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Roadmap to Applying to Participate in the
340B Program
David Garbarino
Director of Government Financ
Children’s Hospital Boston
12th Annual 340B Coalition Conference
July 15th, 2008
1
Agenda
• Introduction
• Getting started
• Preparing the Application/ Meeting the Requirements
• Where are we now/Next Steps
2
Introduction
Institutional background
• Children’s Hospital Boston is a 395 bed independent free standing
facility offering a full range of pediatric services from community level to
quaternary care
• Operate one main pharmacy department, four satellites locations
and one remote site that services all outpatient departments and clinics
• 16,000+ discharges, 55,000 ED visits and 250,000 outpatient visits
• Annual drug buy is $25m, $6m O/P, dispense 2.9m doses per year
• 30% Medicaid or Government payer, 70% managed care & commercial
• No institutional experience with the 340B program unlike adult
hospitals or children’s hospitals that are part of a larger adult system
3
Getting Started
How we assessed the opportunity
• Assembled a multidisciplinary team including representation from
Pharmacy Dept, Finance, Government Relations and Compliance,
to review the following areas;
1. Potential Savings
2. Institutional Eligibility
3. Operational Issues
4. Regulatory and Compliance
• Took a conservative approach in our evaluation to participate in the
340B program to provide a comfortable compliance margin
4
Getting Started
Potential Savings
1. Determine if the potential savings are worth the effort necessary
to meet the requirements
2. Children’s Hospital Boston does not operate a retail pharmacy so
the potential savings are limited
3. Performed the analysis – looked at O/P drug volume by type of drug
and the current cost and determined that the potential savings,
based on our estimated discount, could be substantial
4. Estimated potential savings in year 1 of program participation
to be worthwhile with anticipated growth over several years
5
Getting started
Eligibility for the Program:
1. There are 11 organizational primary categories and several
sub-categories that qualify for 340B participation
• Children’s Hospital Boston applied as a Private, Non-Profit
Disproportionate Share Hospital
2. Under contract with the state or local Government to
provide health care services to low income individuals
who are not eligible for Medicare or Medicaid
• Massachusetts operated an Uncompensated Care Pool which
required low-income participant eligibility and provider enrollment
• Children’s was an enrolled provider and had a signed contract
6
Preparing the Application-continued
3. Meet the Disproportionate share adjustment percentage
requirement of 11.75%
• Children’s disproportionate share patient percentage based
on inpatient days was 32%, > 27.32% requirement
• Adjusted Disproportionate share was 15.94% > 11.75%
threshold
4. Certify that the hospital will not obtain 340B covered drugs
through a group purchasing agreement
5. Provide an attestation of compliance with the PHS Act including
- Prohibition against diversion
- Protecting manufacturers from duplicate rebates
- Preserving the right to audit
7
Operational Considerations and Challenges
Operational Issues:
1. Should we proceed alone or bring experienced consultants
to set-up the program.
2. Should acquire split-billing software to facilitate tracking?
3. Do we create separate physical storage or use virtual segregation?
4. How do we accommodate and track partial doses?
5. How do we create a strict use policy and operational structure
so that 340B purchased drugs are only provided to;
- Patients of the covered entity who meet the regulatory definition
- Outpatient only
- Controls to prevent diversion to inpatient use
8
Operational Considerations and Challenges
Operational Decisions:
1. Decided to hire experienced consultants to address set up.
2. Initially we were on the fence about split-billing software due to questions
about their set-up and ease of use – did decide to acquire software –
advantages out weighed disadvantages.
3. Decided in favor of separate physical storage despite the challenges
2. We will need to acquire software to address issue of partial doses
5. Created a strict use policy and operational structure that
- Created separate 340B purchasing accounts and delivery
- Tracked patient use by type
- Set up a listing of all 340B purchased drugs-updated as needed
- Developed a daily use report managed by the charge pharmacist
9
Operational Considerations and Challenges
6. Billing:
-In keeping with uniform billing standards, Hospital will
charge 340B purchased drugs at the same rate as non-340B
drugs
- Historically, Massachusetts Medicaid allowed providers to
benefit from the 340B savings and does not seek rebates on
those patients
- Each state would have there own policy on 340B billing.
10
Compliance and Regulatory Issues
Monitor compliance with all statutory requirements:
1. Create a comprehensive compliance plan that includes all key
areas of the program
-Eligibility
-Inventory
-Dispensing
-Billing
-Reporting
2. Monitor all regulatory elements so to remain a covered entity
3. Ensure that only patients who meet definition receive 340B
purchased drugs
4. Develop the ability to report all dispensing activity for both
internal needs and external audits.
