On September 27, 2023, the Health Resources and Services Administration (HRSA) issued a Notice in the Federal Register applicable to all 340B Program hospitals that formally ends a COVID-era waiver of the long-standing HRSA requirement that off-site, outpatient facilities be (1) listed as reimbursable on the hospital’s Medicare Cost Report prior to participating in the 340B Program; and (2) registered and listed in the Office of Pharmacy Affairs Information System (OPAIS) prior to participating in the 340B Program.

The waiver was originally set forth in an HRSA FAQ stating that for those “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.” (Emphasis original). The FAQ implied that patients of provider-based outpatient clinics of a hospital could be eligible for 340B drugs before the outpatient clinic was listed as reimbursable on the hospital’s most recently filed Medicare Cost Report and had listed associated outpatient costs and charges. This interpretation was based on language in HRSA’s 1996 guidance implying that patients of a physician under contract with a covered entity would be considered patients of the covered entity as long as the care provided is within the contractual arrangement and the covered entity maintains responsibility for the care and health record documentation.

The FAQ was rescinded after the official end of the public health emergency (PHE) on May 11, 2023. However, no formal statement was issued by HRSA until now concerning the implications of its removal. This Notice provides 340B Covered Entity hospitals with clarity as to HRSA’s intention to reinstate its original guidelines and establish sufficient time for hospitals to come into compliance. The Notice also reinforces that at all times, for reimbursement purposes under Medicare under 42 C.F.R. 413.65(e), provider-based clinics were obligated to, among other things, “demonstrate a high level of integration with the main provider by showing that it meets all of the other provider-based criteria and demonstrates that it serves the same patient population as the main provider.”

HRSA determined that formally ending the waiver is appropriate as the COVID-19 PHE has ended, and to support HRSA’s program integrity efforts and its ability to administer the 340B Program. HRSA indicates in the Notice that HRSA cannot verify whether use of 340B drugs at unregistered off-site, outpatient facilities is warranted “leading to possible diversion and duplicate discounts.” HRSA highlights the confusion surrounding the waiver indicating “some covered entities believe the waiver would continue indefinitely and would not be tied to the end of the PHE.” Accordingly, HRSA has issued the Notice including a transition period for such covered entities to come into compliance with the registration requirements for off-site, outpatient facilities.

HRSA will begin enforcing registration requirements as follows:

1. For Unregistered Sites. Any offsite, outpatient facility currently listed on the hospital’s most recently filed Medicare Cost Report with associated outpatient costs and charges that has not yet registered in OPAIS, may continue to use 340B drugs for patients of the covered entity pending registration of the facility in OPAIS during the next 340B Program quarterly registration period (January 1 – 16). Failure to register may result in an audit and other compliance action by HRSA.
2. For Sites Not Listed on MCR with Associated Costs. Any offsite, outpatient facility not yet listed as a reimbursable facility on the hospital’s most recently filed Medicare Cost Report with associated outpatient costs and charges may continue to use 340B drugs for patients of the covered entity under the following conditions. Failure to so comply would restrict the covered entity from purchasing 340B drugs for use at those facilities and would subject the covered entity to audit and compliance action.
   • The offsite, outpatient facility’s use of 340B drugs predated the Notice; and
   • The hospital covered entity for the offsite, outpatient facility must email HRSA at 340Bcompliance@hrsa.gov within 90 days of the Notice with registration information (i.e., name of the offsite, outpatient facility; date site will be listed on the hospital’s next Medicare Cost Report with associated outpatient costs and charges; and date covered entity will register the site in OPAIS).
3. For Noncompliant Sites. Any offsite, outpatient facility not yet listed as a reimbursable facility on the hospital’s most recently filed Medicare Cost Report with associated outpatient costs and charges, that has not yet registered in OPAIS, and is not otherwise in compliance with the foregoing compliance categories may not use 340B drugs at the unregistered sites “as soon as practically possible, but no later than 90 days” after the publication of the Notice. Failure to comply with this 90-day grace period will result in an audit and compliance action. 

We will continue to monitor the Notice’s impacts on the 340B Program and Covered Entities.

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