American Hospital Assn. v. Becerra

Summary

The Medicare Prescription Drug, Improvement, and Modernization Act of 2003 does not preclude judicial review of the reimbursement rates set by the Department of Health and Human Services for certain outpatient prescription drugs that hospitals provide to Medicare patients; in this case, because HHS did not conduct a survey of hospitals’ acquisition costs in 2018 and 2019, its decision to vary reimbursement rates only for 340B hospitals in those years was unlawful.

Text

PRELIMINARY PRINT 
Volume 596 U. S. Part 2 
Pages 724–739 
OFFICIAL REPORTS 
OF 
THE SUPREME COURT 
June 15, 2022 
REBECCA A. WOMELDORF 
reporter of decisions 
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NOTICE: This preliminary print is subject to formal revision before 
the bound volume is published. Users are requested to notify the Reporter 
of Decisions, Supreme Court of the United States, Washington, D.C. 20543, 
[email protected], of any typographical or other formal errors.

724 OCTOBER TERM, 2021 
Syllabus 
AMERICAN HOSPITAL ASSOCIATION et al. v. 
BECERRA, SECRETARY OF HEALTH AND 
HUMAN SERVICES, et al. 
certiorari to the united states court of appeals for 
the district of columbia circuit 
No. 20–1114. Argued November 30, 2021—Decided June 15, 2022 
The Medicare statute lays out a formula that the Department of Health 
and Human Services must employ annually to set reimbursement rates 
for certain outpatient prescription drugs provided by hospitals to Medi-
care patients. 42 U. S. C. § 1395l(t)(14)(A)(iii). That formula affords 
HHS two options. Option 1 applies if HHS has conducted a survey of 
hospitals' acquisition costs for each covered outpatient drug. Under 
this option, the agency may set reimbursement rates based on the hospi-
tals' “average acquisition cost” for each drug, and may “vary” the reim-
bursement rates “by hospital group.” § 1395l(t)(14)(A)(iii)(I). Absent 
a survey, option 2 applies, and HHS must set reimbursement rates based 
on “the average price” charged by manufacturers for the drug as “calcu-
lated and adjusted by the Secretary.” § 1395l(t)(14)(A)(iii)(II). Option 
2 does not authorize HHS to vary reimbursement rates for different 
hospital groups. From the time these provisions took effect in 2006 
until 2018, HHS did not conduct surveys of hospitals' acquisition costs, 
relied on option 2, set the reimbursement rates at about 106 percent, 
and did not vary those rates by hospital group. For 2018, HHS again 
did not conduct a survey. But this time it issued a fnal rule establish-
ing separate reimbursement rates for hospitals that serve low-income 
or rural populations through the 340B program and all other hospitals. 
For 2019, HHS set reimbursement rates the same way. 
The American Hospital Association and other interested parties chal-
lenged the 2018 and 2019 reimbursement rates in federal court. In re-
sponse, HHS frst contended that various statutory provisions precluded 
judicial review of those rates. The agency also argued that it could 
vary the reimbursement rates by hospital group under its option 2 au-
thority to “adjust” the price-based reimbursement rates. The District 
Court rejected HHS's argument that the statute precluded judicial re-
view, concluded that HHS had acted outside its statutory authority, and 
remanded the case to HHS to consider an appropriate remedy. The 
D. C. Circuit, however, reversed. The court ruled that the statute did 
not preclude judicial review, and upheld HHS's reduced reimbursement 
rates for 340B hospitals. 
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Syllabus 
Held: 
1. The statute does not preclude judicial review of HHS's reimburse-
ment rates. Judicial review of fnal agency action is traditionally avail-
able unless “a statute's language or structure” precludes it, Mach Min-
ing, LLC v. EEOC, 575 U. S. 480, 486, and this Court has long recognized 
a “strong presumption” in its favor, Weyerhaeuser Co. v. United States 
Fish and Wildlife Serv., 586 U. S. –––, –––. Here, no provision in the 
Medicare statute precludes judicial review of the 2018 and 2019 reim-
bursement rates. HHS cites two nearby provisions that preclude re-
view of the general payment methodology that HHS employs to set 
rates for other Medicare outpatient services. See §§ 1395l(t)(12)(A), 
(C). But HHS sets rates for outpatient prescription drugs using a dif-
ferent payment methodology. HHS also argues that other statutory 
requirements would make allowing judicial review of the 2018 and 2019 
reimbursement rates impractical. Regardless, such arguments cannot 
override the text of the statute and the traditional presumption in favor 
of judicial review of administrative action. Pp. 732–734. 
2. Absent a survey of hospitals' acquisition costs, HHS may not vary 
the reimbursement rates only for 340B hospitals; HHS's 2018 and 2019 
reimbursement rates for 340B hospitals were therefore unlawful. The 
text and structure of the statute make this a straightforward case. Be-
cause HHS did not conduct a survey of hospitals' acquisition costs, HHS 
acted unlawfully by reducing the reimbursement rates for 340B hospi-
tals. HHS maintains that even when it does not conduct a survey, 
the agency still may “adjus[t] ” the average price “as necessary.” 
§ 1395l(t)(14)(A)(iii)(II). But HHS's power to increase or decrease the 
price is distinct from its power to set different rates for different groups 
of hospitals. Moreover, HHS's interpretation would make little sense 
given the statute's overall structure. Under HHS's interpretation, the 
agency would never need to conduct a survey of acquisition costs if it 
could proceed under option 2 and then do everything under option 2 
that it could do under option 1. That not only would render irrelevant 
the survey prerequisite for varying reimbursement rates by hospital 
group, but also would render largely irrelevant the provision of the stat-
ute that precisely details the requirements for surveys of hospitals' ac-
quisition costs. See § 1395l(t)(14)(D). Finally, HHS's argument that 
Congress could not have intended for the agency to “overpay” 340B 
hospitals for prescription drugs ignores the fact that Congress, when 
enacting the statute, was well aware that 340B hospitals paid less for 
covered prescription drugs. It may be that the reimbursement pay-
ments were intended to offset the considerable costs of providing health-
care to the uninsured and underinsured in low-income and rural commu-

