Editor’s note: New information from HRSA and Apexus obtained as we were going to press appears at the end of this article.
Hospital representatives said they were floored to learn yesterday that a June 2020 federal 340B patient eligibility policy clarification that they thought was permanent will end Thursday.
In response to the news, many hospitals yesterday began rethinking plans to open new offsite outpatient clinics whose existence depends on revenue from prescribing or administering 340B drugs at the sites.
A health system pharmacy director who requested anonymity said yesterday it is scheduled to open an offsite location on Monday. It has been in the works for several months and the system now does not know what to do, he said. The system also does not know what to do about recently opened offsite locations whose patients are 340B-eligible now but after May 11 will be ineligible to receive 340B drugs for about year.
“This is shocking,” he said.
Lawsuit Against HRSA Likely
Three attorneys whose clients include 340B hospitals and who spoke on background agreed in interviews yesterday that the U.S. Health Resources and Services Administration very likely will be sued if it proceeds.
“This is bananas,” one attorney said. “My initial reaction was, surely, they are going to walk this back once they realize they are not going to be able to proceed…. They cannot—they cannot—simply decide on a whim to change their underlying analysis and [disregard their] prior public communications on this.”
The controversy is over the impending withdrawal of a June 6, 2020, FAQ on HRSA’s then-new 340B COVID-19 resources webpage. (The FAQ was still on the page this morning.) The question posed was, “Are hospital covered entities able to register offsite, outpatient facilities before being listed as reimbursable on their Medicare cost report?”
HRSA answered: “In order to register for the 340B program and be listed on the 340B Office of Pharmacy Affairs Information System (340B OPAIS), HRSA must first verify that the offsite, outpatient facility is listed as reimbursable on the hospital’s most recently filed Medicare cost report and has associated outpatient costs and charges as outlined in HRSA’s 1994 outpatient hospital facilities guidelines.”
“HRSA notes 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 FAQ continued, with a link to HRSA’s 1996 340B patient definition guidance. “These situations should be clearly documented in the covered entity’s policies and procedures. In addition, a covered entity is responsible for demonstrating compliance with all 340B program requirements and ensure that auditable records are maintained for each patient dispensed a 340B drug.”
Hospitals had been complaining for years that due to the 1994 guidance it could take up to 22 months for an open and fully functional offsite location to become 340B-eligible. The lag-time problem was becoming acute early during the COVID-19 pandemic.
Although HRSA posted the FAQ in the context of the pandemic, 340B hospital attorneys noted that the FAQ itself did not mention the pandemic and appeared to them to be generally applicable.
HRSA confirmed that on June 8, 2020, in response to a question from 340B Report. It said the FAQ about patient 340B eligibility at new hospital offsite locations and an FAQ about patient eligibility and telemedicine “are in place regardless of the COVID-19 pandemic.”
The 340B Prime Vendor Program subsequently published an almost identical 340B program FAQ. It too was still publicly available this morning.
Early this month for an article about the May 11 expiration of the COVID-19 public health emergency, 340B Report asked HRSA if the two 340B patient eligibility policy clarifications that it told us in June 2020 would remain in place regardless of the pandemic would, in fact, stay in place when the PHE ended.
Three days after the 340B Report article was published, HRSA said on Friday, May 5: “HRSA would like to clarify that the flexibility that allowed hospitals to use 340B in offsite outpatient facilities not yet listed as reimbursable on a hospital’s Medicare cost report will no longer be available when the public health emergency expires.”
340B Report published a story yesterday morning about what HRSA told us. There was an immediate outcry from hospitals and their representatives.
“America’s Essential Hospitals hopes HRSA will make this flexible policy permanent, as it had previously indicated,” AEH Senior Vice president of Policy and Advocacy Beth Feldpush said yesterday.
“HRSA’s 2020 guidance on 340B hospital offsite locations was a positive step that relieved unnecessary burden and expanded access to affordable medications for marginalized patients,” Feldpush said. “Before this guidance, the time lag between when an offsite clinic is operational and considered part of the hospital and when the hospital files a cost report unnecessarily delayed the distribution of 340B drugs to patients. 340B hospitals have rigorous safeguards in place to ensure they are dispensing 340B drugs only to their eligible patients.”
The American Hospital Association and hospital group 340B Health each said yesterday they had no comment.