11
Compliance Plan
Num Citation Section Requirement Accommodation To Do
Private non-profit hospital under Children’s Hospital Boston is incorporated as
1 Section 340B of the Public Hospital Eligibility state contract to provide care to a private non-profit organization under Section
Health Service Act “Covered Entity” low income individuals not 501(C)(3) of the Internal Revenue Service
42 U.S.C. §256b eligible for Medicaid or Medicare Code; CHB has an evergreen contract with
Medicare Disproportionate share Mass DHCFP.
adjustment percentage greater Children's Hospital, Boston Medicare Review annually-Notify HRSA if
then 11.75 Disproportionate share adjustment percentage we fall below requirement. Update
is equal to 15.5% a/o FY ’05 2552 cost report as Children’s Hospital specific
guidance becomes available
Section 340B discounts may not Maintain separate purchasing accounts and Set up separate 340B purchasing
2 Section 340B(a)(5)(A) of Purchasing/Inventory be combined with GPO segregated inventories within the Department accounts
the Public Health Service discounted pricing Segregate Section 340B inventory from non- Set up separate 340B supply cabinet
Act 340B stock. All 340B drug purchases made Research utilization of third party
42 U.S.C. §256b through the hospital’s wholesalers delivered in software to facilitate split account
separate segregated packages. billing with the wholesaler
A covered entity shall not resell or CHB will only use 340B drugs for patients Set-up a listing of all medication
3 Section 340B(a)(5)(B) of Dispensing otherwise transfer [340B drugs] to who meet the 340B patient definition. purchased under Section 340B
the Public Health Service a person who is not a patient of Patients receiving care through employee within the department; the list will
Act the entity health who do not meet the definition will be be updated as clinical need dictates
42 U.S.C. §256b Section 340B discounted excluded. and product availability allows
medication can only be used for All medication orders are managed through
outpatients. Central Pharmacy. The managing pharmacist Ensure that daily 340B report can be
Such drugs cannot under any will determine if the patient is eligible to run and managed by charge
circumstances be diverted for receive a Section 340B medication based on pharmacist.
inpatient use nor may they be definition, service venue, patient class and
transferred to any other non- availability of medication. Separate CHAMPS
related or covered entity. formulary entries will be created for every
340B medication to facilitate tracking.
Pharmacy will generate a daily report from
CHAMPS for all 340B and non-340B
medication of the same generic name
dispensed in the previous 24 hours. The
report will include: patient name, medical
record number, encounter number, patient
class, location, medication name, dose,
pharmacist and dispense date/time stamp. The
report will be reviewed daily by the charge
pharmacist with emphasis on patients re-
classified as Inpatient class from a non-
inpatient class. Discrepancies will be
reconciled immediately.
Section 340B(a)(5)(A) of Billing Medicaid for drugs CHB will bill Medicaid for 340B discount .
4 the Public Health Service Billing purchased through the 340B drugs in the same way we bill for non-340B
Act discount program must be done in discount Drugs. DMA will not seek rebates
42 U.S.C. §256b such a way as to protect from manufacturers based on the knowledge
manufacturers from duplicate that CHB is a 340B covered entity. Per Nancy
discounts by paying rebates to Schiff, DMA617/210-5659
Mass Health.
HHS and pharmaceutical Aggregate the daily 340B use reports along
5 Reporting/Audit manufacturers retain right to audit with notations demonstrating daily
340B purchase compliance confirmation/reconciliation of eligibility of all
340B drug recipients; include reports in the
12
Preparing the Application-continued
Time Process Output Responsible
Months
0 Analyze -Savings Finance
Potential Savings Analysis Pharmacy
Determine -Org type
Institutional Eligibility -DSH % Calc
-State contract Finance
-340B non-group Government
purchase cert Relations
Establish operations
plan
-Split billing
-Partial dose
-storage
Pharmacy
Develop Compliance
& Reporting plan
-Compliance plan Finance
-Compliance Cert Pharmacy
Submit Application Compliance
8
13
Where we are now
• Application was filed in August of 2006
• We have been anxiously waiting by the phone for word of final approval
• As result of the uncertainty over the final disposition, we have put on hold
all of our plans to set up 340B program
• We had hoped to take advantage of the retroactive billing provision
allowing cost recovery back to the date of passage, but it is unlikely
that we will be prepared to take take advantage of the short window
of opportunity.
14
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