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726 AMERICAN HOSPITAL ASSN. v. BECERRA 
Opinion of the Court 
nities. Regardless, this Court is not the forum to resolve that policy 
debate. Pp. 734–739. 
967 F. 3d 818, reversed and remanded. 
Kavanaugh, J., delivered the opinion for a unanimous Court. 
Donald B. Verrilli, Jr., argued the cause for petitioners. 
With him on the briefs were Elaine J. Goldenberg and Ra-
chel G. Miller-Ziegler. 
Christopher G. Michel argued the cause for respondents. 
With him on the brief were Acting Solicitor General Flet-
cher, Acting Assistant Attorney General Boynton, Deputy 
Solicitor General Kneedler, and Alisa B. Klein.* 
Justice Kavanaugh delivered the opinion of the Court. 
Under the Medicare statute, the Department of Health and 
Human Services must reimburse hospitals for certain outpa-
*Briefs of amici curiae urging reversal were fled for the Americans for 
Prosperity Foundation by Michael Pepson and Cynthia Fleming Craw-
ford; for the National Association of Home Builders et al. by Evan A. 
Young, Amy Chai, Thomas J. Ward, Ellen Steen, Travis Cushman, Scott 
Yager, and Richard Moskowitz; for the National Right to Work Legal 
Defense Foundation, Inc., by Raymond J. LaJeunesse, Jr., and Frank D. 
Garrison; for the New Civil Liberties Alliance by Richard A. Samp and 
Kara Rollins; for the Pacifc Legal Foundation by Daniel M. Ortner and 
Glenn E. Roper; for the Yale New Haven Health System et al. by William 
B. Schultz and Margaret Dotzel; and for 37 State and Regional Hospital 
Associations by Chad Golder. 
Briefs of amici curiae urging affrmance were fled for the Federation 
of American Hospitals by Thomas Barker; and for the Rural Hospital Co-
alition by Andrew S. M. Tsui. 
Briefs of amici curiae were fled for the State of Indiana et al. by Theo-
dore E. Rokita, Attorney General of Indiana, Thomas M. Fisher, Solicitor 
General, Kian J. Hudson, Deputy Solicitor General, and Julia C. Payne 
and Melinda R. Holmes, Deputy Attorneys General, and by the Attorneys 
General for their respective States as follows: Christopher M. Carr of 
Georgia, Jeff Landry of Louisiana, Lynn Fitch of Mississippi, Doug Pe-
terson of Nebraska, John O'Connor of Oklahoma, Ken Paxton of Texas, 
and Sean Reyes of Utah; and for the Chamber of Commerce of the United 
States of America by Paul D. Clement, Erin E. Murphy, Daryl L. Josef-
fer, and Andrew R. Varcoe.