The existence of the 340B prime vendor FAQ on this topic and the fact that it does not refer to the COVID-19 pandemic caused hospitals to rely on “this flexibility remaining in place after the end of the PHE,” another attorney who represents 340B hospitals said. “I have clients that are counting on this…. This change will upend many hospitals’ plans to add outpatient sites. I’m very incensed about this.”
A third attorney who represents 340B hospitals said HRSA’s action did not surprise him. “Our guidance to clients has historically been, ‘Just understand that they may go back on this,’” he said.
The attorney predicted that HRSA’s decision would imperil rural and smaller hospitals most.
He said picture a small 340B hospital and a free-standing physician clinic both on their last breath, both of whose existence depends on merging. Under the policy HRSA will return to after Thursday, “it can be upward of 21 months” before the clinic will be eligible for enrollment in 340B.
“Some entities don’t have 21 months” to survive, he said. When you add on top of this the financial impact of drug manufacturers’ 340B contract pharmacy restrictions, “there undoubtedly will be very real safety-net resource concerns as a direct result of this,” he said.
HRSA, Apexus Communications on Updated Policy
Emily Cook, partner at law firm McDermott Will & Emery, said HRSA and Apexus this morning both answered questions she asked yesterday about the status of their respective FAQs on patient 340B eligibility at hospital offsite outpatient locations not yet on the hospital’s most recently filed cost report.
“Regarding the question about sites not yet registered, during the COVID-19 PHE, HRSA understood the evolving impact of the COVID-19 pandemic and implemented additional flexibilities when possible,” HRSA told Cook. “While HRSA allowed this flexibility during the COVID-19 PHE, HRSA is returning to pre-COVID policy regarding registration of outpatient facilities. Consistent with HRSA’s longstanding 1994 Guidelines, an off-site outpatient facility is eligible to be registered in the 340B Program if the outpatient facility is listed as a reimbursable facility on a 340B hospital’s most recently filed Medicare cost report and has associated outpatient costs and charges. Hospitals registering outpatient facilities will be asked to enter several figures from Worksheet A and Worksheet C from the latest filed Medicare cost report and the associated trial balance to determine eligibility. For more information on hospital off-site outpatient facility registration requirements, visit Hospital Registration Instructions (PDF). In addition, all other 340B guidance regarding the use of 340B drugs for eligible patients must be met.”
“HRSA has reviewed this practice and to ensure compliance with program policy, we have determined that we will be returning to pre-COVID policy regarding registration of outpatient facilities,” HRSA continued. “Beginning May 11, 2023, at 11:59 PM ET, the hospital should stop purchasing and using 340B drugs for that outpatient facility that is not yet registered. Any eligible 340B accumulations accrued during the COVID-19 PHE timeframe may be carried over with appropriate recordkeeping to the extent that the facilities were eligible. The outpatient facility may begin purchasing and using 340B drugs once it is a reimbursable facility on the hospital’s most recently filed Medicare cost report and registered on the 340B Office of Pharmacy Affairs Information System (340B OPAIS) as a child site.”
Apexus, meanwhile, sent Cook this newly HRSA-approved FAQ:
Q: During the COVID-19 PHE, HRSA allowed a hospital’s outpatient facility to use 340B for eligible 340B patients even though the outpatient facility was not yet listed on the hospital’s most recently filed Medicare Cost Report. Will HRSA still allow this practice?
A: During the COVID-19 PHE, HRSA understood the evolving impact of the COVID-19 pandemic and implemented additional flexibilities when possible. While HRSA allowed this flexibility during the COVID-19 PHE, HRSA is returning to pre-COVID policy regarding registration of outpatient facilities.
Consistent with HRSA’s longstanding 1994 Guidelines, an off-site outpatient facility is eligible to be registered in the 340B Program if the outpatient facility is listed as a reimbursable facility on a 340B hospital’s most recently filed Medicare cost report and has associated outpatient costs and charges. Hospitals registering outpatient facilities will be asked to enter several figures from Worksheet A and Worksheet C from the latest filed Medicare cost report and the associated trial balance to determine eligibility. For more information on hospital off-site outpatient facility registration requirements, visit Hospital Registration Instructions (PDF). In addition, all other 340B guidance regarding the use of 340B drugs for eligible patients must be met.
