[Federal Register Volume 88, Number 207 (Friday, October 27, 2023)]
[Notices]
[Pages 73859-73862]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2023-23702]


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DEPARTMENT OF HEALTH AND HUMAN SERVICES

Health Resources and Services Administration


Registration Requirements in the 340B Drug Pricing Program

AGENCY: Health Resources and Services Administration (HRSA), Department 
of Health and Human Services (HHS or Department).

ACTION: Notice.

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SUMMARY: HRSA is issuing this Notice to inform and remind stakeholders 
of the registration requirements for off-site, outpatient hospital 
facilities to participate in the 340B Drug Pricing Program (340B 
Program). This Notice applies to all hospital types that participate in 
the 340B Program.

FOR FURTHER INFORMATION CONTACT: Questions should be directed to 
Michelle Herzog, Deputy Director, Office of Pharmacy Affairs, Office of 
Special Health Initiatives, HRSA, 5600 Fishers Lane, Room 8W12, 
Rockville, MD 20857, or by telephone at 301-594-4353.

SUPPLEMENTARY INFORMATION: Section 340B(a)(4) of the Public Health 
Service Act (PHS) Act (42 U.S.C. 256b) lists the various types of 
organizations (``covered entities'') eligible to participate in and 
benefit from the 340B Program. Section 340B(d)(2)(B)(i and ii) of the 
PHS Act requires the development of a system by which covered entities 
can attest to, and HRSA can verify, continued accuracy of information 
in the 340B database and compliance with 340B Program requirements. 
Section 340B(a)(9) of the PHS Act requires the Secretary to notify 
participating manufacturers of the identity of those organizations that 
meet the definition of covered entity under 340B(a)(4). Section 
340B(d)(2)(B)(iv) of the PHS Act includes requirements for the 
establishment of a standardized

[[Page 73860]]