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Opinion of the Court 
tient prescription drugs that the hospitals provide to Medi-
care patients. HHS's total reimbursements to hospitals for 
prescription drugs add up to tens of billions of dollars 
every year. 
To set the reimbursement rates for the prescription drugs, 
HHS has two options under the statute. First, if HHS has 
conducted a survey of hospitals' acquisition costs for the 
drugs, HHS may set the reimbursement rates based on the 
hospitals' average acquisition costs—that is, the amount that 
hospitals pay to acquire the prescription drugs—and may 
vary the reimbursement rates for different groups of hospi-
tals. Second and alternatively, if HHS has not conducted 
such a survey, HHS must instead set the reimbursement 
rates based on the average sales price charged by manufac-
turers for the drugs (with certain adjustments), and HHS 
may not vary the reimbursement rates for different groups 
of hospitals. 
For 2018 and 2019, HHS did not conduct a survey of hospi-
tals' acquisition costs for outpatient prescription drugs. But 
HHS nonetheless substantially reduced the reimbursement 
rates for one group of hospitals—Section 340B hospitals, 
which generally serve low-income or rural communities. 
For those 340B hospitals, this case has immense economic 
consequences, about $1.6 billion annually. 
The question is whether the statute affords HHS discre-
tion to vary the reimbursement rates for that one group of 
hospitals when, as here, HHS has not conducted the required 
survey of hospitals' acquisition costs. The answer is no. 
We therefore reverse the judgment of the U. S. Court of Ap-
peals for the D. C. Circuit. 
I 
A 
In 2003, Congress passed and President George W. Bush 
signed landmark legislation expanding Medicare to cover 
prescription drugs. See Medicare Prescription Drug, Im-

728 AMERICAN HOSPITAL ASSN. v. BECERRA 
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provement, and Modernization Act of 2003, 117 Stat. 2066, 
42 U. S. C. § 1395. Under that 2003 law, HHS must annually 
set reimbursement rates for certain outpatient prescription 
drugs provided by hospitals. § 1395l(t)(14). 
The Medicare statute meticulously lays out the formula 
that HHS must employ to set those reimbursement rates. 
As relevant here, the agency's reimbursement rate for each 
covered outpatient prescription drug “shall be equal” to one 
of two measures: 
“(I) to the average acquisition cost for the drug for that 
year (which, at the option of the Secretary, may vary 
by hospital group (as defned by the Secretary based 
on volume of covered OPD services or other relevant 
characteristics)), as determined by the Secretary taking 
into account the hospital acquisition cost survey data 
under subparagraph (D); or 
“(II) if hospital acquisition cost data are not available, 
the average price for the drug in the year established 
under section 1395u(o) of this title, section 1395w–3a of 
this title, or section 1395w–3b of this title, as the case 
may be, as calculated and adjusted by the Secretary 
as necessary for purposes of this paragraph.” § 1395l(t) 
(14)(A)(iii) (emphasis added). 
To simplify a bit: Congress afforded HHS two options to 
set the reimbursement rates for hospitals. Option 1 applies 
if the agency has conducted a survey of hospitals' acquisition 
costs—that is, the amount that hospitals pay to acquire the 
prescription drugs. If the agency has conducted a survey 
and collected that data, HHS may set reimbursement rates 
based on the hospitals' “average acquisition cost” for each 
drug. See § 1395l(t)(14)(A)(iii)(I); see also § 1395l(t)(14)(D) 
(requirements for conducting surveys of hospitals' drug ac-
quisition costs). Importantly for present purposes, if HHS 
has conducted a survey of hospitals' acquisition costs, option 
1 authorizes HHS to vary those reimbursement rates for dif-
ferent groups of hospitals. 
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Option 2 applies if HHS has not conducted a survey of 
hospitals' acquisition costs. In that circumstance, the 
agency must set reimbursement rates based on “the average 
price” charged by manufacturers for the drug, as “calculated 
and adjusted by the Secretary as necessary for purposes 
of” this statutory provision. § 1395l(t)(14)(A)(iii)(II). The 
statute in turn sets “the average price” as 106 percent of the 
drug's average sales price. See ibid. (citing § 1395w–3a). 
Critically, option 2 does not authorize HHS to vary reim-
bursement rates for different groups of hospitals. 
For more than a decade after those provisions took effect 
in 2006, HHS did not conduct a survey of hospitals' acquisi-
tion costs. Indeed, HHS has only once attempted to conduct 
such a survey—in 2020, after this litigation commenced. At 
oral argument in this Court, the Government explained that 
HHS had not previously attempted to conduct such surveys 
because the surveys are “very burdensome on the study tak-
ers,” are “very burdensome on the hospitals,” and do not 
“produce results that are all that accurate.” Tr. of Oral Arg. 
41–42. 
As a result, until 2018, HHS consistently relied on option 
2 and set reimbursement rates for each drug based on the 
average-sales-price data provided by manufacturers. Every 
year, HHS set the reimbursement rates at about 106 percent 
of each covered drug's average sales price, and HHS used 
the same reimbursement rates for all hospitals. In other 
words, until 2018, HHS never varied the reimbursement 
rates by hospital group. See Medicare Program: Hospital 
Outpatient Prospective Payment and Ambulatory Surgical 
Center Payment Systems and Quality Reporting Programs, 
82 Fed. Reg. 52490, 52494–52495 (2017). 
During its rulemaking for 2018, HHS proposed a change 
to reduce the reimbursement rates only for 340B hospitals. 
Importantly, HHS did not conduct a survey of hospital acqui-
sition costs. As a policy matter, HHS said that its existing 
reimbursement rates resulted in what the agency viewed as

