Maintaining 340B Program Compliance
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1 Maintaining 340B Program Compliance Tuesday, June 24, :30 4:45 PM Ted Slafsky, President & Chief Executive Officer Safety Net Hospitals for Pharmaceutical Access Maureen Testoni, General Counsel Safety Net Hospitals for Pharmaceutical Access Larry Hudson, Executive Vice President and Chief Financial Officer Charleston Area Medical Center 1 Disclaimer This presentation is not to be construed or relied upon as legal advice 2
2 Learning Objectives Describe current and emerging issues in 340B, including scrutiny of the program Describe how you can engage in much-needed advocacy and communications efforts to preserve 340B Case study on the value of 340B and the key role of C suite executives in navigating the program Outline developments related to contract pharmacy, government and manufacturer audits, the Mega-reg and more 3 Who is SNHPA? National, non-profit membership organization representing over 1,000 hospitals in the 340B program all hospital types At the table since inception of program in 1992 The only exclusive advocate for 340B hospitals Provide support on all aspects of 340B for hospital systems, from operations to compliance Crucial resource for real-time 340B information 4
3 Recent Milestones 2011 Government Accountability Office report HRSA is recertifying the eligibility of hospitals/ clinics and has initiated audits Drug industry has initiated audits and queries AIR340B created Senate reaffirms intent of program February 2014 Health and Human Services (HHS) Office of Inspector General (OIG) report on 340B contract pharmacies 5 Key Allegations/Response Allegation 340B has grown too fast Response Growth is the result of deliberate, policy-oriented actions taken by Congress 340B should be for the uninsured only It s not clear what hospitals are using 340B savings for Congress clear that covered entities may use 340B drugs for any patient. Insurance status irrelevant Published reports, including two government studies, demonstrate that covered entities are using 340B savings to benefit their patients 340B causes drug shortages There is insufficient government oversight No nexus between 340B and drug shortages. Experts have not identified 340B pricing as a contributor to shortages HRSA has conducted hundreds of audits over past few years as well as annual recertification. We support oversight and clearer, more detailed guidance 6
4 Key Allegations/Response Allegation There are too many contract pharmacies Response 82% of covered entities do not use contract pharmacies. Of the 18% that do, 75% have fewer than five contracts in place 340B negatively impacts the oncology market Little to no evidence that 340B negatively impacts private oncologists. Practices struggling to stay afloat because of various market forces. Oncologists refer low-income patients to 340B hospitals Medicare overpays for 340B drugs Congress did not create 340B to reduce Medicare drug expenditures. Government reports have confirmed 340B hospitals are not providing enough charity care 340B not intended to just help hospitals treat uninsured patients. Intended to assist entities with large numbers of Medicaid and low-income, elderly Medicare patients and rural patients 7 Make Up of Congress House of Representatives 233 Republicans 199 Democrats 3 Vacancies Republicans could pick up additional seats Senate 53 Democrats 45 Republicans 2 Independents (Both Caucus with the Democratic Party) Republicans need to pick up 6 seats to take back the Senate in
5 A Closer Look at AIR340B Pharmaceutical manufacturers, private oncologists, major PBMs, some patient advocates 340B should directly support access to prescription drugs for uninsured, indigent patients Treatment decisions should be based on clinical judgment and the best interest of the patient, not the economic interests of the facility Hospitals need to be held accountable for their misuse of the 340B drug discount program 9 Hospital Response: 340B Facts 10
6 Faces of 340B Shannon Williams Pass Christian, MS Lamar Williams Montgomery, AL Guadalupe Mendoza Los Angeles, CA Debbie Scott Uriah, UT Christopher Auburn, NY 11 Challenges Ahead Potential Medicare Part B and D payment reductions Restrictions to patient eligibility Hospital eligibility requirements Reporting requirements Drug shortages legislation Restrictions on contract pharmacies 14
7 CEO Council Oncology Council Go-to group for pro-340b message Media interviews Op-Eds Government relations resource Minimal time investment Promote importance of 340B in cancer mission Author op-eds and journal articles Government relations resource Minimal time investment Interested? Contact Randy Barrett at or (202) How You Can Help: Tell Your Story Educate lawmakers: Importance of 340B to your hospital system s indigent care mission Explain how loss of 340B savings would adversely impact your hospital and patients Questions to consider: How has the program helped improve patient care and serve more patients? Has 340B lowered drug costs for your patients? Helped to extend pharmacy hours? Hire additional medical professionals? Improve access to cancer care and other important services? 14