identification system whereby each covered entity site can be 
identified by manufacturers for purposes of facilitating the ordering, 
purchasing, and delivering of covered outpatient drugs. To fulfill 
these statutory requirements, all covered entities and their associated 
sites must be registered and listed in the 340B Office of Pharmacy 
Affairs Information System (OPAIS).
    Section 340B(a)(4) of the PHS Act defines the types of entities 
eligible to participate in the 340B Program. Section 340B(a)(4)(L) 
states that a subset of Medicare disproportionate share hospitals 
(DSHs), as defined in section 1886(d)(1)(B) of the Social Security Act 
(SSA), are eligible for the 340B Program. Sections 340B(a)(4)(M-O) 
state that certain sole community hospitals, rural referral centers, 
critical access hospitals, children's hospitals, and free-standing 
cancer hospitals qualify for the 340B Program. Section 340B(a)(6) 
indicates that qualification of one part of an institution as a covered 
entity does not qualify all parts of the institution as a covered 
entity. With regard to hospital covered entities, HRSA published final 
guidelines on the participation of off-site, outpatient facilities in 
the 340B Program in the Federal Register at 59 FR 47884 (Sept. 19, 
1994) and provided OPAIS registration instructions at https://www.hrsa.gov/opa/registration. To be registered and continue to be 
listed in OPAIS as participating in the 340B Program, a hospital 
covered entity's off-site, outpatient facility must (1) be listed as 
reimbursable on the hospital's most recently filed Medicare Cost Report 
and (2) have associated outpatient costs and charges on the most 
recently filed Medicare Cost Report, which is filed with the Centers 
for Medicare & Medicaid Services (CMS). This applies to all hospital 
types that are eligible for the 340B Program as outlined above. After 
being registered, if an off-site, outpatient facility is no longer 
reimbursable on the hospital's most recently filed Medicare Cost Report 
or if a facility no longer has outpatient costs and charges on the 
hospital's most recently filed Medicare Cost Report, then the facility 
is not eligible for participation in the 340B Program.
    CMS regulations at 42 CFR 413.65 outline the standards for 
provider-based clinics that must be met for reimbursement purposes 
under the Medicare Program. Specifically, 42 CFR 413.65(e) provides a 
number of additional requirements that off-campus facilities or 
organizations must satisfy, including demonstrating a ``a high level of 
integration with the main provider.'' Approval of provider-based status 
requires submission of documentation demonstrating the off-campus 
facility's services are provided to the same patient population as the 
main provider. For all hospital types eligible to participate in the 
340B Program, HRSA requires submission of the most recently filed 
Medicare Cost Reports, in order to ensure that off-site, outpatient 
facilities comply with 340B Program eligibility requirements. 
Specifically, to be considered eligible for the 340B Program, under 
HRSA's longstanding guidance (59 FR 47884, Sept. 19, 1994) an off-site, 
outpatient facility needs to be reimbursable on a hospital's most 
recently filed Medicare Cost Report. Because the 340B Program is by 
statute a discount drug purchasing program for covered outpatient drugs 
(see section 340B(a)(1) of the PHS Act), the hospital must indicate 
that the off-site, outpatient facility also has associated outpatient 
costs and charges as evidenced on the hospital's most recently filed 
Medicare Cost Report. To meet the statutory requirements at 340B(a)(9) 
and (d)(2)(B)(iv) of the PHS Act, the off-site, outpatient facility 
must also be listed in OPAIS.
    As part of the government's efforts to respond to the unprecedented 
circumstances of the COVID-19 Public Health Emergency (PHE), HHS 
allowed various flexibilities across many of the Department's programs, 
including the 340B Program. In June 2020, the Frequently Asked 
Questions (FAQ) section of the Office of Pharmacy Affairs' COVID-19 
resources web page announced the availability of a waiver of the 
requirement that off-site, outpatient facilities be (1) listed as 
reimbursable on the hospital's Medicare Cost Report prior to 
participating in the 340B Program; and (2) registered and listed in 
OPAIS prior to participating in the 340B Program. The FAQ stated that 
for those ``. . . hospitals who are unable to register their outpatient 
facilities because they are not yet [emphasis added] on the most 
recently filed Medicare Cost Report, the patients of the new site may 
still be 340B eligible to the extent that they are patients of the 
covered entity.''
    The information on the COVID-19 resource web page reflected that 
the waiver was implemented in recognition of the need for hospitals to 
quickly respond to the rapidly evolving conditions of the COVID-19 
pandemic and assist in creating efficiencies for hospitals to adjust 
operations in that response. For example, by providing hospitals the 
ability to quickly move a clinic from within the four walls of a 
hospital to outside the hospital to expand capacity for care for 
patients with COVID-19 while lessening the exposure risk for other 
patients needing access to outpatient care. The FAQ also recognized 
that during the COVID-19 public health emergency, hospitals had to 
transition certain clinic functions to meet the needs of the patients 
(i.e., shift of an outpatient surgery center to an urgent care or 
emergency room) and prioritize care accordingly. As stated on the 
COVID-19 resources web page, HRSA encouraged hospitals to document 
these situations in their policies and procedures and reminded these 
covered entities of their responsibility to demonstrate compliance with 
all 340B Program requirements, including compliance with diversion and 
duplicate discounts, and ensure that auditable records are available 
for any 340B drugs dispensed to patients. As indicated in the FAQ, this 
waiver was only intended for off-site, outpatient facilities that would 
be listed as reimbursable on the hospital's future Medicare Cost 
Report.
    Various HRSA program integrity efforts conducted since the start of 
the COVID-19 PHE have demonstrated that the waiver has added risk and 
complexity to HRSA's ability to effectively oversee ongoing compliance 
in the 340B Program. Further, the circumstances of COVID-19 are no 
longer rapidly evolving in a manner that requires significant unplanned 
activities or changes by hospital covered entities to accommodate these 
exigencies or adjust operations without planning for additional 
requirements to conduct business. The COVID-19 public health emergency 
ended on May 11, 2023, and hospitals have generally returned to regular 
operations.
    Accordingly, HRSA has determined that ending the waiver is 
appropriate at this time given that, as described above, there are no 
longer exigent circumstances of a nationwide public health emergency 
that require allowing hospitals to expeditiously adjust their 
operations and locations for providing care off-site while maintaining 
immediate access to the 340B Program resources. By ending the waiver, 
HRSA will more effectively administer the program and support program 
integrity efforts. This Notice is being issued to provide clarity to 
stakeholders and provide a sufficient time period during which 
hospitals may take efforts to bring their operations into compliance. 
In ending this waiver, HRSA maintains its original policy goals in 
requiring certain criteria for off-site, outpatient facility 
registration on an ongoing basis. This includes:

[[Page 73861]]

