340B Nongovernmental Hospital Eligibility Lacks Oversight

Thoughtware Alert Jan 23, 2020
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On January 10, 2020, the U.S. Government Accountability Office (GAO) issued a report indicating the Health Resources and Services Administration (HRSA) doesn’t have adequate processes in place to confirm eligibility of nongovernmental hospitals that participate in the 340B Drug Pricing Program (340B Program).

For a nongovernmental hospital to be eligible for 340B Program participation, it must be nonprofit and have a contract in place with a state or local government to serve low-income patients who aren’t entitled to benefits under Medicare or Medicaid.

The GAO reviewed contract documentation for 258 nongovernmental hospitals and noted 18 hospitals submitted documentation that didn’t appear to meet the 340B Program contract documentation requirements. Further, the GAO identified 13 hospital contracts that didn’t appear to specify the hospital serves the low-income population as specified in the 340B Program requirements.

The GAO also noted that if contract issues were found during an audit, HRSA allowed hospitals to enter into new contracts and apply a retroactive effective date, ultimately allowing the hospital to avoid an adverse audit finding.

The GAO made six recommendations to HRSA, including:

  • Ensure the information it uses to verify nonprofit status is reliable
  • Implement a process to verify that every participating nongovernmental hospital has a contract with a state or local government that meets program requirements
  • Provide more specific guidance to auditors on how to determine whether a contract meets program requirements
  • Revise audit procedures to document assessment of contracts and require nongovernmental hospitals to demonstrate they have a contract with a state or local government prior to the beginning of their audit period

Nongovernmental hospitals participating in the 340B Program should review their current contracts to help ensure all 340B Program requirements are met.

For more information on these matters, contact your BKD Trusted Advisor™ or use the Contact Us form below.

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