HRSA Lifts Major Barrier to Using 340B Drugs at Hospital Offsite Locations

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HRSA Lifts Major Barrier to Using 340B Drugs at Hospital Offsite Locations

In a major policy change, the U.S. Health Resources and Services Administration (HRSA) has begun advising 340B hospitals it may be possible for patients of a hospital’s offsite facility to be eligible to receive 340B-purchased drugs even though the facility itself is not yet registered in the 340B program.

In response to an inquiry from 340B Report, HRSA said yesterday it has “stated to hospitals who are unable to register their outpatient facilities” because the facilities are not yet listed as reimbursable on the hospital’s Medicare cost report “that patients of the new site may still be 340B eligible to the extent that they are patients of the covered entity.”

“These situations should be clearly documented in the covered entity’s policies and procedures,” HRSA said. “In addition, a covered entity is responsible for demonstrating compliance with all 340B program requirements and for ensuring that auditable records are maintained for each patient dispensed a 340B drug.”

HRSA said “we continue to only register hospital outpatient facilities on the 340B Office of Pharmacy Affairs Information System (OPAIS) that are listed as reimbursable on the hospital’s Medicare cost report.” It also said its 1994 final guidance on the inclusion of hospital outpatient facilities in 340B “is still in place.”

HRSA appears to be responding, at least partially, to 340B hospitals’ complaints that its site registration requirements should be more flexible during the COVID-19 public health emergency. The agency was asked but did not answer whether its decision was permanent or only for the duration of the COVID-19 emergency. 340B Health, a trade group for 340B hospitals, told its members June 2 that the change is not intended merely as an administrative flexibility but will be in effect for the long run. It also told its members it understands that HRSA and Apexus plan to update their frequently asked questions to reflect the new position.

Soon after the pandemic erupted, HRSA announced in April it would let some providers, upon request and review, to immediately enroll in 340B. It instructed such providers to contact Apexus, the 340B prime vendor, saying “we will evaluate each circumstance on a case by case basis.” Apexus has been asking hospitals seeking immediate site registration to:

  • Confirm that the need for the facility’s immediate registration of this facility is related to the hospital’s response to COVID-19
  • Detail the urgency for immediate registration
  • Explain what the facility will be used for
  • Confirm that the facility is listed as reimbursable on the Medicare cost report and meets all other 340B program requirements.

As we reported April 16:

Hospital have told us that while they appreciate HRSA’s easing of several 340B program requirements during the emergency, they are upset that they cannot immediately enroll off-site facilities in 340B during the pandemic. The reason, they say, is HRSA’s decision to maintain its pre-pandemic policy of requiring such sites, as condition of enrollment, to be listed as reimbursable on the hospital’s most recently filed Medicare cost report and have associated outpatient costs and charges. Hospitals say if the cost-report requirement isn’t relaxed, it could keep them from accessing 340B pricing at otherwise eligible sites until Jan. 1, 2021, defeating the purpose of HRSA’s enrollment flexibility in response to COVID-19. That, in turn, would affect their finances and ability to care for patients during the pandemic, they say.

William von Oehsen and Barbara Williams, principals at Powers Law, a 340B Report sponsor, said HRSA new stance on patient 340B eligibility in connection with hospital site registration “is huge news.”

“We think this is very good news for hospitals,” the lawyers said. “HRSA’s change in position makes a lot of sense because an individual’s status as a ‘patient’ should not depend on the timing of when a cost report is filed.” They said if a hospital takes advantage of HRSA’s policy clarification and is later audited, while it might receive an adverse finding for having an offsite facility that was not listed in the OPAIS, “it would no longer have to worry” about being cited for diversion of 340B drugs to ineligible patients.

“This is welcome news out of HRSA, and completely consistent with their authority under the governing statute,” said health care attorney Andrew Ruskin, a partner at Morgan Lewis. “I am sure that HRSA will find that this relaxation of policy will not likely lead to any program abuses, and one can hope that it results in the implementation of a similar policy even after the public health emergency.”

