340B Rebate Pilot Faces Legal and Congressional Challenges

Ahead of the revised 340B rebate pilot’s scheduled launch on January 1, 2027, the American Hospital Association, Maine Hospital Association,  and four hospitals have filed a lawsuit seeking to block the program. The pilot would replace upfront discounts with post-purchase rebates for 18 drugs subject to Medicare negotiated prices, requiring covered entities to pay full price before receiving rebates. Hospitals argue that HHS did not adequately assess the administrative costs, cash flow pressures, and potential effects on patient services, particularly at safety-net and rural hospitals. They also argue that the agency overlooked hospitals’ reliance on the existing discount model and failed to fully consider alternative approaches. The lawsuit follows an earlier court decision blocking the initial pilot, while newly introduced bipartisan legislation would delay the revised program for two years to give Congress more time to consider 340B reforms (Inside Health Policy, October 9).

CMS Expands Provider Exclusion Authority

On October 13, HHS Secretary Robert F. Kennedy Jr. delegated CMS the authority to exclude providers, insurers, and suppliers from federal healthcare programs for certain violations, including healthcare fraud, a responsibility previously held solely by the HHS Office of Inspector General (OIG). According to the HHS Statement of Delegation of Authority, the authority takes effect immediately and expands CMS’ enforcement options, particularly for Medicaid oversight. Certain exclusions may take effect before an appeals hearing, while OIG retains its existing authority and responsibility for hearings and regulations (Modern Healthcare, October 13).

CMS Releases Obligated Funds Report for Rural Health Transformation Program

On October 8, CMS released its first report on how states are utilizing Rural Health Transformation Program (RHTP) Funds, covering the period from December 31, 2025, through July 31, 2026. The report shows how much money each state committed, or “obligated,” to spend during the program’s first year, meaning the state has pledged to use those funds by September 2027, though the money may not be fully spent yet.  Per CMS, the report reflects obligated funds as of the reporting date and is not a full view of state progress. CMS will update the data after the November 30, 2026, Quarterly Report is released and quarterly thereafter. Overall, as of July 31, 2026, states had spent about $4B (40%) of the nearly $10B in Year 1 awards. The 10 states with the most dollars put to work account for about 47% of the national total. Georgia, Hawaii and New Hampshire reported 100% of their awards put to work; Maryland (99.4%), Connecticut (98.4%), Indiana (97.9%), California (93.8%) and Iowa (91.7%) were also above 90%. Alabama, Arkansas, Florida, Idaho, New Mexico, and Wyoming reported only program administration costs and nothing at the initiative level while New York and West Virginia reported zero dollars spent as of July 31 (Medicaid.gov, October 8).

Harvard Study Indicates That Urban and Rural Hospitals Closing at Similar Rates

Harvard’s T. H. Chan School of Public Health published a research letter in JAMA on October 8 detailing the longitudinal changes in hospital closures. The researchers reviewed a national panel of acute care hospitals from 2010 through 2025 and identified hospital openings and closures. Hospital closures were defined using federal standards, meaning the loss of inpatient services either through complete closure or conversion to nonacute care. Of the 4962 hospitals included in the study, 432 closed and 216 opened, leading to a net loss of 24,399 beds. Only 117 of the 432 closed hospitals retained nonacute services. Hospital closures increased 4% year over year while hospital openings decreased by 3% year over year. However, closure rates did not differ significantly by urban (9.1%) or rural (8.3%) status. Researchers did find that openings were generally among urban, for-profit, and small hospitals. In contrast, safety net hospitals and hospitals serving a high percentage of Medicaid patients did not frequently open. Midwestern and Southern states saw the greatest number of closures, particularly in states that did not expand Medicaid (Stateline News, October 8).