5/13/2026 – Legal Fight Over HRSA’s Hospital Child Site Policy Continues, as Agency Appeals Court Decision

Overview

HRSA has appealed a federal district court’s decision that vacated the agency’s eligibility and registration requirements for new 340B hospital outpatient locations, allowing these sites to access 340B drugs as soon as they qualify as hospital outpatient departments under Medicare rules. The case now moves to the DC Court of Appeals. In the meantime, hospitals are free to use the 340B program at new sites without having to wait for the sites to meet HRSA’s eligibility and registration requirements. However, any hospital considering amending its policies and procedures to allow its new offsite outpatient locations to access 340B drugs sooner should carefully evaluate the relevant risks and benefits before doing so.

Background

In early March, the DC District Court invalidated HRSA’s policy that prohibited hospitals from using 340B drugs at new offsite outpatient facilities until 1) the costs and charges for a facility were included on a hospital’s filed Medicare cost report; and 2) the facility was registered in OPAIS as a “child site.” The district court determined that HRSA lacked the statutory authority to impose the policy. The invalidated policy created delays of between eight and twenty-three months before new hospital offsite outpatient sites could begin participating in 340B.

Because the district court decided the issue based on the 340B statute, HRSA cannot resurrect the policy in future rulemaking, leaving an appeal as the agency’s only option if it wanted to try to maintain the policy. HRSA has not updated its website to acknowledge or address the decision, nor has the agency filed a motion to stay the district court’s decision pending resolution of the appeal. Therefore, the agency’s eligibility and registration requirements for new hospital offsite outpatient locations are no longer in effect and will stay that way unless the appeal is successful.

Analysis

Some hospitals might want to modify their policies and procedures in light of the district court decision to allow their new offsite outpatient locations to access 340B drugs sooner. Hospitals should carefully consider the risks and benefits of such changes before making them. While we believe it will be challenging for HRSA to overturn the decision, we cannot rule out the possibility that the agency could prevail in its appeal. If the appellate court overturns the district court’s decision and an appeal to the Supreme Court is either unsuccessful or not pursued, then HRSA’s policy will go back into effect retroactive to the date of the district court’s decision. Any hospital that did not comply with the policy during the interim might receive a finding if audited by HRSA and, in turn, have to repay manufacturers.

Even if the policy ultimately falls, hospitals should be aware that HRSA could introduce a new registration requirement for offsite outpatient locations. However, the agency would be prohibited from reestablishing its filed cost report test for 340B eligibility or otherwise delaying a new offsite outpatient location’s ability to use 340B drugs, including conditioning eligibility upon registration. Hospitals should also note that wholesalers and manufacturers typically will not ship 340B drugs to a covered entity location until it appears in OPAIS. Therefore, even if a hospital offsite outpatient location is 340B-eligible as soon as it opens, the location would not be able to receive 340B drugs directly from wholesalers until it is registered in OPAIS.

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Please contact Powers’ drug pricing team, or your lead Powers attorney, if you have any questions.