After months of relative uncertainty, the Health Resources and Services Administration (HRSA) published a Notice today confirming the end to a COVID-19 pandemic-era flexibility that allowed unregistered child sites to utilize 340B Program benefits in some circumstances. However, HRSA also introduced new “transition periods” in its Notice, providing covered entities a longer runway to come into compliance while minimizing negative operational impacts.
HRSA’s child site registration flexibility effectively allowed covered entity outpatient departments not yet formally registered with HRSA as child sites to participate and benefit from the 340B Program. Historically, HRSA limited 340B eligibility for a child site until that location (1) reported reimbursable outpatient expense and revenue on the hospital’s most recently filed Medicare Cost Report; and (2) was registered on the covered entity’s 340B Office of Pharmacy Affairs Information System (OPAIS) profile.
Beginning in mid-2020, however, HRSA relaxed these eligibility requirements and allowed off-site hospital locations to participate in the 340B Program if the site served patients of a covered entity and would be listed as reimbursable on the hospital covered entity’s future Medicare Cost Report. Covered entities were still required to align its 340B policies and procedures to support the site(s)’ eligibility and generally comply with all program requirements, including maintenance of auditable records for the 340B drugs dispensed to patients receiving applicable services at these off-site locations. This flexibility ultimately enabled covered entities to begin obtaining 340B benefits for new outpatient departments much earlier (over a year in many cases), which resulted in significant 340B savings for those covered entities.
Despite indicating to various stakeholders in 2020 that the child site registration flexibilities would remain in place permanently post-PHE, HRSA has since changed its stance. Covered entities will now have to follow HRSA’s historical child site registration requirements ahead of considering an off-site location 340B-eligible or risk sanction by HRSA.
Notably, the Notice introduces several transition periods for registration of locations, which will allow covered entities to continue to obtain drugs at 340B pricing for those yet-to-be registered locations provided the transition criteria are met.
The first transition allowance covers outpatient facilities that are currently listed on the hospital’s most recently filed Medicare Cost Report but are not yet registered on OPAIS. To continue using 340B drugs for patients at these locations, the covered entity must formally register these sites during the next 340B Program quarterly registration period, occurring January 1-16, 2024. If the covered entity fails to register the locations during this time and continues to consider those locations as 340B-eligible, then the covered entity risks audit and/or enforcement action.
The second transition allowance covers outpatient facilities that are not yet listed as a reimbursable department on the covered entity’s most recently filed Medicare Cost Report. Locations in this category may continue to use 340B drugs, provided that the following conditions are met:
- The outpatient facility was opened and began using 340B drugs prior to October 27, 2023.
- The hospital covered entity provides to HRSA, via email to 340Bcompliance@hrsa.gov by January 25, 2024 (i.e., 90 days after the Notice was posted) the following information:
- The name of the off-site, outpatient facility;
- The date the site will be listed on the hospital’s Medicare Cost Report with associated outpatient costs and charges (this must be the next filed Medicare Cost Report); and
- The date the covered entity will register the site in OPAIS.
After providing this information to HRSA, the hospital covered entity must also subsequently register the outpatient facilities on OPAIS at the soonest opportunity, but no later than the date listed in the information provided to HRSA as described above. On the other hand, if the covered entity does not provide this information to HRSA within the 90-day time period, then any location not listed on the most recently filed Medicare Cost Report must cease purchase of 340B drugs for use at the facilities until it is formally registered as a child site and has an active OPAIS registration.
Finally, hospital covered entities utilizing outpatient facilities that do not fall in to the two categories described above must cease using 340B drugs at those locations as soon as practically possible, but no later than January 25, 2024 (i.e., 90 days after publication of the notice). After the 90-day grace period, any sites not in compliance with the registration requirements may be subject to audit and enforcement actions by HRSA.
Covered entities currently relying on HRSA’s previous child site registration flexibilities should carefully analyze the requirements and conditions contained in the HRSA Notice and take steps to comply with the applicable transition period criteria. Covered entities should also consider whether their policies and procedures align with HRSA’s new guidance in this area. If you have questions or would like to discuss potential options, please reach out to your Quarles attorney or:
- Richard B. Davis: (414) 277-5844 / richard.davis@quarles.com
- Michael French: (312) 715-5261 / michael.french@quarles.com
- Madison Hartman: (317) 399-2883 / madison.hartman@quarles.com
- Brenda Maloney Shafer: (602) 229-5774 / brenda.shafer@quarles.com