8 Larry Hudson Executive Vice President and Chief Financial Officer Charleston Area Medical Center 15 Charleston Area Medical Center Hancock Brooke Ohio Teaching hospital Marshall Regional referral center Tyler Wetzel Monongalia Marion Preston Morgan Berkeley 1000 beds $1.0 billion in net revenue 150 employed physicians Pleasants Mineral Harrison Taylor Hampshire Doddridge Wood Ritchie Grant Barbour Tucker Wirt Hardy Lewis Gilmer Jackson Calhoun Upshur Randolph Mason Roane Braxton Pendleton Putnam Clay Webster Cabell Jefferson A3 stable (Moody s) 6,000 employees Kanawha Nicholas Pocahontas Wayne Lincoln Boone Fayette Greenbrier Logan Mingo Raleigh Wyoming Summers Monroe McDowell Mercer West Virginia s Population: 1.8 million Primary and Secondary Service Area: 557,328
9 CAMC Health System, Inc. CAMC Health Education and Research Institute, Inc. Charleston Area Medical Center, Inc. Charleston Area Medical Center Foundation, Inc. Integrated Health Care Providers, Inc. CAMC General Hospital CAMC Memorial Hospital CAMC Women and Children s Hospital CAMC Teays Valley Hospital West Virginia Ranked First, Second or Third Obesity Diabetes Tobacco use Heart Disease Poverty Age of population 18
10 Individual Value Mortality DEFINE: Improve the Observed to Expected Mortality Ratio CAMC Mortality Index (Observed to Expected) 1 2 Oversight: Mortality Steering Committee UCL= _ X= Strategic Goal Alignment: Improve mortality and Mortality O/E BIG DOT Jan-06 Aug-06 1 Mar-07 Oct-07 May-08 Dec-08 Month Jul-09 Feb-10 Sep-10 Mar-11 Aug-11 LCL= ANALYZE: Projects that impact the O/E Mortality Ratio: Sepsis Clinical Documentation Improvement Program MET Palliative Care Glycemic Management Sleep Apnea Safety Net Mission Working poor Charity care Trauma center NICU Graduate Medical Education 20
11 (14% vs. 5%) 21 HealthRight HealthRight Free clinic for the working poor Two blocks from the trauma campus Over 20,000 patients annually 100,000 visits annually CAMC Provides all outpatient and inpatient services at no charge $10,000,000 per year Pays utilities and other overhead costs Provides a pharmacist 22
12 CAP (Community Access Program) Charity program for 5000 working uninsured Originally started with a HRSA grant Enrolled at FQHC using CAMC charity guidelines Free inpatient and outpatient services at CAMC for patients of FQHC s in five counties Over $7 million in annual charity care 23 Charity Care Uncompensated Care of $123,700,000 Percent of Gross Revenue is almost 7% Percentage of All Uncompensated Care in WV is 17% WV Health Care Authority Annual Report
13 Trauma and NICU Trauma (Level 1) One of two Active blunt trauma unit Trauma cost up $10 million in ten years due to call issues NICU (Level III) One of two Medicaid utilization is 60% $14,000,000 $12,000,000 $10,000,000 $8,000,000 $6,000,000 $4,000,000 $2,000,000 $0 Increased Trauma Burden 25 Graduate Medical Education 13 residency programs 171 medical residents 500 medical students Over 50% of medical staff did their residency at CAMC Loss of over $20,000,000 per year 26
14 Importance of 340B Rising tide Helps to support the mission and the community: Working poor: HealthRight Clinic CAP Charity care Losing services: Trauma NICU Medicaid Graduate Medical Education 27 Role of CFO Be knowledgeable of 340B Be an advocate for the program Be a good steward of the program Be involved with the program Be involved in compliance 28
15 Maureen Testoni General Counsel Safety Net Hospitals for Pharmaceutical Access 29 Key Compliance Areas 5 key compliance areas: Diversion Duplicate discounts Eligibility Registration and Authorizing Official Contract pharmacy Complicated to administer correctly Hospitals spend tens to hundreds of thousands on special software, staffing, and other measures to ensure compliance 30
16 Diversion Drugs can only be used on an outpatient basis for hospitals patients as defined by HRSA Must maintain individual s health care records Must maintain responsibility for individual s care via relationship with health professional Use for other individuals constitutes prohibited diversion Examples of diversion: Using 340B drugs for inpatients Using 340B drugs for persons seen in private physician offices when the patient has no connection to the hospital 31 Duplicate Discount Prohibition The 340B statute protects drug manufacturers from having to pay a Medicaid rebate and a 340B discount on the same drug Process to prevent duplicate discounts involves: the provider sharing Medicaid billing numbers/npi with HRSA if using 340B for Medicaid, and following any state Medicaid requirements for identifying 340B claims 32