730 AMERICAN HOSPITAL ASSN. v. BECERRA 
Opinion of the Court 
overpayments to hospitals that serve low-income or rural 
populations through the federal 340B program. Federal law 
requires drug manufacturers to sell prescription drugs to 
those 340B hospitals at prices below those paid by other hos-
pitals. See 42 U. S. C. § 256b(a)(1) (setting a “ceiling price” 
that manufacturers can charge to 340B hospitals). Consist-
ent with the Medicare statute, however, HHS historically 
had reimbursed 340B hospitals for covered outpatient pre-
scription drugs at the same reimbursement rates that were 
set for all other hospitals. For 2018, HHS said that the uni-
form reimbursement rates combined with the discounted 
prices paid by 340B hospitals for prescription drugs meant 
that 340B hospitals were able to “generate signifcant prof-
its” when they provided the prescription drugs to Medicare 
patients. 82 Fed. Reg. 52494. 
In response to HHS's proposed change, the 340B hospitals 
countered that, under the Medicare statute, HHS could not 
single out 340B hospitals without conducting a survey of hos-
pitals' acquisition costs. With respect to HHS's policy argu-
ments, the 340B hospitals explained that the reimbursement 
payments for prescription drugs helped those hospitals offset 
the considerable costs of providing healthcare to the unin-
sured and underinsured in low-income and rural communi-
ties. The 340B hospitals pointed out, moreover, that Con-
gress had long been aware of the situation. Indeed, the 
hospitals claimed that Members of Congress not only were 
aware, but actually intended for the 340B program's drug 
reimbursements to subsidize other services provided by 
340B hospitals. The hospitals noted that Congress had 
never singled out 340B hospitals for lower Medicare reim-
bursements for outpatient prescription drugs. Nor, until 
2018, had HHS ever done so. Furthermore, the 340B hospi-
tals asserted that reducing their reimbursement rates for 
prescription drugs would force those hospitals to eliminate 
or dramatically curtail other crucial programs that provide 
a wide range of medical services in low-income and rural 
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communities—such as treatments for cancer, mental health 
issues, opioid addiction, and diabetes. 
In the fnal rule for 2018, HHS decided to establish two 
separate reimbursement rates: one rate for non-340B hospi-
tals and another rate for 340B hospitals. The reimburse-
ment rate for non-340B hospitals remained at the historical 
rate of approximately 106 percent of the average sales price 
for each drug. But HHS established a substantially reduced 
rate for 340B hospitals—a rate equal to 77.5 percent of the 
average sales price for each drug. In setting that rate, HHS 
relied on an estimate from the Medicare Payment Advisory 
Commission that 340B hospitals obtained prescription drugs 
at an average discount of at least 22.5 percent below the av-
erage sales price charged by manufacturers. Id., at 52496, 
52499. HHS estimated that the reduction in the reimburse-
ment rates for 340B hospitals would save Medicare (and de-
prive 340B hospitals of) about $1.6 billion annually, which by 
law would be re-allocated for other Medicare services. Id., 
at 52509–52510. For 2019, HHS set reimbursement rates 
for 340B hospitals in the same way. 
When setting the 2018 and 2019 reimbursement rates, 
HHS acknowledged that it had not conducted a survey of 
hospitals' acquisition costs—the statutory prerequisite for 
varying the reimbursement rates by hospital group. Id., at 
52496. Nonetheless, HHS pointed to its statutory authority 
under option 2 to “adjust” the average price “ `as necessary 
for purposes of' ” this statutory provision. Id., at 52499. 
HHS claimed that its authority to “adjust” the average price 
for each drug also implicitly encompassed the authority to 
vary the reimbursement rates by hospital group. Ibid. 
B 
The American Hospital Association, along with two other 
hospital industry groups and several hospitals, sued in U. S. 
District Court to challenge HHS's 2018 and 2019 reimburse-
ment rates for 340B hospitals. Among other things, the 
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732 AMERICAN HOSPITAL ASSN. v. BECERRA 
Opinion of the Court 
Hospitals asserted that HHS did not conduct a survey of 
hospitals' acquisition costs and therefore could not impose 
different reimbursement rates on different groups of 
hospitals. 
In response, HHS frst contended that various statutory 
provisions precluded judicial review of the 2018 and 2019 re-
imbursement rates. As relevant here, HHS further argued 
that it could vary the reimbursement rates by hospital group 
under its authority to “adjust” the price-based reimburse-
ment rates, even though HHS had not conducted a survey of 
hospitals' acquisition costs. 
The District Court ruled for the Hospitals. The court re-
jected HHS's argument that the statute precluded judicial 
review. On the merits, the court concluded that HHS had 
acted outside its statutory authority, and the court remanded 
to HHS for the agency to consider an appropriate remedy. 
See American Hospital Assn. v. Azar, 385 F. Supp. 3d 1 (DC 