    <bullet> HRSA utilizes a hospital's most recent Medicare Cost 
Report filing to verify eligibility of off-site, outpatient facilities. 
As cited above, this is the standard that the 340B Program has used for 
decades, and it is HRSA's policy goal to maintain the continuity of the 
most recently filed Medicare Cost Report standard to determine hospital 
off-site, outpatient eligibility for the 340B Program. HRSA is unable 
to verify the eligibility of 340B Program participants when off-site, 
outpatient facilities are permitted to participate prior to their 
inclusion on the most recently filed Medicare Cost Report. Further, 
HRSA has a long-established standard of requiring not only the 
hospital, but the specific off-site, outpatient facility utilizing the 
discounts to be listed on the hospital's most recently filed Medicare 
Cost Report. This is to ensure that a hospital with multiple locations 
may only seek participation in and remain in the program for sites that 
meet all eligibility requirements.
    <bullet> HRSA requires off-site, outpatient facilities to be 
registered and listed in OPAIS in alignment with the transparency 
provisions of the 340B statute at sections 340B(a)(9) and (d)(2)(B)(iv) 
of the PHS Act. When these facilities participate without first being 
registered and listed in OPAIS, as occurred under the waiver, it can 
create confusion and make efforts to audit or determine compliance 
difficult because HRSA, states, and drug manufacturers do not have 
uniform and comprehensive visibility into which sites are eligible to 
purchase 340B drugs. OPAIS is a centralized resource not just for HRSA, 
but also for manufacturers and states, who use it to plan operations 
(such as distribution) that may adjust depending on the number of 
facilities in a given location.
    <bullet> Section 340B(a)(5)(A) of the PHS Act prohibits duplicate 
discounts in the 340B Program. This occurs when a manufacturer provides 
both a Medicaid rebate and a 340B discount on the same drug. HRSA's 
Medicaid Exclusion File (MEF) is a mechanism used to prevent duplicate 
discounts in Medicaid Fee-for Service for 340B drugs and serves as the 
official data source to determine whether 340B drugs are billed to 
Medicaid. The waiver increases the risk of duplicate discounts as 
unregistered sites cannot be listed on the MEF, as only sites 
registered and listed in OPAIS can be added to the MEF. Therefore, 
manufacturers and states would not know which sites use 340B for their 
Medicaid patients, as the MEF is used by them to decrease the 
likelihood of duplicate discounts. Requiring registration of sites to 
obtain access to 340B discounts on drugs may also decrease the risk of 
diversion that drugs would be dispensed to individuals for whom HRSA is 
unable to verify their patient eligibility status.
    In addition to the foregoing policy goals, audits of covered 
entities suggest that the waiver is widely used by covered entities 
though it is no longer necessary to meet the unique challenges due to 
the unprecedented COVID-19 pandemic. For example, in FY 2023 audits of 
hospital covered entities, HRSA found that more than one-third of those 
hospital covered entities were using 340B drugs in unregistered sites, 
and those hospital covered entities reported that the unregistered 
sites would be listed on a future Medicare Cost Report. However, as of 
May 11, 2023, those off-site, outpatient facilities were not registered 
in OPAIS, causing significant challenges for HRSA to determine 
compliance for these participating sites, as it was unclear whether the 
unregistered sites would ever be eligible and an integral part of a 
340B hospital. In that time period between the audits and May 11, 2023, 
hospitals should have been able to register offsite, outpatient 
facilities on OPAIS. Although these covered entities made 
representations to HRSA that those offsite, outpatient sites would be 
registered on the next filed Medicare Cost Report, HRSA has found that 
despite these representations, those covered entities did not attempt 
to bring those sites into compliance with HRSA requirements. As another 
example and as part of ongoing program integrity initiatives, HRSA 
recently engaged in risk-based program integrity efforts focused on 
hospitals that were at higher risk of compliance issues due to volume 
of purchases; number of off-site, outpatient sites; or prior audit 
findings. Specific to these efforts, HRSA sent letters in March 2023 to 
60 hospitals containing a series of questions and information requests 
regarding program compliance, including the use of 340B drugs at off-
site, outpatient facilities. Recipients of the letters included the 20 
hospitals with the highest volume of purchases in the 340B Program, the 
20 hospitals with the highest numbers of off-site, outpatient 
facilities in the 340B Program, and 20 additional covered entities that 
had other potential compliance risks. Based on analysis of Medicare 
Cost Report data, HRSA found that 27 of the 60 hospitals utilized 340B 
drugs at sites that were not listed on the most recently filed Medicare 
Cost Report. HRSA also found that some hospitals did not maintain that 
their offsite, outpatient facilities continued to have outpatient costs 
and charges on the most recently filed Medicare Cost Report. For sites 
that are using 340B drugs, but not listed on the hospital's most 
recently filed Medicare Cost Report, do not have associated outpatient 
costs and charges, or registered in OPAIS, HRSA cannot verify whether 
use of 340B drugs at those sites for patients is warranted, leading to 
possible diversion and duplicate discounts. Accordingly, HRSA 
determined that there is a need to verify off-site, outpatient 
facilities prior to their participation in the 340B program and on an 
on-going basis to ensure that they continue to meet 340B Program 
eligibility criteria.
    HRSA's audit and other program integrity activities related to off-
site, outpatient facilities highlight the increased 340B Program 
compliance risks associated with hospitals continuing to use a waiver 
that is no longer necessary. As some covered entities believed the 
waiver would continue indefinitely and would not be tied to the end of 
the PHE, HRSA is providing a transition period for covered entities to 
come into compliance with the off-site, outpatient facility 
registration requirements. This transition period will provide the 
opportunity for all hospitals to register, or take affirmative efforts 
to come into compliance with program requirements within an appropriate 
time. The burden of registration and including a facility in the next 
filed Medicare Cost Report does not take significant resources, and 
hospitals making good faith efforts to come into compliance should be 
able to adjust operations within this transition time period. 
Additionally, as was stated on the COVID-19 resources web page, HRSA 
encouraged hospitals to document situations in which the waiver was 
utilized and ensure that auditable records were available for any 340B 
drugs dispensed to patients. Accordingly, HRSA expects that the 
information needed for hospitals to register, or take affirmative 
efforts to come into compliance, should be readily available to 
affected hospital covered entities. HRSA will enforce its longstanding 
registration requirements as outlined below.