17 Eligibility Hospital must: Be owned or operated by state or local government, formally granted governmental powers, or a private non-profit hospital under contract with state or local government; or Be a critical access hospital or meet a disproportionate share adjustment (DSH) threshold (8% if sole community or rural referral hospital, 11.75% for all others, including free-standing children s and cancer hospitals) GPO exclusion for DSH, children s and cancer hospitals 33 Contract Pharmacy 2010 HRSA allowed providers to enter into arrangements with multiple contract pharmacies to dispense 340B drugs to qualifying patients of providers Key compliance requirements also apply to contract pharmacies Hospitals are responsible for compliance and must monitor contract pharmacies; HRSA recommends independent audits SNHPA Stewardship Principle: hospitals should use contract pharmacies to improve access to drugs for vulnerable patients SNHPA encourages hospitals to work with independent pharmacies 34
18 OIG Report on Contract Pharmacies The report (issued Feb. 5, 2014) stated that contract pharmacies create complications in preventing diversion and duplicate discounts The report also noted that some covered entities (CE s) do not: Offer 340B discounts to uninsured patients at their contract pharmacies Provide sufficient oversight of contract pharmacies and many do not engage outside independent auditors to review them 35 Registration Must register with HRSA the hospital and all eligible offsite locations that use 340B drugs Each individual clinic/ department in an offsite location must be separately registered Information collected annually by authorizing official through process called recertification 36
19 Authorizing Official: Definition and Role Electronically signs hospital and outpatient facility registrations, approves contract pharmacy registrations, and is responsible for annual recertification Must be a senior managing official, such as a CEO, CFO, COO, Executive Director, President, Vice President, or similar Must be legally authorized to bind the hospital in a contract with the federal government Must have knowledge of the operation of the hospital s 340B program 37 Authorizing Official: Attestations During hospital and outpatient facility registration and recertification, authorizing officials must personally attest to CE s compliance with 8 statements: 1. Information about the CE in the HRSA 340B database is complete, accurate and correct; 2. CE meets all 340B Program eligibility requirements, including the prohibition against group purchasing; 3. CE will comply with all 340B statutes, regulations and guidance, including those for duplicate discounts and diversion; 4. CE maintains auditable records; 38
20 Authorizing Official: Attestations (cont d) 5. CE has established systems to ensure ongoing compliance with the above; 6. CE s contract pharmacies are 340B compliant; 7. CE will self-report to HRSA as soon as reasonably possible regarding any material change or breach of the above requirements; and 8. CE acknowledges that in the case of breach it may be liable to the drug manufacturer for the amount of the violation, may also be liable for interest, and may be terminated from the program 39 Authorizing Official: Other Issues Is authorizing official personally liable if CE fails to comply with any of the attestations or submits incorrect or inaccurate information on HRSA s database? There is no precedent or HRSA guidance on this point Theoretically, there could be legal liability if the attestation is knowingly false or is the result of reckless disregard 40
21 Audit Background 340B statute permits HRSA and manufacturers to audit covered entities (CEs) September 2011 Government Accountability Office (GAO) report recommended selective audits of covered entities HRSA began covered entity audits in January Audit Background (cont d) HRSA is auditing entities they believe most likely to be at risk based on volume of 340B purchases, complexity of program administration, and use of contract pharmacies Also conducting targeted audits, based on allegations of 340B violations 64 audits posted on website; at least 150 still outstanding 29 no findings 17 duplicate discount 17 diversion 17 incorrect database 42
22 Update on Manufacturer Audits Manufacturers have conducted 7 audits; 6 are final May only conduct audit after showing of reasonable cause Manufacturer inquiries to hospitals may help determine reasonable cause Important for hospitals to respond to manufacturer letters; failure to respond could result in an audit Details of the adverse finding and corrective action plans for these audits are not publicly available HRSA is conducting its first audit of a manufacturer The 340B statute requires HHS to conduct selective audits of manufacturers and wholesalers 43 Audit Process 1. Audit notice and coordination call 2. Data request 3. Audit (exit conference?) 4. Follow-up 5. Preliminary report Areas for improvement Findings CE agrees with or disputes findings 6. Final report CE agrees with or disputes findings Corrective action plan required if CE does not dispute 7. Final determination by HRSA 8. Judicial review 44
