COVID-19, inflation, politics, and an impending recession: it is indisputable that the last two years have had an indelible effect on the healthcare industry. Acute care providers, in particular, have faced a plethora of economic challenges, including increasing costs for drugs and medical devices. However, on June 15, 2022, in American Hospital Association v. Becerra, Secretary of Health and Human Services, 142 S.Ct. 1896 (2022), the American Hospital Association (AHA) secured a win for 340B hospitals—often referred to as safety net hospitals—by successfully challenging the Department of Health and Human Services' (DHHS) calculation of reimbursement rates. As a result, the Becerra court affirmed that DHHS was not statutorily authorized to vary reimbursement rates for different hospital groups; DHHS's power to increase or decrease the price is distinct from its power to set different rates for different groups of hospitals. Id. As a result, the Becerra decision has far-reaching implications for acute care providers who provide services to uninsured, underinsured, and rural communities.

Legislative Backdrop

In order to appreciate the impact of Becerra, it is imperative to have a general understanding of the evolution of the regulatory landscape for healthcare providers. During the nineteenth century, acute care was generally provided in the homes of the wealthy or through benevolent institutions, including voluntary, religious, and public or governmental institutions. Generally, the Wilson-Gorman Tariff Act of 1894 applied to these early acute care providers, which provided that charitable organizations should enjoy tax-exempt status, provided they operate for charitable purposes.

At the beginning of the twentieth century, significant advancements in technology and the creation of health insurance spurred the development of the community hospital. Better patient outcomes were the product of x-rays, laboratories, and aseptic surgery—which were only available in hospital facilities. In 1917, the Revenue Act established an individual income tax deduction for contributions made to tax-exempt charitable organizations, which helped spur donations to these early hospitals. Additionally, following World War II, there was a surge of public demand for community hospitals, particularly to accommodate veterans and provide obstetrical services. As a result, in 1946, Congress enacted the Hill-Burton Act, first enacted as Title VI of the Public Health Service Act of 1944, 42 U.S.C.A. s 291 et seq., which made federal funds available for hospital construction in underserved areas.