2019) (remedy); American Hospital Assn. v. Azar, 348 
F. Supp. 3d 62 (DC 2018) (merits). 
A divided panel of the U. S. Court of Appeals for the D. C. 
Circuit reversed. On the question of judicial review, the 
court unanimously ruled that the statute did not preclude 
judicial review. See American Hospital Assn. v. Azar, 967 
F. 3d 818, 824 (2020). On the merits, however, the court 
upheld HHS's reduced reimbursement rates for 340B hospi-
tals. Id., at 828. 
In dissent, Judge Pillard contended that HHS's reduced 
reimbursement rates for 340B hospitals contravened the text 
and structure of the statute. Id., at 835. In her view, 
“HHS may institute its large reductions, tailored for a dis-
tinct hospital group,” only if the agency has conducted the 
required survey of hospitals' acquisition costs. Ibid. 
This Court granted certiorari. 594 U. S. ––– (2021). 
II 
HHS frst argues that the Medicare statute precludes judi-
cial review of the 2018 and 2019 reimbursement rates. See 
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42 U. S. C. § 1395l(t)(12). The Court of Appeals rejected 
HHS's preclusion argument, as did the District Court. We 
likewise conclude that the statute does not preclude judicial 
review of HHS's reimbursement rates. 
This Court has long recognized a “strong presumption” 
in favor of judicial review of fnal agency action. Weyer-
haeuser Co. v. United States Fish and Wildlife Serv ., 586 
U. S. –––, ––– (2018) (quoting Mach Mining, LLC v. EEOC, 
575 U. S. 480, 489 (2015)). Judicial review of fnal agency 
action in an otherwise justiciable case is traditionally avail-
able unless “a statute's language or structure” precludes 
judicial review. Mach Mining, 575 U. S., at 486. 
No provision in the Medicare statute precludes judicial re-
view of the 2018 and 2019 reimbursement rates. More-over, 
the detailed statutory formula for the reimbursement rates 
undermines HHS's suggestion that Congress implicitly 
granted the agency judicially unreviewable discretion to set 
the reimbursement rates. Cf. Weyerhaeuser Co., 586 U. S., 
at ––– – –––. 
HHS cites two provisions—§§ 1395l(t)(12)(A) and (C)— 
that preclude judicial review of HHS's “development of the 
classifcation system under paragraph (2)” and “periodic ad-
justments made under paragraph [(9)].” But both of those 
provisions refer to the general payment methodology that 
HHS employs to set rates for other Medicare outpatient 
services. By contrast, when HHS sets rates for outpatient 
prescription drugs, it uses a different payment methodol-
ogy—namely, the methodology specifed by paragraph (14) 
of § 1395l(t). And nothing in the statute precludes judicial 
review of reimbursement rates set under paragraph (14). 
HHS further argues that allowing judicial review of the 
2018 and 2019 reimbursement rates would be impractical be-
cause the agency is required to operate the program on a 
budget-neutral basis. Due to that budget-neutrality re-
quirement, HHS says that a judicial ruling invalidating the 
2018 and 2019 reimbursement rates for certain hospitals 
would require offsets elsewhere in the program. The Hospi-
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734 AMERICAN HOSPITAL ASSN. v. BECERRA 
Opinion of the Court 
tals respond that various potential remedies could make 
340B hospitals whole for the past shortfalls without running 
afoul of the budget-neutrality provision. At this stage, we 
need not address potential remedies. Regardless, HHS's ar-
guments against judicial review cannot override the text of 
the statute and the traditional presumption in favor of judi-
cial review of administrative action. 
In sum, HHS's preclusion argument lacks any textual 
basis. We agree with the District Court and the Court of 
Appeals that the Medicare statute does not preclude judicial 
review of the 2018 and 2019 reimbursement rates. 
III 
We turn next to the merits. The question is this: If HHS 
has not conducted a survey of hospitals' acquisition costs, 
may HHS still vary the reimbursement rates for outpatient 
prescription drugs by hospital group? The answer is no. 
The 2003 Medicare Act authorizes HHS to set reimburse-
ment rates for covered outpatient prescription drugs pro-
vided by hospitals. The Act also specifes how HHS must 
set those reimbursement rates. 42 U. S. C. § 1395l(t)(14)(A). 
The statute therefore refects a careful congressional focus 
not only on the goal of proper reimbursement rates, but also 
on the appropriate means to that end. 
To reiterate, the statute affords HHS two options for set-
ting reimbursement rates for outpatient drugs. Option 1 
applies if HHS collects “hospital acquisition cost survey 
data” from hospitals. § 1395l(t)(14)(A)(iii)(I). If the agency 
has conducted a survey and collected that data, then HHS 
may use the data to set reimbursement rates equal to “the 
average acquisition cost for the drug.” Ibid. Importantly, 
in that circumstance, HHS may “vary” reimbursement rates 
“by hospital group.” Ibid. 
By contrast, if HHS does not conduct a survey of hospitals' 
acquisition costs and if acquisition cost data are therefore 
“not available,” HHS must instead proceed under option 2 
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Opinion of the Court 