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Keeping Track of Your Compliance and Accreditation Obligations

Tony Zappa, CEO of ZAA Technologies, LLC, makers of LicenseTrak

All 340B covered entities would agree that program compliance is critical to their organizations. Loss of 340B savings would mean significant reductions in staffing, community services, and care provision. However, many 340B providers, including large health systems and community-based clinics, may not understand the day-to-day requirements of the various rules and regulations that govern 340B programs. And, others may not invest in sufficient resources to update procedures and audit performance against the rules.

A few years ago, I performed an external 340B program audit for a large academic health system. They had been audited before without any material findings. Yet even a cursory review of their program identified deficiencies, ranging from contract pharmacy agreements missing key compliance elements to ineligible providers being included as eligible. Reviews of individual prescriptions and medical services uncovered several qualified prescriptions that were, in fact, ineligible because of poor provider list updates. Having a routine internal-audit process driven by an application that scheduled, tracked, and documented compliance reviews and tasks would have prevented most, if not all of these deficiencies.

LicenceTrak’s Core and Accreditation module supports 340B program audits, along with requirements for accreditation programs, grants, quality assurance activities, and regulatory reviews. Tasks can be customized for any type of facility: For 340B, LicenseTrak can:

  • Schedule policy and procedure reviews and updates, and store completed documents for future audits
  • Schedule system updates and file reviews
  • Store contract pharmacy agreements and remind users to perform annual reviews against the 12 essential compliance elements
  • Schedule 340B program training and store completion records for each staff member
  • Document completion of HRSA file updates with reminders of future reviews.

If 340B is strategically important to your organization, don’t let a weak process derail program performance or value. Let LicenseTrak streamline compliance of your 340B program (and other regulatory or operational rules and requirements).  Visit for more information and to schedule a demo.

Tony Zappa, Pharm.D, M.B.A., is CEO of ZAA Technologies, LLC, makers of LicenseTrak. He has 35 years of executive experience in pharmacy and health care, including 10 years with 340B-related businesses. You can reach him at or on 844-542-8725.

Powerful Bipartisan Committee Chairs Press HHS To Speed Up COVID-19 Relief Disbursements

In a rare bipartisan rebuke, leaders of the U.S. House and Senate committees with jurisdiction over Medicaid asked U.S. Health and Human Services (HHS) Secretary Alex Azar yesterday how much longer must Medicaid-dependent providers have to wait to get “a dedicated tranche of funds” from the nation’s $175 billion pool of COVID-19 health care emergency relief.

“We are concerned…that providers that depend on Medicaid for a large source of their payments have not yet received a meaningful allocation” from the Public Health and Social  Services Emergency Fund for hospitals and other providers, wrote Sens. Chuck Grassley (R-Iowa) and Ron Wyden (D-Ore.) of the Senate Finance Committee and Reps. Frank Pallone (D-N.J.) and Greg Walden (R-Ore.) of the House Energy & Commerce Committee. “Many of these providers are safety net providers that operate on thin profit margins, if at all. The COVID-19 pandemic has strained their already scarce resources, threatening their ability to keep their doors open in the midst of a declared public health emergency.”

Congress and President Trump have deposited $175 billion into the COVID-19 emergency fund for health care providers. HHS distributed the first $50 billion in two batches: $30 billion based on providers’ shares of 2019 Medicare fee for service revenues and $20 billion on shares of revenue from all sources. Yesterday, June 3, was the deadline for many providers to apply to HHS to tap into the second batch of funds.

The department also has allocated $10 billion from the emergency fund to hospitals in COVID-19 high-impact areas, $10 billion to rural providers, and about $2 billion to the Indian Health Service and other providers. The administration is holding on to an unspecified portion of the emergency fund to reimburse providers at Medicare rates for treating the uninsured for COVID-19.

The committee chairmen and ranking minority members said in their letter to Azar that while they understand some of the reasons for the slowness in getting emergency aid to safety-net providers, “it is our sincere hope that HHS can martial its resourcefulness, and its relationship with states, to develop a methodology to fairly and robustly allocate funds for Medicaid providers that reflects their costs, the nature of their care, and the financial pressures they face.”

