The 340B Drug Pricing Program helps certain healthcare providers in the United States give outpatient medicines at lower prices to people who need them most. It started in 1992 under Section 340B of the Public Health Service Act. Drug makers must sell outpatient drugs at big discounts to eligible healthcare groups called “covered entities.” These include hospitals such as critical access, sole community, rural referral centers, and disproportionate share hospitals. They serve low-income, uninsured, or vulnerable patients.
For healthcare administrators, owners, and IT managers, knowing the rules of 340B program compliance is very important. Following the rules helps expand patient care, keep funding steady, and avoid legal or financial problems. This article looks at the rules, challenges in the 340B program, and useful methods for healthcare groups, especially those dealing with its complex management and tech needs. It also talks about how AI and automation help manage 340B compliance processes.
The main goal of the 340B program is to help covered entities use limited federal money more wisely and offer more health services. The program gives big discounts on outpatient prescription drugs to hospitals and clinics that serve low-income and uninsured patients. The savings help hospitals give free or low-cost care, run immunization programs, manage medicines, and support other community health services.
According to the American Hospital Association (AHA), in 2020, 340B hospitals gave almost $85 billion in community benefits, a 25% increase from the year before. Although these benefits are large, the 340B program amounts to only about 3% of all drug company revenues. This means the discounts don’t heavily hurt the manufacturers but still play an important role in community health.
The program asks hospitals to confirm they qualify every year and keep clear, checkable records of 340B and non-340B drugs. The Health Resources and Services Administration (HRSA) checks about 200 covered entities each year. But it only audits five drug makers yearly, which shows there is less oversight of manufacturers.
Medical administrators and IT managers must know many compliance rules to keep eligibility and avoid penalties in the 340B program. Key requirements are:
Covered entities must confirm each year that they still meet patient and service rules. This includes proving that many patients are low-income or underserved. This is shown through disproportionate share hospital (DSH) data or federal facility designations.
Covered entities have to keep detailed records that track buying, giving out, and stock of discounted drugs. They must separate 340B drugs from non-340B drugs to stop wrong use, which happens if discounted drugs reach patients or places that are not eligible. Good record keeping is very important for passing HRSA and drug maker audits.
A big rule challenge is avoiding “duplicate discounts.” This happens if a drug bought at a 340B price is also claimed for a Medicaid rebate. This means the drug maker gives two discounts on the same drug, which breaks program rules. This has caused drug makers to lose about $34 billion to $37.5 billion in sales costs.
To stop this, hospitals and makers use “scrubbing” processes. They check claims data to find and reject possible duplicate discounts. This cleaning needs detailed data checks and exact patient eligibility confirmations.
Contract pharmacies let covered entities give 340B discounts to more patients. But since 2019, some drug makers limit 340B prices for these pharmacies. This cuts down savings for covered entities. It has caused fights and lawsuits since HRSA’s power to enforce rules here is limited.
Contract pharmacies also struggle with billing rules from the Centers for Medicare and Medicaid Services (CMS). These rules lower reimbursements by up to 30% on some outpatient Medicare Part B drugs. Without real-time claim eligibility info, billing and eligibility verification is hard, causing compliance and financial problems.
Since 2018, CMS cut reimbursements by almost 30% on 340B outpatient drugs billed to Medicare Part B. This affects financial planning and requires correct billing modifiers to avoid False Claims Act penalties. Administrators must coordinate pharmacy billing, finance, and compliance teams well to follow these rules.
Healthcare facilities face many problems when managing 340B compliance:
Rules and explanations for the 340B program often change because of new policies, court decisions, and enforcement actions. For example, HRSA gave an Advisory Opinion in 2020 that stopped manufacturers from limiting 340B prices via contract pharmacies. Later, that opinion was taken back, and HRSA started legal actions against some manufacturers who set restrictions.
Medical administrators must stay updated on rules and legal changes to adjust policies and keep following the law.
Following 340B rules needs much administrative work. Facilities must build and manage detailed tracking systems, work across departments, and prepare for audits. Upgrading hospital information systems costs time and money.
The COVID-19 pandemic added more challenges by changing how healthcare is delivered. Governing boards often find it hard to understand the financial and reimbursement numbers related to 340B, needing extra training and outside help.
Finding eligible patients and documenting outpatient drug use is tough due to many different electronic health records (EHR) and pharmacy systems. Data spread over many platforms makes checking and billing complicated.
HRSA audits many covered entities, but audits of drug makers are rare. This causes worries about fair oversight. Groups like the American Hospital Association want more openness and equal audits to keep the program honest.
