FQHC Section 340B Audit Readiness: A Pound of Prevention

hospital-corridor-1057587-m.jpgFor Federally Qualified Health Centers and other eligible safety net health care centers, proper utilization of the federal Section 340B Drug Discount Program can offer enormous financial advantages to facilitate delivery of high quality primary health care services to their communities. The Section 340B Program, created in 1992, requires drug manufacturers to provide outpatient drugs to qualifying health care centers and organizations at reduced prices. The purpose of the Section 340B Program is to provide a financial advantage that supports FQHCs and other safety net providers, enabling them to stretch scarce federal resources as far as possible to the benefit of their patients.

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The federal Health Resources and Services Administration (HRSA), which regulates and supervises the Section 340B Program, has legal authority to audit Section 340B Program covered entities. Alternatively, HRSA may authorize a drug manufacturer to audit a covered entity under particular circumstances and according to HRSA’s protocol. An audit is for the purpose of assessing covered entity compliance with HRSA regulations and protocol governing the Section 340B program and, in particular, to identify and remedy diversion of Section 340B drugs or duplicate discounts.

Program Integrity Audits, as they are known, were first initiated in 2012 and have increased each year. Audit results can be reviewed on the HRSA website. A covered entity’s failure to pass audit scrutiny can result in very adverse financial consequences, including having to refund discounts to a drug manufacturer and/or exclusion from the Section 340B Program. Through Fall 2014, approximately 240 audits have been performed. More audits are expected in 2015, as HRSA continues to ramp up its oversight and scrutiny of the Section 340 participants. Many hundreds of FQHCs will be the subject of upcoming audits.

For FQHCs and other covered entities that potentially subject to an audit, the financial stakes are so high that audit readiness should be a top priority. Fortunately, HRSA provides contract pharmacy guidelines that, if properly followed, can reduce the risk of being audited and of a bad audit outcome. For every Section 340B participant, following HRSA guidelines is therefore a must.

For example:

1. If a health center participates in the Section 340B Program, it should have written Section 340B policies.

2. A health center’s written Section 340B policies should assure as to all individuals who receive access to 340B drugs:

a. That the health center has an established patient relationship with the individual;

b. That the established patient relationship with the individual is documented in the individual’s health records;

c. That the health maintains such health records;

d. That the individual’s health care services are provided by a physician (or other health care professional) who is either employed by the health under a legally compliant or other contractual arrangement pursuant to which responsibility for care remains with the health center.

3. A health center that uses a contract pharmacy services model should ensure:

a. That a legally compliant written contract exists with the contract pharmacy;

b. That the contract contains appropriate policies and procedures that provide how the contract pharmacy will avoid diversion of Section 340B drugs;

c. That the contract contains compliant policies and procedures that provide how the contract pharmacy will avoid prohibited duplicate discounts.

The mechanics of Section 340B are in many respects very nuanced and evolving. Governance of the program continues to develop. Strict compliance with Section 340B Program requirements is essential for effective, legal utilization of Section 340B Program benefits. FQHCs and other Section 340B covered entities should consult a qualified FQHC consultant or their lawyer as needed when they have questions about Section 340B.

If you have questions about this post, contact our business and health care law firm at info@ksllawfirm.com, or by calling our Atlanta (404.685.1662) or Augusta (706.722.7886) office.

Source: HRSA

Disclaimer: Thoughts shared here do not constitute legal advice. Please consult with an attorney to discuss your legal issue.

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