Published May 5, 2023

Preparing for the End of PHE: Impacts to the 340B Program

The end of the COVID-19 public health emergency (PHE) means the end of federal regulatory waivers and flexibilities. Providers now must roll back policies and practices implemented in reliance on those waivers and flexibilities. Unless stated otherwise, return to normal operations must be completed before May 12, 2023.

The COVID-19 pandemic brought many flexibilities to covered entities (CEs) participating in the 340B program.[1] While the Health Resources and Services Administration (HRSA) showed no real leniency with 340B auditing efforts and continued to conduct desk audits of CEs throughout the pandemic, flexibilities were extended related to entity and child site[2] registration, provider definition and subsequent medical record documentation, and overall program eligibility for some entity types. With the ending of the PHE quickly approaching, PYA has outlined three key areas to consider and evaluate in order to remain compliant with 340B program requirements.

Three Impacts to Covered Entities Resulting from the End of the PHE

1. Entity and Child Site Registration

Prior to the pandemic, all CEs, child sites, and contract pharmacy arrangements were required to register with the Office of Pharmacy Affairs (OPA) database during one of the designated registration windows. This registration process typically took 150 to 210 days, with participation effective dates aligning with the beginning of the following quarter (approximately three months post-registration window).

Pre-Pandemic 340B Program Registration Timeline

Pre-Pandemic 340B Program Registration Timeline

In light of COVID-19, HRSA allowed some organizations, upon request and review, to enroll in the 340B program without going through the enrollment cycle. A supplemental Medicaid Exclusion File was posted every Friday outlining those new CEs added through this flexibility. CEs were also permitted to add and enroll off-site, outpatient clinic child sites without having to wait for a registration window and subsequent start date. As soon as the child site was deemed eligible to be listed on the CE’s Medicare cost report, it was eligible for enrollment. This flexibility granted CEs and their child sites immediate access to drug savings through the 340B program.  

As the PHE comes to an end, CEs should be prepared to operate under the pre-pandemic registration process and timeline. Any covered entity that enrolled during the PHE should ensure they understand and adhere to all requirements for recertification. CEs should continually monitor their program eligibility (see #3 below). If CEs are contemplating adding new child sites or contract pharmacy arrangements, they should identify the appropriate registration window and plan for future start dates vs. immediate access to drug savings.

2. Provider Definition and Medical Record Documentation

During the PHE, many CEs might have expanded their provider definitions to meet patient demands. Some organizations relied upon volunteer health professionals to deliver care. HRSA required emergency documentation that clarified the relationship between the provider and the CE, as well as the CE’s responsibility for providing care. Documentation was required to recognize the emergency nature of the situation and include the name and address of the volunteer, as well as his or her relationship to the clinic or hospital.

HRSA also understood that providers may not have had access to full medical histories, patient insurance information, and/or other patient demographic identification documentation during the PHE. In response, HRSA issued guidance stating an abbreviated health record would be adequate for purposes of documenting the patient/provider relationship and the CE’s responsibility for patient care as required by the 340B program. At a minimum, the health record was required to identify the patient, record the medical evaluation, and outline the treatment provided or prescribed.

As CEs return to pre-pandemic operations, they should review their provider definition, updating as needed and removing any provider types no longer meeting that definition. The eligible prescriber listing should also be regularly reviewed with updates communicated to all registered contract pharmacies and with any applicable split-billing software vendors. Policies and procedures should be reviewed to note the effective date of a revised procedure (during COVID) and return to pre-pandemic requirements (post-May 12, 2023). CEs should ensure medical record documentation is sufficient to meet HRSA’s pre-pandemic expectations and that all records are maintained in an auditable manner. Finally, as Medicare reverts to typical (i.e., longer) timelines for provider enrollment, CEs should ensure they are allowing sufficient time within the onboarding process to allow for full provider credentialing.

3. Overall Program Eligibility

340B program eligibility requirements for parent sites differ depending on organization type.

340B Program Eligibility by Entity Type

340B Program Eligibility by Entity Type

Many CEs expressed concerns about maintaining program eligibility during the COVID-19 pandemic due to changes in volume and payer mix. For example, many hospitals saw fewer Medicaid patients receiving in-hospital services during the pandemic. Additionally, as more patients have moved and continue to move from traditional Medicare plans to Medicare Advantage plans, the disproportionate share (DSH) dollars moving through the Medicare cost report were impacted because Medicare Advantage diagnosis-related groups (DRGs) are not included in the DSH calculation.

In response to this and other concerns, President Biden signed the Consolidated Appropriations Act 2022 on March 15, 2022, which protected some hospitals from losing their 340B program eligibility due to COVID-19. Protected hospitals must have been terminated from the 340B program due to an inability to meet the statutorily-required DSH percentage during Medicare cost reporting periods beginning October 1, 2019, and ending no later than December 31, 2022. Additionally, the hospital’s termination must have been a result of actions taken by the hospital or impacts resulting from the COVID-19 PHE, and the hospital must have been a CE on January 26, 2020, (i.e., the day before the first day of the COVID-19 PHE).

Presently, there is no indication that this flexibility will be extended.  As such, CEs (other than critical access hospitals with no DSH percentage requirement) will need to closely monitor their eligibility and plan accordingly. If a CE anticipates that they may lose eligibility due to an inability to meet the required DSH percentage, they may consider reaching out to the 340B Prime Vendor and/or local legislators. PYA is also able to assist in preparing or reviewing Medicare cost reports for accuracy and identifying potential missed opportunities for reimbursement as it relates to meeting the required DSH percentage.

As always, CEs should regularly review their policies and procedures related to the 340B program. They should evaluate any 340B-related changes made during the COVID-19 PHE for current relevance and compliance with pre-PHE rules and update as needed. CEs also should anticipate that HRSA could change from desk audits to in-person audits. CEs should remember the importance of preparing their programs by complying with registration and eligibility requirements, continuing to conduct routine auditing and monitoring of dispensation activity, and providing staff training and education.

For more information on the end of the PHE, visit our End-of-PHE Resources page.

If you have any questions regarding these matters or would like assistance in evaluating 340B program eligibility and compliance, please contact one of our PYA executives by email below or by calling (800) 270-9629.

[1] The 340B program was created in 1992 by President Bush and requires drug manufacturers to provide covered outpatient drugs to eligible CEs at significantly reduced prices. The CEs benefit from the difference between the drug’s reduced cost and the unadjusted reimbursement received from payers. Many CEs use these savings to provide additional community benefit programs to patients who are uninsured or underinsured.

[2] HRSA defines a child site as “a hospital clinic/department/offsite facility that is eligible to participate in the 340B program because it is an integral part of a hospital that participates in the program, as evidenced by the fact that it is reimbursable on the hospital’s Medicare cost report.”

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