Notable Mis-Quotables: Setting Organizational Policy When the Statute is Silent


As with so many other things in life, the 340B program has its own elements that have moved from practice, to accepted principles, to perceived law. This may be because we by nature want the program to be clearly and explicitly defined to prevent inadvertent and unintentional compliance errors. Fortunately, and sometimes unfortunately, the program has been designed by Congress and HRSA to allow for program application variation across the variety of covered entity types.

In the past, it was commonly accepted that only clinicians such as doctors, physician’s assistants and nurse practitioners were 340B eligible providers. A close read of HRSA’s Patient Definition reveals it says health care professional not prescriber or provider. Very much as we all remember movie lines like “Luke, I am your Father” and “Mirror, Mirror, on the wall” which were not ever said, the way people often recall the patient definition’s covered entities (CE) staff mention is often askew.

Adapting to Changes in Health Care Delivery

With the expanding roles of pharmacists and nurses in the care team, it can be helpful to include clarifying language in policy to address this. For example: “A health care professional who is either employed by the covered entity or provides health care under contractual or other arrangements (e.g. referral for consultation) such that responsibility for the care provided remains with the covered entity. The health center defines health care professionals to include physicians, dentists, physician assistants, nurse practitioners, registered nurses, pharmacists, and other professionals licensed to provide healthcare.”

Another place where practice has evolved into perceived law is the concept of the closed loop referral. In an ideal world, consulting specialists would immediately send visit notes back to the provider who referred the patient through a shared medical record. These notes would be complete, accurate, and include documentation of the prescription, including anticipating any payer required therapeutic substitutions.

Practical Steps for Ensuring Compliance with Specialists

In practice, it is not always possible to receive consult notes back in a timely fashion, or in some cases at all (e.g. Psych notes). The consult note, along with other elements, help to demonstrate the “responsibility for the care provided remains with the covered entity.” The closed loop referral process is one way to establish ongoing responsibility of care, but it is not the only one. As long as your policy is clear on how your CE deems ongoing responsibility of care to be met, the patient is active, and you have the outgoing referral, you will be HRSA audit ready.

To play devil’s advocate further, it could be argued that a scanned note in the chart from a specialist, is not as accessible in the clinical decision-making process as having the specialist prescriptions included in the patient’s medication list and the diagnosis in their problem list. To be clear, every effort should be made to obtain consult notes, but when that is not possible, CEs have other avenues to demonstrate ongoing responsibility of care for referral prescriptions.

The inclusion of referrals as 340B eligible comes from HRSA’s patient definition guidance published in 1996. To date, referrals are not mentioned in statute or regulation. As with so many other areas of the 340B program, HRSA recognizes that there will be a variety of applications across covered entities and looks for the CE to define their referral processes within policies and procedures. 

The guidance language calls out health care professionals who provides health care under contractual or other arrangements (e.g. referral for consultation).” The guidance does not say referral for consultation with a note back, or referral for consultation with a note naming the medication exactly as prescribed. These are both reasonable applications but likely overly rigid. In HRSA audits, the auditor is absolutely looking for the outgoing referral and to see the patient is active with the health center. The presence of a consult note is not the determining factor alone. 

Demonstrating Ongoing Responsibility of Care

HRSA FAQ 1493 states “If the covered entity can document that it retained responsibility for the health care services provided to the referred individual, then that individual may be eligible to receive 340B drugs from the covered entity. How a covered entity counts referrals under the 340B Program should be addressed in their written policies and procedures.”

Suggested language to include in policy if you take this approach: “The presence of consult note/clinical summary within the patient’s chart does not qualify nor disqualify 340B eligibility. The lack of a consult note should not be a barrier for an eligible patient receiving medication.”

Examples of Additional Strategies for Demonstrating Ongoing Responsibility of Care:  

1. Specialist initial or updated notes in EHR

2. Medication list includes prescription

3. CE visit note includes medication or specialist

4. Problem list includes related diagnosis

5. Patient has been seen in last 12-24 months by CE.

Implications of Genesis Healthcare vs. Becerra

The importance of continually coming back to the 340B statute, as the reference point for setting organizational 340B policies and procedures, has been poignantly re-emphasized in the litigation of the Genesis Healthcare v. Becerra  case. During oral arguments, when federal legal counsel was asked about the enforceability of the patient definition, he responded, “Your honor, this is non-binding guidance,” subsequently noting that “They [the CE] are subject to the statute.” 

The non-binding nature of guidance published by federal agencies, was again reinforced in HRSA’s 2020 statement that while the 2010 contract pharmacy guidance remained in effect, it was not legally enforceable.

HRSA’s Expectations When Setting Organizational Policy

HRSA directs CEs to established policies and procedures for areas where the 340B statute is silent, and therefore open to interpretation. HRSA FAQ 1526, addressing inpatient vs. outpatient status determinations, directs organizational policy determinations, noting they “must be auditable, transparent, and consistently followed.” The FAQ goes on to state that CEs should establish specific written policies and procedures and “be able to demonstrate compliance with this policy.” Consistent with HRSA’s expectation, in recent years, HRSA auditors have regularly been observed to request CE policy and procedures supporting the organization’s 340B program interpretations and applications for matters which are not directly addressed in 340B statute or regulations.

At the end of the day, it is important to know the elements of the 340B program that are legal requirements (falling under statute and regulation), understand the program’s intent, and develop systems and processes which deliver best patient care in compliance with the requirements. Best practice is to always go back to the source, the 340B statute, regulations, and guidance to determine program requirements.

Felicity Homsted is Chief Executive Officer at FQHC 340B Compliance, a 340B consulting firm focused on community health centers and other HRSA grantees.  She can be reached at

Click here to read our 340B Industry Leader Spotlight on Felicity.

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