and obtain price data from drug manufacturers. § 1395l(t) 
(14)(A)(iii)(II). And in that circumstance, HHS must set re-
imbursement rates based on “the average price for the drug” 
as “calculated and adjusted by the Secretary as necessary 
for purposes of” this statutory provision. Ibid. Critically, 
that second option does not authorize HHS to vary reim-
bursement rates by hospital group. Instead, HHS must set 
uniform reimbursement rates for all hospitals for each cov-
ered drug, and the rates must be equal to the average price 
for that drug for that year. 
HHS's authority to proceed under option 1 and to vary 
reimbursement rates by hospital group thus depends on 
whether HHS has obtained acquisition cost survey data from 
hospitals. The statute expressly authorizes HHS to vary 
rates by hospital group if HHS has conducted such a survey. 
But the statute does not authorize such a variance in rates 
if HHS has not conducted a survey. Cf. Babb v. Wilkie, 589 
U. S. –––, ––– (2020); Sandoz Inc. v. Amgen Inc., 582 U. S. 
1, 19–20 (2017); Russello v. United States, 464 U. S. 16, 23 
(1983). 
The statute thus protects all hospitals by imposing an im-
portant procedural prerequisite—namely, a survey of hospi-
tals' acquisition costs for prescription drugs—before HHS 
may target particular groups of hospitals for lower reim-
bursement rates. The survey allows the agency to deter-
mine whether there is in fact meaningful, statistically sig-
nifcant variation among hospitals' acquisition costs. The 
data regarding variation in hospitals' acquisition costs in 
turn help HHS determine whether and how much it should 
vary the reimbursement rate among hospital groups. See 
§§ 1395l(t)(14)(D)(iii)–(iv). But absent that survey data, as 
Congress determined, HHS may not make “billion-dollar de-
cisions differentiating among particular hospital groups.” 
967 F. 3d, at 837 (Pillard, J., dissenting). 
In this case, all agree that HHS did not conduct a survey 
of hospitals' acquisition costs. See, e. g., 82 Fed. Reg. 52501. 
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736 AMERICAN HOSPITAL ASSN. v. BECERRA 
Opinion of the Court 
HHS nonetheless varied the rates by hospital group, fxing 
a substantially lower reimbursement rate for 340B hospitals 
than for non-340B hospitals. 
Under the text and structure of the statute, this case is 
therefore straightforward: Because HHS did not conduct a 
survey of hospitals' acquisition costs, HHS acted unlawfully 
by reducing the reimbursement rates for 340B hospitals. 
HHS maintains that there is more to the case than that 
straightforward analysis would suggest. HHS emphasizes 
that even when it does not conduct a survey of acquisition 
costs and thus is required to employ option 2 (based on 
price), the agency still may “adjus[t]” the average price “as 
necessary for purposes of ” this statutory provision. 
§ 1395l(t)(14)(A)(iii)(II). 
It is true that the statutory text of option 2 affords HHS 
discretion to adjust the average price. The parties here vig-
orously debate how much HHS may adjust the price. To 
resolve this case, however, we need not determine the scope 
of HHS's authority to adjust the price up or down. 
Regardless of the scope of HHS's authority to “adjust” the 
average price up or down under the statute, the statute does 
not grant HHS authority to vary the reimbursement rates 
by hospital group unless HHS has conducted the required 
survey of hospitals' acquisition costs. Under the statute, 
varying a rate by hospital group is not a lesser-included 
power of adjusting price. Otherwise stated, HHS's power 
to increase or decrease the price is distinct from its power 
to set different rates for different groups of hospitals. 
The text of option 2 confrms the point. It requires reim-
bursement in an “amount” that is equal to “the average price 
for the drug in the year.” Ibid. The text thus requires the 
reimbursement rate to be set drug by drug, not hospital by 
hospital or hospital group by hospital group. The only item 
that the agency is allowed to adjust is the “average price for 
the drug in the year.” Ibid. Such an adjustment can con-
sist of moving the average-price number up or down, but it 
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Opinion of the Court 
cannot consist of giving a single drug two different average 
prices for two different groups of hospitals. (Tellingly, be-
fore 2018, the agency never used its adjustment authority to 
vary reimbursement rates by hospital group.) 
Moreover, HHS's contrary interpretation of the statute— 
and its broad understanding of its adjustment authority— 
would make little sense given the statute's overall structure. 
To proceed under option 1 (based on cost) and vary the rate 
by hospital group, HHS must conduct a survey. In HHS's 
view, the agency can decline to conduct a survey and can 
proceed under option 2, and then can still do everything 
under option 2 that it could do under option 1—including 
varying the reimbursement rates by hospital group. So 
under HHS's interpretation, the agency would never need to 
conduct a survey of hospitals' acquisition costs. But why, 
then, would Congress have constructed this elaborate stat-
