There are initial indications that the Health Resources and Services Administration (HRSA), which administers the federal 340B drug pricing program, may allow hospitals to begin using 340B drugs at offsite locations (“Child Sites”) as soon as those locations meet Medicare provider-based requirements, even if they do not yet appear on a filed Medicare cost report.  If this proceeds, this could advance 340B participation of Child Sites by as much as one year or more.

Historically, HRSA has prohibited hospitals from utilizing 340B drugs / generating 340B contract pharmacy prescriptions at Child Sites until they appeared on a filed Medicare cost report and were registered in the 340B Program. Even in a best case scenario, this resulting in a waiting period of approximately 6 months. This apparent change in position brings welcome news, particularly during COVID-19 pandemic. However, there are still some unanswered questions that Polsinelli’s 340B team continues to explore. Examples include: how will this change appear in the HRSA / Bizzell audit process, will HRSA auditors now need to validate provider-based compliance to assess if pre-registration 340B utilization was appropriate, and how will this change the Child Site registration process?

HRSA’s 340B prime vendor, Apexus, developed two internal FAQs last month that they indicated address the policy / enforcement change. Apexus advised that the FAQs were approved by HRSA. These FAQs (copied below) provide that although a Child Site must report reimbursable outpatient costs and charges on its most recently filed cost report to be listed on the 340B Office of Pharmacy Affairs Information System (OPAIS), the Child Site may be able to qualify drugs for 340B before it is listed on the cost report / registered.  The FAQs also appear to give hospitals the flexibility to begin using 340B drugs at Child Sites under circumstances where the hospital, subject to the 340B program’s prohibition on group purchasing, has moved a clinic outside the four walls, but the clinic has not yet reported costs and charges on the cost report.  Neither HRSA nor Apexus have yet published FAQs or guidance on this topic, although we understand that guidance may be forthcoming. In the interim, we urge 340B hospitals to proceed with caution and properly document support in their policies and procedures.

Apexus FAQ 1

Question: Hospitals that have only ‘costs’ associated with that cost center/department have been rejected from 340B registration because they had to wait for revenue to be on the MCR for that cost center/dept. Does worksheet A (and/or C) have to show costs, revenue, or both? For example, a clinic might just be opened and have costs, but has not seen patients (no revenue on cost report). Would such a clinic be eligible?

Answer: HRSA is not able to register and list this site on 340B OPAIS at this time. In order to be registered and listed on the 340B Office of Pharmacy Affairs Information System (OPAIS), the site must have reimbursable outpatient costs and charges on the most recently filed Medicare cost report. However, until such time the site is listed on the cost report, you should evaluate whether the patients of the site would be considered eligible patients of the hospital and defined in your policies and procedures. More information on HRSA’s patient definition guidance can be found here.

Apexus FAQ 2

Question: Our hospital subject to the GPO Prohibition moved a clinic outside the four walls but didn't register it on the 340B OPAIS. It is not on the most recently filed cost report at that location but will be on our next cost report as a reimbursable clinic. Will OPA consider the site "continuously eligible?”

Answer: HRSA is not able to register and list this site on 340B OPAIS at this time. In order to be registered and listed on the 340B Office of Pharmacy Affairs Information System (OPAIS), the site must have reimbursable outpatient costs and charges on the most recently filed Medicare cost report. However, until such time the site is listed on the cost report, you should evaluate whether the patients of the site would be considered eligible patients of the hospital and defined in your policies and procedures. More information on HRSA’s patient definition guidance can be found here.

Key takeaways for impacted covered entities:

• Applicable hospitals should ensure that their policies and procedures address qualification of 340B drugs dispensed at Child Sites for services not yet included in the most recently filed Medicare cost report — based on whether those locations meet Medicare provider-based requirements, whether the 340B covered entity maintains the responsibility and records of the patient’s care, and whether the health care professional prescribing the 340B drugs to the patient has a relationship with the 340B covered entity.
• Once charges for the Child Site appear on a filed Medicare cost report, hospitals must register that location with the OPAIS.
• Hospitals should continue to maintain auditable records to demonstrate that Child Sites qualify for 340B accordingly i.e., they meet the provider-based regulations at 42 C.F.R. § 413.65 before 340B drugs are administered / dispensed.
• Hospitals with an upcoming fiscal year end date should assess this potential policy change to determine if it impacts provider-based conversion schedules.