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There's Still Room for Improvement: Strategically Optimize Your 340B Program and Ensure Compliance

Scott Drugan, Pharm D., Senior Director with GE Healthcare Partners, sat down for a Q & A session about the 340B Program and shares his insights regarding the opportunities that are still available for hospitals to improve and optimize their respective programs.

Drugan’s expertise enables hospitals and health systems to improve pharmacy operations, develop and enforce utilization guidelines, implement complex 340B programs in a compliant manner, optimize employee pharmacy benefits, and establish retail and specialty pharmacies.  

Question: The 340B Program was introduced to Disproportionate Share Hospitals as part of the Omnibus Reconciliation Act of 1992, with Critical Access Hospitals, Free Standing Children’s Hospitals, Free Standing Cancer Hospitals, Rural Referral Centers, and Sole Community Hospitals being added as part of the Patient Protection and Affordable Care Act of 2010. So, with the 27 years and 9 years respectively, since these hospitals qualified for the 340B Program, what can possibly be left to optimize?

Drugan: Admittedly it has been a bit surprising that nearly every health system we have encountered has significant room for improvement/optimization as it pertains to their respective 340B Program. However, when you think about all the possibilities within the 340B Program, it may be easier to understand why hospitals implement to a certain degree and leave additional areas untouched. A few examples would be:

  • A large academic disproportion share hospital may have implemented and optimized the program with all their hospital outpatient administered drugs, but not developed the appropriate 340B contract pharmacy network to pull in all the prescriptions generated from hospital-based outpatient clinics, emergency room visits, and discharge prescriptions.
  • Another scenario may be that a health system or hospital that is self-insured with considerable 340B qualified hospital-based outpatient services has not yet encouraged the care of employees and dependents at these locations to reduce the plan’s pharmaceutical cost as the prescriptions generated from these visits qualify for 340B pricing.
  • A final example pertains to the evaluation of physician practices versus hospital-based practices. Specific specialties (e.g., oncology, neurology, and rheumatology) are hospital-based within a 340B qualified hospital, and the service locations are enrolled in the program. The prescriptions generated from these services will qualify for 340B Program pricing.

There are many other optimization opportunities that should be customized or tailored to a specific hospital or health system and, very importantly, these can all be accomplished in a regulatory compliant manner.

Question: Since these potential un-tapped 340B drug pricing savings that you describe seem to be very substantial, why don’t all qualified hospitals take advantage of this program to the greatest extent possible?

Drugan: We encounter many reasons for hospitals and health systems to not fully optimize the 340B Program. A few of the reasons we have seen in the past are:

  • A hospital may have implemented with the understanding that it will provide savings in a specific area, such as infusion services. They work through the implementation process, which can be complicated, develop policies and practices to maintain compliance, monitor the results, hit their targets, and feel very proud of this success. The thought of continued expansion of the program may at this point seem rather daunting.
  • The 340B Program has received a lot of scrutiny over time, and periodic proposals to reduce its scope or impact or limit the growth of the program coupled with the efforts to compliantly implement has many organizations questioning the value of program optimization.
  • Lastly, a hospital with a more robust 340B program may face an increased risk of an HRSA audit. Since no one relishes a governmental agency audit, hospitals are a bit hesitant to pursue all 340B optimization opportunities.

Question: Hearing some of the regulatory challenges that you described and the added burden of the increased probability of a HRSA Audit, you can understand the hesitancy to move forward with some of the 340B Program optimization opportunities you previously described. How can you overcome or provide necessary safeguards to ensure--or at least minimize--the probability of non-compliance with the program and/or negative audit findings and sanctions?

Drugan: Simply stated, it takes a commitment to understanding program requirements and the dedicated time and effort to implement and maintain this compliance throughout all areas that a hospital may pursue the 340B Program. A careful return on investment evaluation should be conducted to determine if the value of the program’s expansion or optimization will be greater than the time and effort necessary to manage the program. It should be noted that with the high cost of outpatient pharmaceutical care and the substantial discounts available with the 340B Program, it is becoming increasingly rare to find situations where the savings is not worth the investment. To assist in the process, there are external experts who are available to help

  • Identify opportunities;
  • Develop implementation plans;
  • Provide implementation support (inclusive of developing policies and procedures for compliance, education, and training of internal staff); and
  • Ultimately engage with the enrollment of the hospital or its additional program expansion areas with HRSA.

Additionally, there are 340B providers--such as 340B administrators and outside auditing firms--that should be considered a necessary cost of doing business as it pertains to creating a 340B compliant environment.

Question: Although you have described the extraordinary value of the 340B Program and the basic path to regulatory compliance, with all the conflicting priorities within these hospitals and their potential limited resources, how would you expect hospitals to successfully move forward?

Drugan: We do not envision this differently than any other service that a hospital contemplates pursuing as it tries to fulfill its overall mission in a financially viable manner. There must be a commitment to additional cost or resource investment to optimize or expand the program, and we would highly recommend that a hospital not pursue this optimization opportunity without understanding this need.  The growth of the 340B Program should be considered alongside other areas of investment to determine which has the greatest probability to deliver value to the organization. It is with rare exception that the 340B Program expansion does not become a top priority.    

Question: You seem to imply that a hospital may not be successful without some outside assistance or expertise or additional resources. Do you believe this to be an imperative, or can a hospital independently set up processes for compliance that will drive optimization in a very efficient, non-resource intensive manner?

Drugan: We would not recommend that a hospital move forward with the initial implementation of the 340B Program let alone the expansion or optimization that we have described without understanding that it will take more time, effort, and resources. However, the overall return on this investment should be very high. On the other hand, while it is certainly possible to successfully implement without external partners; the return on investment of a partnership to support implement and optimization in an expedited manner would also be extremely positive.

Closing Comment: This was a lot of good information. Is there any last tip that you would like to leave with the readers?

Drugan: I would like to take this opportunity to state that we do our very best to stay current with the 340B environment and proposed changes to the program. However, we cannot predict the future. While we are very certain of the opportunities that this program provides to qualified organizations today, we recommend that a careful evaluation of this opportunity be conducted within all qualified organizations and that there should not be a reluctance to expand or optimize the program, but rather a recognition that there must be an appropriate investment to provide executive oversight and daily management to drive program compliance. Like most areas of investment, there should be a business case to support this additional cost and a belief that there will be a very high probability that when objectively evaluated, the value will far outweigh the investment.

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