ute premised on HHS's surveys of hospitals' acquisition 
costs, including specifying when HHS could vary reimburse-
ment rates by hospital group? HHS has no good answer to 
that question. 
HHS's interpretation not only would render irrelevant the 
survey prerequisite for varying reimbursement rates by hos-
pital group, but also would render largely irrelevant the pro-
vision of the statute that precisely details the requirements 
for surveys of hospitals' acquisition costs. See § 1395l(t) 
(14)(D). We must hesitate to adopt an interpretation that 
would eviscerate such signifcant aspects of the statutory 
text. See, e. g., Chicago v. Fulton, 592 U. S. –––, ––– (2021); 
Maine Community Health Options v. United States, 590 
U. S. –––, ––– (2020); Whitman v. Amer ican Trucking 
Assns., Inc., 531 U. S. 457, 484−485 (2001). 
In short, the statute allows HHS to set reimbursement 
rates based on average price and affords the agency discre-
tion to “adjust” the price up or down. But unless HHS con-
ducts a survey of hospitals' acquisition costs, HHS may not 
vary the reimbursement rates by hospital group. 
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738 AMERICAN HOSPITAL ASSN. v. BECERRA 
Opinion of the Court 
As a fnal argument, HHS insists that Congress could not 
have intended for the agency to “overpay” 340B hospitals for 
prescription drugs. But when enacting this statute in 2003, 
Congress was well aware that 340B hospitals paid less for 
covered prescription drugs. After all, that had been the law 
for the duration of the 340B program, which began in 1992. 
In 2003, Congress nonetheless did not see ft to differentiate 
340B hospitals from other hospitals when requiring that the 
reimbursement rates be uniform under option 2. And for 
more than a decade after this statute took effect, HHS em-
ployed option 2 but did not differentiate 340B hospitals from 
other hospitals—an agency practice that was known in the 
wider hospital industry and in Congress. 
If HHS believes that this Medicare reimbursement pro-
gram overpays 340B hospitals, it may conduct a survey of 
hospitals' acquisition costs to determine whether and how 
much the data justify varying the reimbursement rates by 
hospital group—for example, reducing reimbursement rates 
paid to 340B hospitals as compared to other hospitals. Or if 
the statute's requirement of an acquisition cost survey is bad 
policy or is working in unintended ways, HHS can ask Con-
gress to change the law. 
Of course, if HHS went to Congress, the agency would 
presumably have to confront the other side of the policy 
story here: 340B hospitals perform valuable services for low-
income and rural communities but have to rely on limited 
federal funding for support. As amici before this Court, 
many 340B hospitals contend that the Medicare reimburse-
ment payments at issue here “help offset the considerable 
costs” that 340B providers “incur by providing health care 
to the uninsured, underinsured, and those who live far from 
hospitals and clinics.” Brief for 37 State and Regional Hos-
pital Associations as Amici Curiae 7. As the 340B hospitals 
see it, the “net effect” of HHS's 2018 and 2019 rules is “to 
redistribute funds from fnancially strapped, public and non-
proft safety-net hospitals serving vulnerable populations— 
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Cite as: 596 U. S. 724 (2022) 739 
Opinion of the Court 
including patients without any insurance at all—to facilities 
and individuals who are relatively better off.” 967 F. 3d, at 
840 (Pillard, J., dissenting). In other words, in the view of 
those hospitals, HHS's new rates eliminate the federal sub-
sidy that has helped keep 340B hospitals afoat. All of which 
is to say that the 340B story may be more complicated than 
HHS portrays it. In all events, this Court is not the forum 
to resolve that policy debate. 
In sum, after employing the traditional tools of statutory 
interpretation, we do not agree with HHS's interpretation of 
the statute. We conclude that, absent a survey of hospitals' 
acquisition costs, HHS may not vary the reimbursement 
rates for 340B hospitals. HHS's 2018 and 2019 reimburse-
ment rates for 340B hospitals were therefore contrary to the 
statute and unlawful. 
* * * 
We reverse the judgment of the U. S. Court of Appeals for 
the D. C. Circuit and remand the case for further proceedings 
consistent with this opinion. 
It is so ordered. 
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Page Proof Pending Publication
Reporter’s Note 
The attached opinion has been revised to refect the usual publication 
and citation style of the United States Reports. The revised pagination 
makes available the offcial United States Reports citation in advance of 
publication. The syllabus has been prepared by the Reporter of Decisions 
for the convenience of the reader and constitutes no part of the opinion of 
the Court. A list of counsel who argued or fled briefs in this case, and 
who were members of the bar of this Court at the time this case was 
argued, has been inserted following the syllabus. Other revisions may 
include adjustments to formatting, captions, citation form, and any errant 
punctuation. The following additional edits were made: 
None

