Preserving 340B benefits for safety-net healthcare providers

By Michelle L. Beard, CPA, and Kimberly J. Ott, 340B ACE
| 4/15/2020
Preserving 340B Benefits for Safety Net Healthcare Providers

As COVID-19 continues to spread across the U.S., safety net hospitals face unique challenges caring for their communities. With ever-growing concerns about access to personal protective equipment, ventilators, medication, and staff, these healthcare facilities will need support to continue providing care for some of the nation’s most vulnerable populations. Despite legislation intended to ease the financial burden of this public health emergency, many healthcare facilities will experience a loss of revenue combined with the higher costs of dealing with a pandemic, resulting in financial burdens for many safety net healthcare providers already struggling to survive.

Established in 1992 under Section 602 of the Veterans Health Care Act, the 340B Drug Pricing Program allows eligible hospitals, health centers, and clinics (covered entities) to access covered outpatient drugs at reduced prices from manufacturers participating in Medicaid. The 340B program is intended to enable covered entities to stretch scarce federal resources, reaching more eligible patients and providing more comprehensive services. The Health Resources and Services Administration’s (HRSA) Office of Pharmacy Affairs (OPA) is responsible for administering the 340B program. To purchase drugs at the 340B price, covered entities must continuously meet the following requirements:

  • Maintain auditable records.1
  • Keep the 340B OPA Information System (340B OPAIS) accurate and up to date.
  • Complete yearly recertification.
  • Prevent diversion of 340B drugs to ineligible patients.2
  • Prevent duplicate discounts.3
  •  Do not participate in group purchasing organization (GPO) purchases of covered outpatient drugs for applicable entity types.4
  • Prepare for 340B program audits.
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COVID-19 impact

As the coronavirus pandemic races across the nation at unprecedented rates, many covered entities are struggling with balancing the ongoing compliance demands of the 340B program while addressing emergent patient care needs. Hospitals, healthcare professionals, and organizations such as 340B Health, an advocacy group for the 340B program, have asked HRSA to relax program regulations during the pandemic to relieve this burden.5 HRSA has noted that it understands that the public health emergency might warrant additional flexibilities and has acknowledged that many 340B stakeholders have concerns; however, at this time, it has provided only limited relief from compliance expectations.6

HRSA is posting general guidance and a series of frequently asked questions related to the COVID19 pandemic on its website. Guidance includes:

  • Covered entities should update policies and procedures regarding any changes to practices during this disaster.
  • In a declared emergency, an abbreviated health record might be adequate for purposes of the 340B program. The record must identify the patient, record the medical evaluation (including any testing, diagnosis, or clinical impressions), and note the treatment provided or prescribed. For purposes of 340B program eligibility, the record may be a single form or note page. In the current public health emergency, self-reporting of identity, condition, and history are adequate for purposes of 340B recordkeeping requirements.
  • In a situation where volunteer health professionals are providing healthcare, the name and address of the volunteer and his or her relationship to the covered entity should be kept on file. Documentation should be clear that the covered entity has responsibility for providing care to the patient.
  • If hospitals subject to the GPO prohibition are unable to purchase covered outpatient drugs at the 340B ceiling price or at wholesale acquisition cost, the hospitals may use a GPO (or GPO private label product). A temporary relaxation of the requirement to report this information to HRSA and manufacturers has been granted during the COVID-19 public health emergency. Under the new policy, covered entities should address this situation in their policies and procedures and maintain auditable records.
  • HRSA is allowing some covered entities, upon request and review, to immediately enroll into the 340B program. Every Friday HRSA will be posting an additional Medicaid Exclusion File, which will include the covered entities that have been approved for immediate enrollment. The weekly list is in addition to the list posted quarterly on the 340B OPAIS. This is an improvement over previous guidance that covered entities needed to send their requests to Apexus, the 340B Prime Vendor.

One expected relief yet to occur is the postponing of HRSA 340B program integrity audits. Instead, HRSA has indicated it will begin conducting audits remotely while monitoring and assessing the impact of the COVID-19 pandemic on covered entities. However, the effort required to prepare for and undergo a 340B program audit requires significant time and attention from multiple departments. For most covered entities, all resources are being diverted to treating and containing this pandemic. HRSA has indicated that covered entities with specific requests regarding audits should contact the Bizzell Group (the 340B audit contractor), which will coordinate with HRSA to address such requests. It likely is in a covered entity’s best interest to request postponing any 340B program integrity audit during this public health emergency. Emphasis should be made to HRSA that an audit at this time would put an undue burden on the covered entity and hinder patient care.

