BKD NATIONAL HEALTH CARE GROUP

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1 BKD NATIONAL HEALTH CARE GROUP PRESCRIPTION FOR 340B SUCCESS IN 2018 February 14, 2018 BRIAN BELL DIRECTOR TO RECEIVE CPE CREDIT Participate in entire webinar Answer polls when they are provided If you are viewing this webinar in a group Complete group attendance form with Your printed name, signature & address All group attendance sheets must be submitted to training@bkd.com within 24 hours of live webinar Answer polls when they are provided If all eligibility requirements are met, each participant will be ed their CPE certificate within 15 business days of live webinar 1

2 GETTING TO KNOW YOU Of which HFMA Chapter are you a member? Western PA Central PA Northeast PA Metro Philadelphia New Jersey OUR GOALS FOR TODAY Who is BKD? CMS & Legislative Updates 340B Drug Pricing Program Overview B Outlook 340B Compliance Questions Split Billing Software & 340B Strategy This presentation should not be relied upon as legal advice. 2

3 BKD NATIONAL HEALTH CARE GROUP 610 professionals with year-round focus on health care Broad technical expertise & best practice recommendations Serving providers since 1940s Working with Medicare since 1960s A Washington D.C. perspective on industry trends & challenges 3,900 health care provider clients BKD OFFICE LOCATIONS 3

4 340B DRUG PRICING PROGRAM OVERVIEW Federally mandated drug pricing program created in 1992; 2017 marked the 25 th anniversary of the program Part of Public Health Service Act, section 340B & Medicaid rebate program Drug manufacturers must provide front-end discounts on covered outpatient drugs purchased by covered entities Provides discounts on outpatient drugs purchased by safety net providers for eligible patients Intended to provide financial relief to facilities that provide care to medically underserved Average savings of 25 to 50% for eligible covered entities on outpatient drugs How are covered entities using 340B savings? 340B COMPLIANCE Eligibility Diversion Contract Pharmacy Orphan Drugs Registration Duplicate Discounts Group Purchasing Organization 4

5 ELIGIBILITY 340B participation is limited to only certain not-for-profit & government-affiliated hospitals DSH Hospitals traditional acute care hospitals that can demonstrate a DSH Adjustment Factor greater than 11.75% on the most recently filed Medicare Cost Report Children s Hospitals pediatric hospitals with a 3300-series Medicare provider number that can perform a DSH calculation based on worksheet S-3 & demonstrate a result greater than 11.75% Sole Community Hospitals hospitals with Sole Community designation that can demonstrate a DSH Adjustment Factor greater than 8.0% on the most recently filed Medicare Cost Report Rural Referral Centers hospitals with Rural Referral Center designation that can demonstrate a DSH Adjustment Factor greater than 8.0% on the most recently filed Medicare Cost Report Critical Access Hospitals all Critical Access Hospitals, regardless of DSH values REGISTRATION 4 registration periods annually New 340B OPAIS went live on September 18, 2017 Authorizing Official & Primary Contact must be different individuals & neither can be consultant Both are required to create logins 2-step authentication Only Authorizing Official can attest to changes, registrations, terminations & recertification Government Official 340B OPAIS will house the statutorily mandated secure website to make 340B ceiling pricings available to providers 5

6 RECERTIFICATION 340B covered entities must annually recertify their 340B eligibility Notifications are sent to Primary Contact & Authorizing Official Once recertification period begins the Authorizing Official only has access via their user accounts to attest their covered entity s compliance with 340B requirements & complete recertification Contacts listed in the 340B database must be accurate at all times to receive all notifications DIVERSION Diversion Drugs can only be used on an outpatient basis for covered entity s patients as defined by HRSA Use for other individuals constitutes prohibited diversion Focus on defining patient & covered entity What is covered entity? Where services are provided Physicians must be employed or under a contractual or other arrangement Entity should maintain a listing of approved 340B physicians 6

7 MEDICAID DUPLICATE DISCOUNTS 340B laws prohibit application of both 340B price discount on front end & payment of pharmacy rebate to state Medicaid on back end for same drug claim General options for covered entities Carve-out Medicaid from 340B drug purchases Carve-in Medicaid requires verifying Medicaid exclusion file is accurate in 340B OPAIS Some states have been slow to establish & communicate Medicaid billing requirements & potential modifiers Transition to Medicaid managed care has created confusion Covered entities should have mechanisms in place to identify Medicaid MCO patients Contract pharmacies should not Carve-in Medicaid FFS or MCO CONTRACT PHARMACY HRSA allows providers to enter into arrangements with multiple contract pharmacies to dispense 340B drugs to qualifying patients of providers Covered entity is responsible for compliance & must monitor contract pharmacies HRSA recommends independent audits Child sites, outpatient clinics Retail pharmacy split-billing software Brand vs. generic Do you periodically review your contract pharmacy arrangements? 7

