Track Data to Monitor 340B Impact

By Kathy Langley, CIA, CISA, ACDA; Jerry Lear, CIA, CISA; and Chris Wasik, CIA, CFE
| 5/3/2016

support-img-ecomm-hc-connect-monitor-380 Although the full effect of the proposed 340B mega-guidance issued in August 2015 may not be known until later this year, it is clear that the guidance is likely to have a significant financial impact on many covered entities. For example, the program’s refined patient eligibility requirements could greatly reduce the number of qualified dispensations. This reality will require organizations to develop robust processes and automated monitoring to help them track the potential impact of the mega-guidance on their bottom line and maintain the program’s benefits for the patients they serve.

At a recent webinar conducted by CHAN Healthcare, a subsidiary of Crowe, participants raised some interesting questions about the intricacies of 340B Drug Pricing Program compliance during a period of increasing scrutiny. Following are some of the questions along with recommendations.

We are worried that the 340B program may not be profitable moving forward. Are you expecting many covered entities to drop their 340B programs?

Many individuals from covered entities have asked this question since the proposed mega-guidance was issued in August 2015. Whether an organization should continue participating in the 340B program will depend to a large extent on its unique situation and program structure. However, all covered entities are strongly advised to perform an impact analysis to determine the ongoing benefits of the 340B program. An impact analysis is essential to obtain a true baseline and to arm an organization with the business intelligence needed to make a sound decision.

The impact analysis should follow a two-pronged approach. First, it is essential to conduct a thorough assessment of the program in order to understand its true savings potential. Based on findings from assessments undertaken by CHAN Healthcare, it is not uncommon to identify program errors that translate into uncaptured eligible transactions. On the other hand, instances of unexpected paybacks can surface as well.

Second, it is important to quantify the impact of the current versus the proposed provisions of the 340B mega-guidance. The analysis should cover such major areas as patient eligibility (including eligible providers) for 340B drugs and prohibition of duplicate discounts, specifically related to Medicaid managed care in the contract pharmacy setting. It also is important to remember that at this time the mega-guidance is proposed guidance. Adjustments may be needed when the final guidance is published in the fall of 2016.

We are overwhelmed with information and don’t know how to start analyzing all of the data. We thought that our splitter software would take care of this. Where do we begin?

The appropriate use of data analytics supports the effective forecasting of 340B program savings and can help your CFO, financial planning team, and other senior leaders make more solid decisions about the program.

Analyzing data for the 340B program entails the manipulation of large data sets. This involves much more than merely importing data sets into spreadsheet software. If someone at the organization has a strong data analytics background, he or she can help support the desired testing. If the organization does not have this internal expertise, external support might be found.

Many covered entities already have some type of splitter or accumulator software product in place. These products provide important benefits, such as streamlining the eligibility process. However, these systems also require testing to validate the accuracy of inputs and appropriate accumulation.

For example, a data analytics review of the processing and use of splitter software for one organization revealed a large number of drug dispensing records that had been accumulated as group purchasing organization items. In fact, the records actually were for outpatient drugs and should have been accumulated as 340B items. Not only was this a significant compliance issue, it also had significant financial impact. The covered entity estimated that once it fixes the root cause of the problem, it will add $700,000 to $900,000 to its annual 340B savings.

The mega-guidance appears to restrict provider eligibility. Have you assessed how much these changes could affect 340B savings?

Yes. CHAN has analyzed the potential impact of these proposed changes on some of the covered entities with which it works. Many leaders from covered entities are expecting that the changes could reduce their savings and their volume of 340B-eligible transactions. The extent of the impact could vary depending on physician arrangements and staff structure, interpretation of the rule, and the final guidance.

It is important for organization leaders to have a clear understanding of eligibility criteria, to use a conservative approach in looking at what providers will remain eligible once the final guidance is in place, and to work with the organization's legal department to determine if anything can be done with those at-risk providers who may not be eligible in the future. Some states, such as California, don’t allow hospitals to directly employ physicians, so the final guidance may have a greater impact in these states.

Look for additional CHAN webinars and 340B thought leadership as the final mega-guidance is published this fall.

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Kathy Langley
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Chris Wasik