HRSA begins audits

HRSA begins 340B audits -are you prepared?

The passage of the federal 340B drug discount program in 1992 gave the Health Resources and Services Administration (HRSA) authority to audit hospital pharmacies enrolled in the program, but the HRSA has only recently begun to exercise its authority.

The 340B program allows qualified pharmacies and health care providers to purchase and dispense outpatient medications at a discount for dispensation to low-income patients, many of whom have chronic conditions. The HRSA claims that the program passes significant savings of 20% to 50% to participants, a total annual savings of about $5 billion.

Lately, Congress and other federal regulatory groups have been pressuring HRSA to audit program participants to prove that only eligible patients receive benefits.

Ironically, Krista Pedley, director of HRSA’s Office of Pharmacy Affairs, cited the reason that the audits have not been performed previously as “financial constraints.” Auditing is expensive, the department budget is small, and if they don’t find program abuse, it’s money wasted. At which point the same group of people who pressured the HRSA to audit are likely to complain about the waste.

Diversion and duplicates

The audits will focus on two areas, diversion of discounted drugs to ineligible patients, and duplicate discounts – when a pharmacy double dips and gets Medicare rebates on drugs bought through the 340B program.

Pharmacies and providers that break the rules may be required to reimburse the discounts to the drug manufacturer, repay the interest on the discounted amount, and may be booted from the program.

Here’s the problem

First, there’s no concrete definition of who constitutes an eligible patient. The HRSA makes it clear that pharmacies are responsible for compliance, but with the rules for eligibility fuzzy, it’s difficult to ensure compliance.

Be prepared

Jason Atlas, director of pharmacy services for recently audited hospital, offered some helpful advice. “You need to be in a constant state of audit readiness,” Atlas said. “Be confident in your patient definition and your 340B usage.” His hospital, 477-bed Denver Health and Hospital Authority, was notified less than a month before the audit began. They were required to produce the hospital’s related policies and procedures, a list of hospital affiliated 340B clinics, a Medicare cost report, and data files for electronic prescription and providers.

Atlas warns that if your facility is not prepared in advance, producing documentation could prove problematic.

Would you be prepared for such an audit? And while Medicare fraud is certainly a significant issue, is there a pressing need for this specific type of audit, targeting low-income and AIDs recipients, or is this strictly politically motivated? There’s a lot of money at stake, but what about the consequences of kicking health care providers who administer to chronic low-income patients off the program?