23 How Providers Have Responded to Audit Findings Response to findings is important Can lead to significant repayment to manufacturers Some providers have challenged findings successfully, either in preliminary report or final report 45 Lessons from Audits Important to have written policies and procedures (P&Ps) Self-funded employee health plan and follow-up care models being challenged Accuracy of information on HRSA website If using 340B for Medicaid patients, the Medicaid billing numbers used to bill those drugs must be listed on OPA database All offsite clinics/hospital departments that use 340B must be separately registered with OPA 46
24 Repayment Requirements Under statute, violation of diversion or duplicate discount prohibition could require repayment of 340B discount Statute also includes enhanced sanctions Knowingly and intentionally diverting drugs could require payment of interest on the 340B discount If also systematic and egregious, removal from 340B HRSA could also refer a CE to other authorities if it suspects violation of other provisions, like the False Claims Act, anti-kickback statute, or Prescription Drug Marketing Act 47 Repayment Requirements (cont d) Period of time for repayment: Covers claims dating from first day of HRSA audit sample No official period for manufacturer audits, but one audit reportedly went back eight years Providers reportedly did not challenge Unclear if HRSA would have upheld an eight-year retrospective review if asked to rule on it 48
25 Repayment Requirements (cont d) Claims for which repayment may be necessary: For HRSA, more than just specific claims identified in the audit - need to identify all claims that were subject to the type of error identified HRSA does not dictate actual amount of money to be repaid; determined through manufacturer and provider collaboration 49 Elements of Corrective Action Plans Corrective action Correct the process that led to finding or area needing improvement so problem does not reoccur Fix past errors Evaluate whether there are other claims that contain the same error Identify and contact manufacturers to resolve situations where 340B price should not have been used 50
26 HRSA Mega-Reg Expected: June or July 2014 Areas HRSA intends to cover: Eligible patient Contract pharmacy Hospital eligibility Off-site facility eligibility Not included in this list: Provisions in the ACA relating to program integrity for manufacturers Medicaid managed care 51 Mega-Reg: Process HHS sent proposed regulation to the OMB for review on April 9 OMB has 90 days to review, but process may take more or less time OMB may send back to HHS for revisions Will be published in Federal Register with 60-day public comment period Finalized after review of public comments; may be changed in response to comments If making significant changes, could be revised and published for additional review 52
27 Mega-Reg: Eligible Patient Possible areas to be addressed: Prescriptions written outside of 340B registered sites Infusion services provided pursuant to orders written outside of 340B registered site Definition of covered outpatient drugs 53 Mega-Reg: Contract Pharmacy Existing guidance from 2010 What will be the impact of OIG report? Limits on number or location of contract pharmacies? SNHPA program stewardship principle: Use contract pharmacies to enhance convenient access to drugs for vulnerable patients 54
28 Mega-Reg: Hospital and Off-Site Facility Eligibility Off-site facility eligibility Enrollment documentation requirements Hospital eligibility GPO exclusion Private non-profit contract with state or local governments requirement for minimum level of uncompensated care? 55 Quantifying & Reporting 340B Savings Policymakers are asking: How much are entities saving through 340B? How are entities using their 340B savings? Seeking transparency similar to requirements for HRSA grantees 56
29 Quantifying 340B Savings How can the amount of money a hospital saves through 340B be estimated? Can compare drug spending as a 340B participant to drug spending outside 340B Compare 340B to GPO and WAC Often available from wholesalers and vendors But, need to take into account costs of participating in 340B, including WAC purchases and compliance costs, e.g. software, consultants, which can be significant Different process for contract pharmacy 57 Tracking Spending Related to 340B Savings Can a hospital track the spending of money it did not receive as a payment or grant? Providers should be able to describe how 340B savings allow them to better serve their vulnerable patients What would your hospital have to stop doing if the 340B program were no longer available? How do your 340B savings compare to your overall community benefit? 58
30 Upcoming In-Person Events (cont d) 18th Annual 340B Coalition Summer Conference Washington, DC July SNHPA Summer Legislative Event July For more details, contact Kathryn DiBitetto at or (202) Contact Us Safety Net Hospitals for Pharmaceutical Access th Street, NW Suite 900 Washington, DC Phone: (202) Fax: (202)
31 Contacts Ted Slafsky President & Chief Executive Officer (202) Maureen Testoni General Counsel (202) Larry Hudson Executive Vice President & Chief Financial Officer (304)
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