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Court Reverses Pharmacy Residency Program Disallowance

On March 29, 2021, the U.S. District Court of South Carolina granted the Medical University of South Carolina’s motion for summary judgment against the U.S. Department of Health & Human Services (HHS) for HHS’s disallowance of its postgraduate year one (PGY1) pharmacy residency costs.

Based on a reinterpretation of program regulations made without notice to stakeholders or an opportunity to comment, the Centers for Medicare & Medicaid Services (CMS) disallowed two years of pass-through funding. The court remanded the case to HHS, directing the agency to reimburse MUSC for its residency costs with interest. ASHP lacked standing to intervene in the case, but we submitted an amicus brief in support of MUSC, outlining the failure of CMS to provide meaningful regulatory guidance to residency programs.

The MUSC lawsuit was a precursor to the recent spate of residency program disallowances based on a reinterpretation of program regulations following publication of the 2018 Transmittal for Medicare Administrative Contractors (MACs). In December 2019, ASHP had a preliminary meeting with CMS to discuss residency program audits and the MACs’ application of new and inconsistent interpretations of residency program regulations. Since then, ASHP has followed up several times with the agency. We are still hoping to work with CMS to resolve the issue fully and to safeguard residency program funding.

The MUSC win is good news for residency programs facing disallowances following MAC program audits. While the facts of MUSC’s case may differ from other cases, the court’s finding that CMS’s disallowance was “arbitrary and capricious” will likely extend to similarly situated programs facing disallowances. At a minimum, the MUSC decision should force CMS to develop guidance for residency programs, as ASHP has previously requested.

ASHP will submit a letter to the agency requesting that, on the basis of the court’s decision, they reverse outstanding disallowances based on the agency’s erroneous interpretation of program regulations and issue compliance guidance outlining CMS’s expectations for PGY1 program operations.

You can help by sending an email to members of Congress asking them to protect pharmacy residency programs.

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