The American Hospital Association published a study that found 340B hospitals' community benefit increased significantly in 2020.

AHA Urges HRSA to Restore Policy Allowing Earlier Use of 340B Drugs in Hospital Outpatient Clinics

The American Hospital Association has asked the U.S. Health Resources and Services Administration to resume letting hospitals dispense 340B drugs at offsite clinics that have not yet appeared on the hospital’s most recently filed Medicare cost report.

AHA asked HRSA to restore its nearly three-year-old policy clarification and issue clarifying guidance “as soon as possible” in a June 5 letter. The request comes following HRSA’s abrupt decision to reverse the clarification in early May during the final days of the COVID-19 public health emergency (PHE), drawing ire from 340B hospitals.

In the letter to HRSA Administrator Carole Johnson, AHA stressed that HRSA’s decision to let hospitals start using 340B drugs at certain offsite locations sooner than previously allowed was not specifically tied to new authority granted under the PHE. As a result, AHA said HRSA’s recent move was an “arbitrary and unexplained policy change” that left hospital systems with significant operational and financial challenges.

HRSA told 340B Report on May 5 the policy would end when the COVID-19 public health emergency ended on May 11, nearly three years after HRSA told 340B Report the policy was “in place regardless of the COVID-19 pandemic.” Meanwhile, we also reported in May that the government’s 340B prime vendor had confirmed to an outside law firm in 2020 that the policy clarification would apply regardless of COVID-19.

Initial HRSA clarification did not cite PHE

During the COVID-19 pandemic’s first wave, HRSA noted in an FAQ on its then-new COVID-19 340B Resources webpage that “for hospitals who are unable to register their outpatient facilities because they are not yet on the most recently filed Medicare cost report, the patients of the new site may still be 340B eligible to the extent that they are patients of the covered entity.” (The COVID-19 Resources webpage is no longer available).

However, the FAQ cited HRSA’s 1996 guidance on patient definition—and not flexibilities afforded by the PHE—as the rationale for the policy clarification. As such, AHA argued that the policy clarification should not have been reversed at the end of the PHE: “Nowhere in the FAQ does it state that the 1996 guidance was no longer in effect or that the FAQ itself was a change in policy or that it was in any way tied to the PHE or a general flexibility afforded to hospitals during the pandemic.” HRSA’s 1996 guidance outlines the criteria for patients that can receive 340B drugs, but it does not specifically limit the locations where 340B drugs can be dispensed.

Because HRSA’s FAQ guidance and subsequent communications had led hospital systems to believe the policy change was permanent, AHA described the abrupt reversal as “arbitrary and unexplained.” We previously covered brewing outrage among hospital systems over HRSA’s decision in the days immediately following the announcement.   

‘Significant challenges’ for 340B hospitals

Hospitals participating in the 340B program rely on HRSA’s guidance and FAQs to inform operational decisions, including the way they categorize new outpatient clinics. As a result, AHA said unexpected changes to HRSA policies such as the recent reversal can generate “significant challenges, both operationally and financially” for hospital systems. Specifically, AHA pointed toward “unsustainable” financial losses for hospitals at a time where many providers are reeling from inflationary cost pressures and widespread drug shortages.

Prior to the FAQ published at the start of the COVID-19 pandemic, HRSA had long said that before a hospital offsite outpatient facility may be registered for 340B it must be listed as reimbursable on the hospital’s most recently filed Medicare cost report and have associated outpatient costs and charges, as outlined in 1994 340B program guidance. Hospitals have complained that under this policy it can take up to 22 months for an open and fully functioning offsite location to become 340B-qualified.

The letter closed with AHA urging HRSA to “promptly issue clarifying guidance that restores the prior policy consistent with the agency’s 1996 340B patient definition guidance,” which would then ensure hospitals can continue to purchase 340B drugs for eligible patients who have not yet been included on the hospital’s most recently filed Medicare cost report.

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