The mega wait is over! The Health Resources and Services Administration (HRSA) recently released for comment the much-anticipated 340B “mega-guidance.” The draft omnibus guidance clarifies previous 340B program requirements, which were largely vague and open to interpretation in several areas. In today’s environment of highly publicized government scrutiny and oversight regarding healthcare regulatory compliance, organizations participating in the 340B program should be aware of the changes proposed in this new rule, and the degree to which they will affect current 340B policies and procedures. Specifically, updates to the patient eligibility criteria may have many 340B program participants revisiting (and restricting) their patient definition requirements, resulting in more limited 340B savings available.
The 340B program was created to allow safety-net healthcare providers (such as disproportionate share hospitals) to stretch scarce federal resources by requiring that pharmaceutical manufacturers offer certain outpatient drugs at discounted rates. However, to remain compliant, entities participating in the 340B program (known as covered entities) must have strong controls in place to ensure 340B dispensations are provided to patients who meet multiple criteria. In particular, HRSA previously detailed general requirements as part of the 340B eligible patient definition, which included that the covered entity retains “responsibility for the individual’s care” and that the covered entity has a contractual or other relationship with the prescribing provider. In addition, 340B drugs should only be administered to patients during outpatient status encounters; however, the preferred method for determination of outpatient status was not explicitly defined.
Given this lack of specificity, covered entities were left to interpret and apply the patient definition criteria to identify eligible patients at varying levels. For example, conservative entities might only choose to include patients who received a prescription from a physician employed by the hospital. Others might choose to include prescriptions written by physicians on the hospital’s medical staff or those dispensed based on a referral for consultation.
In the new 340B Omnibus Guidance, HRSA seeks to clarify this “gray area” by expanding upon the criteria within the patient definition, which would narrow the scope of the program for many covered entities. Notably, HRSA now explicitly recommends that 340B-eligible dispensations are identified on a “prescription-by-prescription or order-by-order basis,” instead of the broad application of criteria to identify certain patients or physicians for whom all prescriptions are considered eligible. In addition, HRSA revised the patient definition to include the following requirements:
- 340B-eligible prescriptions must originate from a healthcare service provided at a registered 340B facility. This means that prescriptions to patients seen in a physician’s private practice are not eligible.
- The prescribing provider either must be employed by the covered entity or an independent contractor such that the entity may bill for services on behalf of the provider. HRSA cited examples of compliant relationships which included faculty practice and established residency, internship, and locum tenens arrangements. HRSA also stated that medical staff privileges alone are not sufficient in the determination of eligibility.
- Patient status should be determined based on how the patient’s service is billed to the patient’s insurance. This clarification could be cause for concern for many entities, which may have previously interpreted a patient to be 340B eligible if drugs were prescribed when the patient was considered an outpatient, even if the services billed were related to an inpatient stay. For example, prescriptions issued at the time of a patient’s hospital discharge from an inpatient surgical stay may no longer be eligible based on the new guidance.
In addition to the comprehensive patient definition updates, HRSA also highlighted three exceptions for the group purchasing organization (GPO) prohibition, which allow hospitals to purchase 340B-covered outpatient drugs from GPOs under certain circumstances. Also, HRSA clarified its stance on determinations for Medicaid managed care patients and proposed a record retention standard of at least five years. In addition, HRSA proposed a requirement of annual independent audits of contract pharmacy arrangements.
HRSA continues to improve its program integrity efforts with increased audits of covered entities and strengthened program oversight. However, as noted in a March 2015 congressional hearing, the number of covered entities has doubled from 2001 to 2011, necessitating even greater program transparency and accountability. Further, in addition to audits performed by HRSA, pharmaceutical manufacturers also are permitted to conduct audits of covered entities to ensure compliance. Thus, in conjunction with the updated and more restrictive program guidance, HRSA’s focus on 340B compliance will likely continue to grow into the future, highlighting the importance of ensuring an up-to-date compliance plan with strong program controls and both internal and independent audit functions.
HRSA is accepting comments on the proposed rule through October 27, 2015.
If you have any questions about 340B compliance or would like to discuss an independent review of your organization’s 340B program compliance activities, contact PYA at (800) 270-9629.
