About Baptist Medical Center

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2 About Baptist Medical Center Locally owned and operated in Jacksonville, Florida BMC includes 2 Adult and 1 Children s Hospital 960 licensed beds Disproportionate Share Hospital Recently opened Baptist MD Anderson Cancer Center Added 3 Remote Emergency Rooms

3 About 340B U.S. federal government program Created in 1992 Requires drug manufacturers to provide outpatient drugs to eligible health care organizations/covered entities that care for indigent patients at significantly reduced prices

4 Program Intent The Congressional intent of the program is to allow covered entities to stretch scarce Federal resources as far as possible, reaching more eligible patients and providing more comprehensive services

5 340B Hospital Eligibility The following hospital entity types must meet eligibility criteria to be included in the 340B Drug Pricing Program: Disproportionate Share Hospital (DSH)¹ Children s Hospital (PED)¹ Free-Standing Cancer Hospital (CAN)¹ Critical Access Hospital (CAH) Rural Referral Center (RRC) Sole Community Hospital (SCH) 1 Requirement includes Nonprofit/Government Contract & DSH percentage >11.75%

6 340B Hospital Eligibility To participate in the 340B program covered entities must register, be enrolled, and comply with the following requirements: Covered Entity eligibility (parent & child sites) Patient definition Contract Pharmacy Compliance Covered entities must complete the recertification process every year.

7 340B Hospital Clinic Eligibility To purchase 340B drugs, a hospital outpatient clinic must: Be an integral part of the 340B eligible hospital Appear as a reimbursable clinic above line 90 on Worksheet A of the hospital s most recently filed Medicare cost report Have patients that meet the criteria in the 340B patient definition guideline Submit to HRSA the most recently filed cost report to verify clinic eligibility Be listed on the HRSA 340B Database as an eligible parent or child site

8 340B Patient Definition Only patients that meet the following criteria are eligible for 340B purchased drugs 1. The covered entity has established a relationship with the individual, such that the covered entity maintains records of the individual s health care. 2. The individual receives health care services from a health care professional who is either employed by the covered entity or provides health care under contractual or other arrangements (e.g., referral for consultation) such that responsibility for the care provided remains with the covered entity. 3. The individual s drug is ordered or prescribed pursuant to a health care service that is classified as outpatient.

9 340B Contract Pharmacy 340B covered entities may contract with a pharmacy (or pharmacies) to provide pharmacy services to the covered entity s patients. Registered with HRSA and listed on the 340B HRSA database Written and signed contract pharmacy services agreement to include the dispensing fees and operational procedures Bill to/ Ship to account for purchasing drugs Policy and procedures in place to determine patient eligibility, methods for preventing diversion and duplicate discounts, and maintenance of auditable records.

10 340B Compliance Elements Prevention of Diversion Covered Entities are responsible for maintaining an accurate patient eligibility determination system, including tracking and accounting of all 340B drugs at the covered entity to ensure diversion has not occurred. Prevention of Duplicate Discounts A duplicate discount, prohibited by the 340B statute, occurs when manufacturers both provide a 340B discount on a drug AND pay a Medicaid rebate to the state on the same drug. A duplicate discount would occur if an up-front 340B discount is given and the state submits the same claim for a back-end Medicaid rebate. 340B covered entities are prohibited from causing a duplicate discount to occur. The Covered Entity must attest that they will carve-in or carve-out for Medicaid FFS to prevent duplicate discounts. GPO Prohibition A hospital subject to the GPO Prohibition may not purchase covered outpatient drugs through a GPO or GPO-like arrangement for any of its clinics or departments within the four walls of the hospital (at the same physical address) or its offsite outpatient clinics that are participating in the 340B Program and registered on the HRSA 340B Database.

11 340B Pricing

12 Program Savings Hospital Outpatients Drug Purchases Covered Entities realize significant savings for drugs used in the outpatient areas of the Hospital from the difference between the GPO vs. the 340B drug cost. Contract Retail Pharmacy(ies) Covered Entities may have one or more contracts with local retail pharmacies throughout their service area, where the Contract Pharmacy adjudicates & dispenses the prescriptions of Hospital s patients. On a monthly basis, the pharmacy retains a dispensing fee while the Covered Entity receives the revenue from the Third Party & patient copay and purchases the drugs at the 340B cost, which then is shipped to the dispensing pharmacy. Contract Specialty Pharmacy(ies) Specialty pharmacies receive far fewer prescriptions from the patients of the covered entity and are often located in different areas of the state/country. In addition, insurance restrictions and/or limited distribution of the drugs often dictate where the Rx can be filled. However, the high cost and potential savings from these Rx, as well as the added service to assist these patients to promptly get their drugs make this an important service for the Hospital to provide.

