resources and Services Administration (HRSA), the agency responsible for overseeing the 340B program, began scaling back pandemic-era flexibilities that facilitated the dispensing of discounted drugs at new outpatient sites. However, a federal district court ruling against the administration may have weakened its oversight authority, potentially allowing hospitals to assert more extensive claims for discounts under the program.
The legal dispute between Baptist Health and Humana encapsulates broader debates surrounding healthcare reimbursement fairness and compliance with regulatory mandates. Baptist Health’s pursuit of recompense for underpayments underlines the critical importance of upholding contractual obligations and ensuring equitable reimbursement practices. Beyond the immediate financial implications for the healthcare system, this confrontation underscores the need for greater transparency and accountability within the insurance industry. Moreover, it underscores the enduring challenges faced by safety-net providers in serving vulnerable patient populations while navigating complex reimbursement landscapes. Ultimately, the resolution of this dispute will have far-reaching ramifications for healthcare stakeholders, shaping the future trajectory of reimbursement policies and provider-insurer relationships.