Retrieval chunks

• #1

  PRELIMINARY PRINT Volume 596 U. S. Part 2 Pages 724–739 OFFICIAL REPORTS OF THE SUPREME COURT June 15, 2022 REBECCA A. WOMELDORF reporter of decisions Page Proof Pending Publication NOTICE: This preliminary print is subject to formal revision before the bound volume is published. Users are requested to noti…

• #2

  judicial review of those rates. The agency also argued that it could vary the reimbursement rates by hospital group under its option 2 au- thority to “adjust” the price-based reimbursement rates. The District Court rejected HHS's argument that the statute precluded judicial re- view, concluded that HHS had acted o…

• #3

  price is distinct from its power to set different rates for different groups of hospitals. Moreover, HHS's interpretation would make little sense given the statute's overall structure. Under HHS's interpretation, the agency would never need to conduct a survey of acquisition costs if it could proceed under option …

• #4

  Kara Rollins; for the Pacifc Legal Foundation by Daniel M. Ortner and Glenn E. Roper; for the Yale New Haven Health System et al. by William B. Schultz and Margaret Dotzel; and for 37 State and Regional Hospital Associations by Chad Golder. Briefs of amici curiae urging affrmance were fled for the Federation of A…

• #5

  The question is whether the statute affords HHS discre- tion to vary the reimbursement rates for that one group of hospitals when, as here, HHS has not conducted the required survey of hospitals' acquisition costs. The answer is no. We therefore reverse the judgment of the U. S. Court of Ap- peals for the D. C. C…

• #6

  1 authorizes HHS to vary those reimbursement rates for dif- ferent groups of hospitals. Page Proof Pending Publication Page Proof Pending Publication Cite as: 596 U. S. 724 (2022) 729 Opinion of the Court Option 2 applies if HHS has not conducted a survey of hospitals' acquisition costs. In that circumstance, t…

• #7

  those 340B hospitals at prices below those paid by other hos- pitals. See 42 U. S. C. § 256b(a)(1) (setting a “ceiling price” that manufacturers can charge to 340B hospitals). Consist- ent with the Medicare statute, however, HHS historically had reimbursed 340B hospitals for covered outpatient pre- scription drug…

• #8

  rate for 340B hospitals—a rate equal to 77.5 percent of the average sales price for each drug. In setting that rate, HHS relied on an estimate from the Medicare Payment Advisory Commission that 340B hospitals obtained prescription drugs at an average discount of at least 22.5 percent below the av- erage sales pri…

• #9

  See American Hospital Assn. v. Azar, 385 F. Supp. 3d 1 (DC 2019) (remedy); American Hospital Assn. v. Azar, 348 F. Supp. 3d 62 (DC 2018) (merits). A divided panel of the U. S. Court of Appeals for the D. C. Circuit reversed. On the question of judicial review, the court unanimously ruled that the statute did not …

• #10

  HHS employs to set rates for other Medicare outpatient services. By contrast, when HHS sets rates for outpatient prescription drugs, it uses a different payment methodol- ogy—namely, the methodology specifed by paragraph (14) of § 1395l(t). And nothing in the statute precludes judicial review of reimbursement rat…

• #11

  average acquisition cost for the drug.” Ibid. Importantly, in that circumstance, HHS may “vary” reimbursement rates “by hospital group.” Ibid. By contrast, if HHS does not conduct a survey of hospitals' acquisition costs and if acquisition cost data are therefore “not available,” HHS must instead proceed under op…

• #12

  736 AMERICAN HOSPITAL ASSN. v. BECERRA Opinion of the Court HHS nonetheless varied the rates by hospital group, fxing a substantially lower reimbursement rate for 340B hospitals than for non-340B hospitals. Under the text and structure of the statute, this case is therefore straightforward: Because HHS did not c…

• #13

  Moreover, HHS's contrary interpretation of the statute— and its broad understanding of its adjustment authority— would make little sense given the statute's overall structure. To proceed under option 1 (based on cost) and vary the rate by hospital group, HHS must conduct a survey. In HHS's view, the agency can de…

• #14

  more than a decade after this statute took effect, HHS em- ployed option 2 but did not differentiate 340B hospitals from other hospitals—an agency practice that was known in the wider hospital industry and in Congress. If HHS believes that this Medicare reimbursement pro- gram overpays 340B hospitals, it may cond…

• #15

  We reverse the judgment of the U. S. Court of Appeals for the D. C. Circuit and remand the case for further proceedings consistent with this opinion. It is so ordered. Page Proof Pending Publication Page Proof Pending Publication Reporter’s Note The attached opinion has been revised to refect the usual publicat…