Industry Insights

340B Compliance – It’s All on the Covered Entity!

August 2015
Authors:  Todd Kenney

Todd Kenney



Health Care

1201 Walnut Street, Suite 1700
Kansas City, MO 64106-2246

Kansas City

 & Michael Earls

Michael Earls



Health Care
Not-for-Profit & Government

200 E. Main Street, Suite 700
Fort Wayne, IN 46802-1900

Fort Wayne

Washington, D.C., again hosted the 340B Coalition Summer Conference in July. More than 1,400 attendees heard multiple presentations and breakout sessions for each covered entity type that participates in the 340B Drug Pricing Program. One of the major discussion topics was compliance, with representatives from the Health Resources and Services Administration (HRSA) focusing on audits, Medicaid billing, contract pharmacy relationships and the upcoming recertification period for hospital-type covered entities. Covered entities were reminded that compliance with each aspect of 340B program participation is the covered entity’s responsibility. While the 340B program continues to be under attack from lobbyist groups and certain members of Congress, there appears to be bipartisan support, as the benefit it provides to safety-net providers is a desirable resource. 

HRSA representatives discussed their guiding principles—maximizing oversight and managing compliance risk. With increased funding from Congress for the 2015 year, HRSA focused on integrity efforts and compliance by establishing a new branch:  Program Performance and Quality (PPQ), which administers audits, recertification processes and certain other integrity efforts for both covered entities and manufacturers. The number of audits HRSA will perform in 2015 is expected to be approximately 200, with 135 audits being performed thus far in the current federal fiscal year, which ends September 30. Covered entities are selected for audits using either the random or target method. Random selections are made from a risk stratification system based on number of outpatient facilities, contract pharmacies, program complexity and purchase volume, while target selections are based on reported allegations or violations or as a follow-up to prior corrective action plans. Since 2012, HRSA has conducted 363 on-site audits that cover more than 4,000 child sites and 9,000 contract pharmacies. In the past year, HRSA has updated its audit protocol and made significant investments in staff training.

Participants were left with five key takeaways:

  1. Be prepared. Each covered entity should have policies and procedures that address all compliance areas.
  2. 340B program oversight is the covered entity’s responsibility. Software does not create compliance; the covered entity should understand how the system is set up to prevent diversion.
  3. Patient eligibility includes maintaining auditable records that demonstrate the covered entity is maintaining patient responsibility.
  4. Understand how your covered entity prevents duplicate discounts regardless of whether you carve in or carve out.
  5. Have methods in place to prevent diversion and perform self-audits. Covered entities with contract pharmacies are expected to engage in external reviews or mock audits.

Several panelists from covered entities across the U.S. spoke of their HRSA audit experiences, providing best practices and recommendations. Many lessons were consistent with HRSA’s message, including the importance of complete policies and procedures and taking ownership of program compliance. Many covered entities unknowingly rely on software vendors, consultants or contract pharmacies to maintain their program compliance, but all aspects of compliance are the covered entity’s responsibility. The panelists stressed the importance of performing self-audits of program compliance in addition to obtaining external compliance reviews and staying educated on new guidance or program changes. 

One topic not addressed in specific breakout sessions but of great concern for participants was the status and potential impact of the upcoming 340B omnibus guidance, which the industry refers to as the “Mega Guidance.” The Mega Guidance is expected to provide much-anticipated additional guidance on the patient definition in addition to other matters, such as hospital eligibility, contract pharmacy relationships, audit, Medicaid managed care and annual covered entity recertification. The expected public release of the proposed guidance has been delayed until at least fall 2015.

The 340B recertification window for hospital covered entities is August 5 through September 9, 2015. Information regarding the recertification process will be emailed from HRSA to the covered entity’s authorizing official and primary contact in early August. Authorizing officials will be emailed a username and password for completion of the registration. It’s important for covered entities to begin the recertification process early by reviewing the information listed in the OPA database and having any applicable changes ready before the recertification process begins. 

Earlier this month, HRSA published on its website keys to the recertification process, along with helpful hints and best practices. HRSA recently held a webinar on recertification, which also has been archived online.

For more information on this or other topics, contact your BKD advisor.

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