8 GPO EXCLUSION The GPO Prohibition pertains to DSH, Pediatric Hospitals & Free-Standing Cancer Hospitals Drug Purchases through GPO contracts cannot be used for outpatients covered by 340B If covered entity is unable to track 340B & GPO use, required to purchase on WAC account All outpatient drugs not purchased on 340B account must be purchased on WAC account ORPHAN DRUGS These covered entity types must purchase all orphan drugs at non-340b pricing Critical Access Hospitals Sole Community Hospitals Rural Referral Centers Free-Standing Cancer Hospitals Manufacturers are not required to provide orphan drugs under the 340B program to the above covered entities; a manufacturer may, at its sole discretion, offer discounts on orphan drugs to these hospitals October 14, 2015 U.S. District Court for District of Columbia ruled on Orphan Drug Interpretation HRSA lacks the authority to allow 340B pricing for orphan drugs used for common indications 8

9 HRSA AUDITS HRSA believes covered entities that do not regularly review & audit contract pharmacy operations are at increased risk for compliance issues Annual audit of each location will provide covered entities Covered entity should compare 340B prescribing records with contract pharmacy s dispensing records at least on a quarterly basis to prevent Conducting these audits using an independent auditor will test if the pharmacy is following all 340B program requirements & provide the covered entity with ability to timely report any violations if applicable Regular opportunity to review & reconcile 340B patient eligibility information Diversion Prevent diversion Duplicate discounts 2017 AUDIT RESULTS HRSA has conducted approximately 200 audits annually since publically available for 2017 Audits initially had a collaborative/educational tone but the tone changed when HRSA began instituting punitive penalties to ensure compliance HRSA s budget will remain the same for FY B program has grown to 22 FTEs in 2017 from 4 FTEs in 2014 HRSA will continue to focus on contract pharmacy arrangements, diversion, duplicate discounts & 340B database records 9

10 MANUFACTURER AUDITS Manufacturer Audit Guidelines May only conduct after showing of reasonable cause Manufacturer inquiries to covered entity may help support reasonable cause Important for covered entities to respond to manufacturer inquiries; failure to respond could result in audit Details are not publicly available CONSEQUENCES OF NON-COMPLIANCE Repayment of discount to manufacturer Removal from 340B Program Possible civil monetary penalties for knowing & intentional violations Potentially false claim liability (ripe for qui tam actions?) 10

11 340B STRATEGY Strategy Legislative Changes Compliance Risk Continuum SPLIT BILLING SOFTWARE Virtual inventory Receive discounts based on the drug utilization by covered outpatients Retrospective procurement is used to realize the discounts based on utilization Example vendors CaptureRx, eaudit Solutions, Macro Helix, PSG, Rx Strategies, Sentry, SunRx, Verity Solutions, Wellpartner Accumulator maintenance Direct vendors Crosswalk 11

12 EVOLUTION OF 340B 340B was started with Public Health Services Audit guidelines established Patient definition clarified Contract pharmacy process established HRSA guidance on contract pharmacies allowing multiple relationships ACA expands eligibility to include 5 new entities HRSA begins audits & Recertification process established Federal judge invalidates HRSA s orphan drug regulation Guidance on outpatient clinics released by HRSA Medicaid duplicate discount prohibition Carve-in/Carve-out Orphan drug exclusion GPO prohibition guidance HRSA issues final rule on orphan drug exclusion 340B CURRENT On August 28, 2015, HRSA released 340B Omnibus Guidance (Mega Guidance) On January 30, 2017, the White House Office of Management and Budget withdrew the final Mega Guidance OPPS Final Rule 340B Reduction for Status Indicator K drugs effective January 1, 2018 H.R introduced to reverse OPPS Final Rule on November 20, 2017; AHA files lawsuit to block OPPS Final Rule PAUSE Act introduced on December 21, 2017 in House Energy and Commerce Committee releases Review of the 340B Drug Pricing Program on January 10, 2018 HELP Act introduced on January 17, 2018 in Senate 12

13 OPPS FINAL RULE CY 2018 On November 1, 2017, CMS released a Final Rule that reduces payment to certain 340B hospitals for separately payable Part B drugs without pass-through status (Status Indicator K) by nearly 30% Prior to January 1, 2018, these drugs are reimbursed at Average Sales Price + 6%; effective January 1, 2018, the Final Rule reduces the payment rate to Average Sales Price minus 22.5% The payment reduction will apply to 340B hospitals that are designated by Medicare as DSH, RRC or Urban SCH The payment reduction will not impact 340B hospitals that are designated by Medicare as CAH, Rural SCH, children s hospital & PPS-exempt cancer hospitals CMS released FAQs on December 13, 2017 Hospitals that are subject to the reduced payment will be required to use modifier JG for all OP 340B drugs with status indicator K from Addendum B Hospitals that are subject to the reduced payment will be required to use modifier TB for all OP 340B drugs with status indicator G from Addendum B OPPS FINAL RULE CY 2018 Hospital Type (CMS Designation) Status Indicator G Drugs (Passthrough) Status Indicator K Drugs (Separately Payable) Vaccine (Status Indicator F, L or M) Status Indicator N (Packaged Drug) Not Paid Under OPPS Critical Access Hospital TB, Optional TB, Optional N/A TB or JG, Optional Maryland Waiver Hospital TB, Optional TB, Optional N/A TB or JG, Optional Non-Excepted Off-Campus TB TB N/A TB or JG, Optional Paid Under OPPS, Excepted from the 340B Payment Adjustment for 2018 Children's Hospital TB TB N/A TB or JG, Optional PPS-Exempt Cancer Hospital TB TB N/A TB or JG, Optional Paid Under the OPPS, Subject to the 340B Payment Adjustment Rural Sole Community Hospital TB TB N/A TB or JG, Optional Disproportionate Share Hospital TB JG N/A TB or JG, Optional Medicare Dependent Hospital TB JG N/A TB or JG, Optional Rural Referral Center TB JG N/A TB or JG, Optional Non-Rural Sole Community Hospital TB JG N/A TB or JG, Optional Source: Medicare-FFS Program Billing 340B Modifiers under the Hospital Outpatient Prospective Payment System (OPPS) Frequently Asked Questions 13