13 About Ponaman Phoenix based consulting firm established in 2001 Focused solely on 340B Serves clients in 43 states and Puerto Rico o Hospitals o HRSA grantees Has participated in over 50 HRSA audits

14 Current 340B Landscape 340B is front and center in drug pricing debate New Leadership Cuts to Part B Reimbursement Bills introduced in House and Senate

15 HHS Secretary Alex Azar Former executive at Eli Lilly Formerly served as General Counsel and Deputy Director of HHS under George W. Bush

16 Part B Payment Cuts Final rule went into effect on Jan. 1, B Hospitals (excluding CAHs) must use modifiers when billing for Part B drugs o DSH and RRCs will received reduced reimbursements rates for these items o New rate is ASP minus 22.5% Rep. McKinley (R-W.Va.) and Rep. Thompson (D-Ca.) have introduced a bill to prevent the cuts from being implemented Hospital associations and several hospitals filed a lawsuit against CMS in an attempt to stop implementation o The suit was dismissed due to it being filed prior to the rule s implementation o The hospital groups are appealing the decision and have asked the appeals court for an expedited review o Oral arguments possible as soon as April

17 Energy & Commerce Committee Report Released on January 10, 2018 Recommendations include regulatory and legislative changes to program Re-evaluate program intent Review and update DSH eligibility requirements Create strict reporting requirements for hospitals on use of program savings Initially noted that recommendations would be addressed by the end of March

18 340B PAUSE Act H.R Introduced in the House by Reps. Bucshon (R-IN) and Peters (D- CA) Recommends 2 year freeze on DSH enrollment in 340B Requires strict reporting for hospitals on program savings Calls for additional GAO and OIG reports

19 340B HELP Act S Introduced in the Senate by Sen. Cassidy (R-LA) Would implement 2 year freeze on DSH enrollment in 340B New eligibility requirements for DSH, children s, and cancer hospitals Implements sliding fee scale requirements for hospitals Adds new 340B modifiers Calls for additional GAO and OIG reports

20 White House Advisory Report The report outlines program changes that could be made to address the high cost of drugs including: Limiting 340B drug reimbursement to cover the "uses the purchased drugs are intended to treat. Only providing 340B drugs to the intended poor patient populations. Developing more precise eligibility criteria [to] help meet the primary goals of the program in the future. Allowing a single agency to set prices at which the eligible providers can buy drugs. There is skepticism in the Congress around how limiting 340B would help lower drug costs

21 President s Budget 340B mentioned in President s proposed budget Proposes broad regulatory authority for the 340B program to set enforceable standards of program participation and require all covered entities to report on use of program savings. Recommends new 340B User Fee This was included in former President Obama s budget but was never implemented

22 Thinking Strategically about 340B With all the attention on the program right now, compliance central to maintaining the integrity of the program HRSA is ramping up its audits of 340B Programs Internal monitoring Regular external auditing Regular meetings with key internal stakeholders Policies and Procedures

23 Best Practices for Running a Compliant Program Develop an oversight committee with key stakeholders for 340B Include finance, IT, pharmacy, etc. Set and establish appropriate expectations for staff Hold regular meetings to review and analyze 340B data Research and resolve issues as they come up Disclose any issues to HRSA or manufactures as soon as they arise

24 Conduct Regular Internal Audits Mixed-use Settings ED, Infusion Center, etc. In-house and Contract/Retail Pharmacy Provider and patient eligibility Referrals Discharge patients Physician-administered Medications

25 Recommended External Audits HRSA recommends having an annual independent external audit of contract pharmacy/ies Recommended annual split-billing audits Validate eligibility processing practices

26 Avoid Common Pitfalls Lack of internal oversight Loss of knowledge during staff turnover Changing expectations of 340B Program Vendor relationships

27 Questions? Chris R. Durkin, FHFMA Vice President /Controller Baptist Health (904) Scott Ponaman President Ponaman Healthcare Consulting (480)