I. Transition Period for Registration of Off-Site, Outpatient 
Facilities

    HRSA's approach to enforcement of 340B registration requirements 
will occur as follows:
    1. HRSA will continue to allow off-site, outpatient facilities that 
are currently listed on the hospital's most recently filed Medicare 
Cost Report with

[[Page 73862]]

associated outpatient costs and charges, but that have not yet 
registered in OPAIS, to continue to use 340B drugs for patients of the 
covered entity pending registration of the facility in OPAIS during the 
next 340B Program quarterly registration period (January 1-16). If a 
facility is not registered during January 1-16 quarterly registration 
period, the hospital covered entity may be subject to audit and 
compliance action.
    2. HRSA will continue to allow off-site, outpatient facilities that 
are not yet listed as a reimbursable facility on the hospital's most 
recently filed Medicare Cost Report with associated outpatient costs 
and charges to continue to use 340B drugs for patients of the covered 
entity if the following conditions are met:
    a. The off-site, outpatient facility was opened and began using 
340B drugs prior to the publication date of this Notice; and
    b. The hospital that is the covered entity and the parent 
organization for the off-site, outpatient facility provides HRSA, via 
email to <a href="/cdn-cgi/l/email-protection#0f3c3b3f4d6c60627f63666e616c6a4f677d7c6e21686079"><span class="__cf_email__" data-cfemail="be8d8a8efcddd1d3ced2d7dfd0dddbfed6cccddf90d9d1c8">[email protected]</span></a> within 90 days of publication date of 
this Notice, with the following information consistent with 340B 
registration requirements:
    <bullet> The name of the off-site, outpatient facility;
    <bullet> The date the site will be listed on the hospital's 
Medicare Cost Report (this must be the next filed Medicare Cost Report) 
with associated outpatient costs and charges; and
    <bullet> The date the covered entity will register the site in 
OPAIS.
    If a covered entity does not provide this information within 90-
days of publication of this Notice, any off-site, outpatient facility 
that is not listed on the most recently filed Medicare Cost Report with 
associated outpatient costs and charges will have to cease purchasing 
340B drugs for use at those facilities and will be subject to audit and 
compliance action. Consistent with longstanding 340B Program 
requirements, covered entities that provide this information within 90 
days of publication must subsequently register in OPAIS at the soonest 
possible opportunity (and no later than the dates listed in the 
information provided to HRSA), and recertify in OPAIS annually with the 
most recently filed Medicare Cost Report with associated outpatient 
costs and charges.
    3. Hospital covered entities using 340B drugs at off-site, 
outpatient facilities that are not listed on the most recently filed 
Medicare Cost Report with associated outpatient cost and charges, are 
not in OPAIS, and do not meet categories 1 or 2 above are out of 
compliance and must stop using 340B drugs at these unregistered sites 
as soon as practically possible, but no later than 90 days after the 
publication of this Federal Register Notice. After the 90-day grace 
period, non-compliant covered entities may be subject to audit and 
compliance action. HRSA is allowing for a 90-day grace period for 
affected hospitals to come into compliance and does not believe that 
any undue burden would be caused by reverting back to its original 
program guidelines, which have been in place since 1994.

II. Other Deadlines

    Deadlines for 340B Program requirements other than those listed 
above are not affected by this Notice. All other registrations and 
change requests are not affected by this Notice and will be processed 
as they are received.

Carole Johnson,
Administrator.
[FR Doc. 2023-23702 Filed 10-26-23; 8:45 am]
BILLING CODE 4165-15-P


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