14 OPPS FINAL RULE CY 2018 On November 13, 2017, the AHA, AAMC & America s Essential Hospitals filed a lawsuit against HHS to prevent the payment cuts The district court dismissed the lawsuit on December 29, 2017 on the basis that hospitals have not presented a specific claim for reimbursement that has received the reduced payment On January 9, 2018 the AHA, AAMC & America s Essential Hospitals formally notified the court of their intent to appeal the decision On January 31, 2018, federal appeals court agreed to fast-track its consideration of the lawsuit; final briefs are due in early April On November 14, 2017, H.R introduced to prevent the payment cuts; as of January 31, 2018, the bill had 184 sponsors ENERGY & COMMERCE REVIEW HRSA should have regulatory authority to administer & oversee 340B Improve program integrity Program requirements Monitor & track use Ensure low-income & uninsured directly benefit from 340B HRSA requires additional resources Independent audit requirements Reduce duplicate discounts paid for under Medicaid managed care HRSA should work toward ensuring that it audits covered entities & manufacturers at the same rate Intent of the 340B program 340B transparency Ceiling prices Disclose annual savings &/or revenue Monitor charity care provided by covered entities Reassess whether DSH is an appropriate measure for program eligibility or base on outpatient population metric 14

15 340B PAUSE ACT Introduced in House in late December with bipartisan support 2-year moratorium on new DSH covered entities entering 340B 2-year moratorium on new child sites for current DSH covered entities Significant data reporting requirements DSH, Cancer Hospitals & Children s Hospitals All other covered entities are exempt from new reporting requirements Would begin within 14 months of the enactment of the bill Provides authority for HHS Government official contract OIG & GAO reporting for DSH, Cancer Hospitals & Children s Hospitals No change to patient definition Does not apply to all covered entity types HELP ACT Introduced in the Senate on January 17, 2018, by Dr. Bill Cassidy Increase transparency & strengthen reporting requirements to prevent abuse & ensure 340B savings are used to lower drug costs Hold hospitals accountable for passing 340B savings to patients Prohibit new enrollments in 340B for at least 2 years Require the HHS Secretary to issue new reporting requirements for current program covered entities Critical Access Hospitals, Rural Referral Centers, Sole Community Hospitals, Grantees, PPS-exempt Children s & Cancer Hospitals would be excluded from enrollment restrictions & new reporting requirements In recent years, government watchdogs like the GAO, HHS, OIG & MedPAC have identified transparency concerns & loopholes in the 340B program that enable hospitals to take advantage of Medicare & Medicaid reimbursement rates & divert resources away from the patients the program is intended to help The 340B program is an important resource for hospitals serving low-income areas, said Dr. Cassidy. But too often the program s discounts are used to pad hospitals bottom lines instead of helping disadvantaged patients afford their treatments. This bill will increase transparency and accountability and help ensure these discounts reach patients. 15

16 2018 OUTLOOK IN SUMMARY Monitor Compliance Engage in Advocacy Optimize Savings Be Ready for the 340B Roller Coaster Ride in 2018 Track Legislative Changes & Update Strategy 16

17 CONTINUING PROFESSIONAL EDUCATION (CPE) CREDITS BKD, LLP is registered with the National Association of State Boards of Accountancy (NASBA) as a sponsor of continuing professional education on the National Registry of CPE Sponsors. State boards of accountancy have final authority on the acceptance of individual courses for CPE credit. Complaints regarding registered sponsors may be submitted to the National Registry of CPE Sponsors through its website: The information contained in these slides is presented by professionals for your information only & is not to be considered as legal advice. Applying specific information to your situation requires careful consideration of facts & circumstances. Consult your BKD advisor or legal counsel before acting on any matters covered. 17

18 CPE CREDIT CPE credit may be awarded upon verification of participant attendance For questions, concerns or comments regarding CPE credit, please the BKD Learning & Development Department at THANK YOU Brian Bell, Director