October2015HRSA 340B Audit Findings: The Dis-enrollment Question!

- By Keith Chop, Managing Partner

At the 340B Health summer conference, we were asked multiple times if we knew of any covered entities that were asked to dis-enroll from the 340B program due to adverse findings. It was certainly a “hot” topic, and a good one at that considering program speculation is at an all-time high. Inquirers probed further, asking how egregious negative audit findings had to be to warrant a HRSA request for disenrollment. And so, we thought we might provide a little information about the process to handle HRSA negative audit findings, the chances of audit findings that warrant disenrollment (how egregious they must be), and the steps that need to be taken to re-enroll in the program and/or handle adverse findings by HRSA.

Request for HRSA Disenrollment – Past

For adverse findings, provide and execute a Corrective Action Plan. Whether it was diversion, OPA database in-accuracies, faulty Policies and Procedures, Medicaid billing non-compliance, or general program negligence resulting in numerous infractions, the covered entities facing adverse findings from a HRSA audit, especially in the contract pharmacy arena, have not faced a request by HRSA to dis-enroll from the program. While various covered entities have engaged the Alinea analytics team to perform material breach extrapolation analyses for manufacturer settlement as a result of diversion, we have not witnessed many covered entities facing disenrollment from HRSA. In 99% of the adverse findings, covered entities found non-compliant have been asked to provide a corrective action plan for audit discrepancies that could not be resolved through additional supporting documentation refuting identified issues.

Request for HRSA Disenrollment – FUTURE!

We predict required disenrollment, as a result of adverse HRSA audit findings, will rise in 2016. While we are dealing with a small sample size, in which two different covered entities recently contacted our group regarding a request from HRSA to dis-enroll from the 340B program as a result of negative audit findings, we believe there will be a trend and increase toward required dis-enrollment for entities that are not meeting the new HRSA audit standards. In discussing HRSA audit findings with these covered entities, we did not find their discrepancies to be out of the norm for organizations there size dealing with common issues in charge capture, interdepartmental communication, and/or software qualification filters utilized for the inpatient and outpatient, retail, and contract pharmacies. Based on our conversations, and the work we were engaged to perform assisting them their adverse findings response and overcoming operational challenges, we would classify these organizations in the top 25% in performance of the more than 100 programs we have audited as it relates to the severity of their audit discrepancies; comparatively their offenses would not be deemed egregious by past standards. Of the two covered entities that engaged Alinea to assist with overturning HRSA’s request for the covered entity to dis-enroll, one hospital did not have any contract pharmacy relationships and utilizes a reputable, legacy 340B split billing software.

Where do we go from here?

Covered entities should adhere to stricter standards and prepare for audits. While it is our hope that HRSA is using these notable covered entities to send a message to the 340B community, we find the consequences these covered entities face to be alarming and expect many more hospitals to face the same fate in 2016 and beyond. The threat for 340B program disenrollment is now real.

If covered entities have not engaged outside assistance, regardless of whether or not they have contract pharmacy relationships (per OPA suggestion, covered entities should engage an independent contract pharmacy audit (http://www.hrsa.gov/opa/implementation/contract/index.html), it is suggested that an outside firm should be engaged to provide a compliance review or assistance in developing the proper controls and technology enhancements to meet the “new” HRSA audit standards. Protecting your program and applying conservative practices in the oversight and management of your 340B program will save your organization from the financial impact of dis-enrollment and cost to re-enroll. It is not enough to depend on 340B split billing software anymore. In addition to an outside firm, which has requisite healthcare audit, pharmacy operations, deep data analytics, and regulatory and legal backgrounds, legal counsel should also be engaged to handle negative findings responses, required disenrollment repudiation, and HRSA written and/or verbal communication regarding mediation of results. It is suggested that legal representation, along with a 340B audit firm with operational understanding, be engaged upon initiation of the 340B HRSA audit.