“Medicaid-dependent providers serve some of the frailest and most vulnerable Americans,” they said. “We must not let their financial insolvency due to the COVID-19 pandemic threaten access to essential care for these individuals.”

America’s Essential Hospitals President and CEO Bruce Seigel thanked the committee leaders for sending Azar the letter. “Emergency aid allocations so far have disadvantaged essential hospitals,” Seigel said. “Each day that passes without more funding for the safety net pushes these hospitals closer to a financial crisis that will put their communities at risk. The administration must act immediately to release more aid that targets Medicaid-reliant providers.”

The American Hospital Association (AHA), meanwhile wrote separately to Azar a day earlier  asking him to speed up and prioritize delivery of another $50 billion in COVID-19 relief funds to hospitals and health systems, with “hot spot” hospitals first in line, hospitals serving high numbers of Medicaid and uninsured patients next, then all hospitals based on “an equitable manner, such as number of beds,” all followed up with a new application-based relief process.

In its June 2 letter to Azar, AHA asked for $10 billion for hot-spot hospitals plus an additional $2 billion “based on a hospital’s low-income and uninsured population, $10 billion for hospitals “that care for the nation’s most vulnerable patients,” and $30 billion for all hospitals. The group said HHS next should create an application process to “reimburse eligible hospitals and health systems for health care-related expenses or lost revenues attributable to COVID-19.”

“We recognize that standing up a process to directly distribute funds based on hospital applications is not an easy or quick task,” AHA wrote. “This means that further distributions are necessary in the meantime to help maintain financial stability for hospitals.”

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Update on Push in Tennessee to Stop PBMs from Lowering 340B Payments

Tennessee Lookout, an independent nonprofit news site that covers Tennessee government and politics, wrote this week about the push for state legislation to stop pharmacy benefit managers (PBMs) from lowering drug reimbursement rates for 340B providers.

The state Senate Commerce and Labor Committee was scheduled to vote on the bill, SB 1942, this week but deferred action until June 9. Companion legislation in the state House, HB 1890, was “placed behind the budget” this week by the Finance, Ways, and Means Subcommittee, which means the subcommittee will revisit the bill after the state budget is set.

State Sen. Richard Briggs (R), sponsor of his chamber’s version of the bill, told the news site that the 340B program is helping to keep rural hospitals’ and government-funded clinics’ heads above water. The article also notes that the bill “has faced some resistance from insurance and pharmacy benefit management companies.”

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California Health Centers Continue Efforts to Stave Off Huge 340B Cuts

California community health centers and their supporters are continuing to pressure state lawmakers to stop Gov. Gavin Newsom (D) from implementing an executive order that could deprive the state’s 340B providers of potentially hundreds of millions of dollars in revenues from the state.

The Primary Care Development Corporation (PCDC), a national nonprofit lender to health centers and other providers of safety net health care, this week asked the California legislature’s budget committee and subcommittee chairs to delay Newsom’s order moving pharmacy benefits from Medicaid managed care into Medicaid fee for service. The transfer would save state government hundreds of millions of dollars, essentially all at the expense of health centers, hospitals, and others that now bill Medi-Cal managed care organizations for 340B-purcchased drugs. Medi-Cal FFS reimburses 340B drugs at acquisition cost, Medi-Cal MCO at negotiated rates.

“As a mission-driven lender with a history of expanding and enhancing quality primary care in low-income communities, we are acutely aware of how health centers and safety net providers rely on the 340B discount program to sustain and invest in access to care for hard to reach and underserved patients,” PCDC wrote. “Today, in the throes of the COVID-19 pandemic, California’s 340B providers, who exclusively serve the state’s most vulnerable patients, should be able to focus on what they do best: providing essential, quality care to underserved and at-risk populations.”

“While the overall goal of lowering drug costs is critically important, the impact of transitioning the pharmacy benefit to FFS on 340B covered entities and the communities they serve will be catastrophic,” the lender said.

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