Maintaining compliance

Many other federal relief efforts occurring for healthcare facilities that are not directly related to the 340B program likely will inadvertently affect the program. These programs include new drugs entering the market, new billing expectations, changes to care delivery models, and more. Managing these changes and keeping 340B program compliance a priority present unique challenges to covered entities. Maintaining program benefits in a time of uncertainty can be crucial for many facilities to continue serving their communities in the post-COVID-19 world.

Following are some areas for consideration and methods for maintaining program benefits:

  • Telehealth is becoming the best option for providing care without potentially exposing other patients or crucial healthcare workers to the virus. In addition to the other challenges with establishing telehealth as a primary method of delivering care, 340B program implications should be considered. If unique department identifiers are created for telehealth services, covered entities should ensure those are marked as eligible in their 340B software to continue allowing patients access to discounted drugs. Documentation of telehealth encounters will be critical for maintaining auditable records and ensuring 340B program compliance.
  • If additional sites of care are created that will administer drugs to outpatients or write discharge prescriptions, those also should be added to the 340B software to ensure 340B-eligible drug use is captured.
  • In the event additional healthcare professionals are added to a covered entity’s staff to assist in responding to COVID-19, those individuals should be added to the eligible provider list used in qualifying 340B drug administrations and prescriptions.
  • The ability to continue monitoring practices might become taxed but remains crucial for maintaining 340B program benefits. Monthly audits often include review of prescriptions dispensed at contracted pharmacies that have been placed in a pending status to allow for confirmation of 340B program eligibility by covered entity staff. This part of the qualification process allows covered entities to increase 340B program value by qualifying prescriptions that are the result of a referral or are from floating providers that are an increased compliance risk. In addition, covered entities often maintain compliance by disqualifying prescriptions identified as noncompliant and immediately adjusting virtual inventories. Adjustments to the virtual inventory mitigate the risk of covered entities inadvertently purchasing ineligible drugs at a 340B discount. Retrospective review of these circumstances, following a delay and recovery from the coronavirus pandemic, might be too late due to contract pharmacy operations limiting changes in eligibility to a certain number of days (that is, reprocessing windows).
  • The COVID-19 pandemic already is highlighting issues related to patient financial responsibility. With an increasing number of patients bypassing the normal registration process, hospitals are facing the challenge of capturing payment information. Covered entities use payer information to prevent duplicate discounts. This delay or change in payment information might cause difficulties in this process. If possible, hospitals should pay close attention to changes in insurance payers.

The new normal post COVID-19

When the nation comes out of this public health emergency, review and analysis of the impact of the COVID-19 virus should include reviewing the impacts to the 340B program. Covered entities should consider doing the following:

  • Assess how purchasing practices during the public health emergency might have affected virtual inventories (that is, accurate 340B and GPO accumulations), including review of GPO prohibition adherence for applicable entity types.
  • Review electronic medical record documentation to confirm minimum requirements to demonstrate 340B eligibility and maintain auditable records.
  • Confirm policies and procedures were updated to include new processes employed during the pandemic.
  • Review changes to billing practices that could have affected the ability to prevent duplicate discounts.
  • Confirm that telehealth or other new locations used to manage patient care have been properly registered on the 340B OPAIS.
  • Determine if updates to 340B software included new providers, locations, and medications used during the pandemic.
  • Analyze contract pharmacy program benefits and losses.
  • Review adherence to duplicate discount and diversion prevention.

As healthcare providers navigate this public health emergency, third-party 340B program specialists can provide updates and clarifications about ever-changing policies and can help organizations prepare for the impact of COVID-19 and make their way through this new normal.

1 Section 340B(a)(4)(L) and 340B(a)(5)(C).
2 Section 340B(a)(5)(B).
3 Section 340B(a)(5)(A).
4 Section 340B(a)(4)(L)(iii).
5 “340B Health Requests Federal Flexibility for Hospitals Amid COVID-19 Response,” 340B Health news release, March 20, 2020,
6 “COVID-19 Resources,” HRSA, March 2020,

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Michelle Beard
Michelle L. Beard
Partner, Financial Services Consulting