Although the 340B program aims to improve patient access, some patients still find medicines too expensive because of operational problems or unclear communication about savings. Healthcare organizations need to make sure these savings reach patients as planned.
A well-planned compliance program with teamwork across departments helps solve challenges. These methods are helpful:
Good 340B compliance needs cooperation between pharmacy, compliance, finance, IT, and clinical leaders. Starting teamwork early stops errors and reduces compliance risks.
Keeping accurate, checkable inventory and data is very important. Facilities should use electronic systems that separate 340B and non-340B drug data and create reports automatically for audits.
Many covered entities hire special 340B consultants because the program is complex. These experts help review compliance, plan strategies, develop policies, prepare for audits, and train staff. They also help deal with manufacturer limits, contract pharmacy rules, and third-party manager arrangements.
Referral capture is important to get the most 340B savings. It means billing correctly for eligible referrals to collect program money. But building and keeping referral capture systems is hard and needs cooperation between departments and ongoing audits to make sure billing is correct.
Regular internal audits with key performance indicators (KPIs) and dashboards help track compliance and find missed chances. Audits also prepare hospitals for HRSA or manufacturer checks and spot risk areas early.
Healthcare groups must keep updating their policies with rule changes, keep full documentation proving compliance work, and share changes clearly among teams.
More healthcare facilities use artificial intelligence (AI) and automation to handle 340B compliance problems. The program needs precise data handling, audit prep, patient eligibility checks, and stopping duplicate discounts. AI tools help in many ways.
AI can look at big amounts of pharmacy claims, patient data, and billing info fast. This helps spot mistakes or duplicates in real time. Automation makes scrubbing faster and more exact, stopping wrong claims and cutting penalty risks.
AI linked with third-party eligibility check tools helps match patients with Medicaid and Medicare data quickly. These tools use National Council for Prescription Drug Programs (NCPDP) benefit eligibility codes to confirm who qualifies for 340B pricing.
Automation helps communication between IT, pharmacy, compliance, and finance by sending alerts and tasks when billing errors, inventory problems, or audit deadlines happen. This cuts down manual mistakes and slowdowns.
AI creates compliance reports automatically, points out rule breaks, and shows financial impacts. Hospitals can predict possible savings or risks from trends, helping leaders make decisions based on data.
No one system fits all hospitals. AI platforms can be changed based on the size, risk level, and resources of a facility. Whether for pharmacy or provider use, automation tools can grow as the facility’s needs change.
Administrators and owners should create plans linking 340B use with their organization’s goals. They need to make sure savings go back into patient services. This means supporting compliance teams with enough resources and training.
IT managers are important in setting up and running systems that track drug buying, patient eligibility, billing codes, and audit info. Working with finance and pharmacy teams to add AI and automation can make compliance easier.
All teams should keep clear records and stay updated on changing federal rules, ongoing lawsuits, and drug maker actions related to 340B.
By managing 340B program rules carefully and using available technology, healthcare providers can keep offering important drug discounts to patients who need help. This balances following the rules while giving affordable care across the country.
The 340B Program allows eligible hospitals to purchase outpatient drugs at discounted prices, helping them stretch limited resources to serve vulnerable populations, including uninsured and low-income patients.
The 340B Program is administered by the Health Resources and Services Administration (HRSA), which oversees compliance and audits to ensure hospitals meet program requirements.
Eligible facilities include critical access hospitals, sole community hospitals, rural referral centers, and certain public and nonprofit disproportionate share hospitals that serve low-income populations.
340B savings enable hospitals to provide services such as free care for uninsured patients, vaccination programs, and mental health services, ultimately enhancing community health.
Some manufacturers have violated program rules by unilaterally stopping discounts for drugs dispensed through certain pharmacies, undermining the program’s integrity and threatening healthcare access.
Hospitals must recertify annually, attest to compliance with program rules, maintain auditable records, and participate in HRSA and manufacturer audits.
Increasing transparency helps enhance public understanding of the program’s value and supports compliance by demonstrating the benefits the program provides to communities.
Eliminating the orphan drug exclusion could expand savings and access for 340B hospitals treating underserved populations who need these specialized medications.
Critics argue that the program should be scaled back due to concerns about its growth and efficiency, suggesting increased regulatory burdens and proposing new reporting requirements.
Hospitals should maintain accurate records, stay informed about changes in program regulations, participate in audits, and leverage available resources to understand compliance requirements.
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