340B Program self-monitoring: A road map to eligibility compliance

Sarah Cole, CPA; Susan E. Brankin, R.Ph., 340B ACE; and Kimberly J. Ott, 340B ACE
| 7/13/2021
340B Program self-monitoring: A road map to eligibility compliance

The 340B Drug Pricing Program requires drug manufacturers that participate in Medicaid to provide covered outpatient drugs at a discounted rate to enrolled healthcare facilities. When it created the 340B Program, Congress intended it to be used by covered entities “to stretch scarce federal resources as far as possible, reaching more eligible patients and providing more comprehensive services.”Covered entities must enroll with the Health Resources & Services Administration’s (HRSA) Office of Pharmacy Affairs (OPA) and comply with all 340B Program rules and expectations.

Covered entities are subject to audits by both manufacturers and HRSA.Throughout the existence of the 340B Program, HRSA’s expectations during 340B Program integrity audits, currently outsourced by HRSA to the Bizzell Group, have evolved. One constant, though, is the expectation for covered entities to self-monitor all aspects of the program. Covered entities must continually strive to comply with 340B Program regulations, make improvements to program operations, and notify manufacturers – and possibly HRSA – when compliance concerns are identified.

The key areas of HRSA’s focus during a 340B audit are eligibility, diversion, and duplicate discounts. Purchasing and inventory management also play key roles in 340B Program compliance. Each area of compliance presents unique challenges to covered entities, and a comprehensive self-monitoring program is fundamental to ensuring program integrity. The ability to operate compliantly in these areas requires a comprehensive net of operational structures working together to accurately define key program functions, implement supporting software solutions, and provide adequate oversight.

Eligible covered entity types

The initial requirement for participation in the 340B Program is being an eligible covered entity type and maintaining relevant supporting documentation of such eligibility.

Eligible covered entity types include:

  • Disproportionate share hospitals
  • Children’s hospitals
  • Free-standing cancer hospitals
  • Critical access hospitals
  • Rural referral centers
  • Sole community hospitals
  • Nonprofit healthcare organizations with certain federal designations or funding from specific federal programs

Eligibility criteria

Each eligible covered entity type has a unique subset of eligibility criteria and must be able to document that the criteria have been met. An assessment of the documentation to support eligibility should identify the covered entity type, as registered on the 340B Office of Pharmacy Affairs Information System (OPAIS), and should demonstrate compliance with all criteria. This information should be maintained in a readily accessible location and should be easily retrievable in the event of an audit.

Necessary documents should be reviewed annually. They vary by entity and might include:

  • State or local government contract or ownership information
  • Hospital charter or bylaws
  • Internal Revenue Service documentation
  • Law(s) creating the healthcare entity
  • Issuance of governmental powers
  • Notice of grant award or notice of award
  • Federally qualified health center or federally qualified health center look-alike documentation or agreement
  • HRSA Electronic Handbook
  • Medicare Cost Report(s) (MCR) and associated trial balance(s)
  • Disproportionate share adjustment percentage calculation 

Hospitals with off-site locations purchasing drugs through the 340B Program must confirm each location is reimbursable to the covered entity.

Required documents should be reviewed quarterly and include:

  • MCR(s)
  • Trial balance(s)
  • Revenue usage reports
  • Location directories

Services that occur at varying locations but that report outpatient revenue and expenses to the same cost center code must be separately registered. Although cost reports are filed annually, departments and locations might be added or removed throughout the year. For this reason, quarterly review of off-site location eligibility is recommended.

Auditable records

Another area of compliance under the umbrella of eligibility is a covered entity’s ability to maintain auditable records. Entities can gauge preparedness with the maintenance of auditable records by taking these actions:

  • Obtain the current HRSA audit data request list at the start of the government’s fiscal year of Oct. 1.
  • Outline where each data request list item would be generated and who would be responsible for gathering the data.
  • Complete a walk-through with staff of the data collection process to understand where gaps might exist.

HRSA requires covered entities to maintain records for a minimum of three years. Covered entities also should verify their organization’s record maintenance policy, as it might require record retention for a longer amount of time than HRSA’s policy.


The last component of eligibility, applicable to only a subset of hospital covered entity types, is prevention of group purchasing organization prohibition violations. Due to the size and potential complexity of this eligibility component, it is addressed in a future part of this series.

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Policies and procedures

HRSA expects covered entities to maintain policies and procedures governing their 340B Program operations. Policies and procedures standardize practices throughout an organization, promote compliance, and serve as a resource for all team members. These policies and procedures should articulate a covered entity’s operational model(s) and include any unique nuances. Review of policies and procedures should occur annually at a minimum. Overarching organizational policy governance procedures might dictate the process and timing of policy reviews and updates, and covered entities should ensure the 340B Program policies and procedures follow that process.


The 340B OPAIS is the database for all 340B Program participants, covered entities, and manufacturers. Users have access to recertify, register, and change information regarding their organization. The 340B OPAIS is an important component of 340B Program compliance, and HRSA reviews a covered entity’s entries during a 340B audit.

340B OPAIS accuracy includes review of the following:

  • Authorizing officials’ (AO) and primary contacts’ (PC) names, titles, and phone numbers
  • Physical, bill-to, and ship-to addresses of each location
  • Medicaid billing numbers

The following documentation might be used to complete the review of a covered entity’s 340B OPAIS entries:

  • Business cards or email signatures for the AO’s and PC’s official company title and contact information
  • Medical record location reports, facility maps, or in-person walk-throughs for physical addresses
  • Invoices from the 340B accounts to verify the bill-to and ship-to addresses reflect the drug delivery model of the covered entity
  • Invoices from 340B accounts for owned retail pharmacies, repacking companies, or central warehouses for additional ship-to addresses

AO and PC contact information should be reviewed annually at a minimum. Due to recertifications, registrations, and changes requiring approval by the AO, covered entities may consider reviewing the AO’s information quarterly. Physical, bill-to, and ship-to addresses should be reviewed quarterly.

Maintain compliance to provide critical services

Self-monitoring by a covered entity should include all areas needed to comply with 340B Program regulations. To start, each covered entity must be able to document that eligibility criteria have been met. The rest of this series will address other areas of self-monitoring. Part 2 will delve into self-monitoring of diversion and duplicate discount prevention. Part 3 will be directed at monitoring purchasing and inventory management. Monitoring and maintaining 340B Program compliance will allow organizations to continue serving their communities and providing critical healthcare services to those most in need.


“340B Drug Pricing Program,” HRSA, last reviewed May 2021, https://www.hrsa.gov/opa/index.html

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Sarah Cole
Sarah Cole
Healthcare Risk Consulting Leader, Office Managing Partner, St. Louis
Susan Brankin
Susan Brankin
Senior Manager, Consulting