Understanding the 340B Program:

Covered Entities, Eligibility & Revenue Potential

What Is The 340B Drug Pricing Program?

The United States Congress created the 340B drug pricing program in 1992 to help nonprofit healthcare providers (which operate on very low, or negative, margins) fill-in their revenue gaps, by providing them with access to prescription drugs at significant discounts.

As The American Hospital Association (AHA.org) noted in a March, 2023 Fact Sheet, “The program allows 340B hospitals to stretch limited federal resources to reduce the price of outpatient pharmaceuticals for patients and expand health services to the patients and communities they serve.”

For many of the hospitals VytlOne serves, 340B savings and revenue are the lifeline enabling them to pursue their missions of serving patients who lack the financial resources to pay for healthcare. To read the experience of two Pharmacists In Charge at health systems we serve, visit our blog post.

How does the 340B program work for covered entities?

When a patient receives a 340B-eligible prescription from a covered entity, the health system is entitled to be reimbursed for the full market price of the prescription, but — by purchasing the drugs on the 340B catalog — pays only a small portion of the drugs’ costs.

340B covered entities are legally entitled to determine how they use their 340B savings. Many of the health systems we serve use the revenue generated by their 340B programs to provide a variety of healthcare services they would be otherwise unable to afford to offer.

How much revenue can your health system expect from the 340B program?

The answer depends upon a number of factors. What we can say with 100% certainty is this: We know of no program partner offering better, or more proven, 340B solutions for hospitals — or a more comprehensive understanding of 340B pharmacy for health systems.

We’ve developed proven solutions to increase 340B revenue and reduce 340B claim errors, and we’re constantly improving the quality and scope of our services. Are we the best 340B vendor? We like to think so.

What is the legal definition of a 340B Covered Entity?

The Health Resources and Services Administration (HRSA) considers includes six categories of healthcare providers “covered entities” under the 340B Drug Pricing Program.

• Critical access hospitals
• Rural referral centers
• Children's hospitals & cancer hospitals exempt from the Medicare prospective payment system
• Sole community hospitals
• Disproportionate share hospitals (DSH)

Healthcare facilities included in the 340B program.

Covered Entity Hospital Facilities include:

• Rural Health Clinics
• Federally Qualified Health Centers
• Community-based rehabilitation programs
• Psychiatric hospitals
• Long term/continuing care nursing homes
• Home infusion therapy centers
• Hospices
• Freestanding acute care general hospitals
• State mental institutions
• Indian Health Service facilities

A 2018 study by the U.S. Government Accountability Office (GAO), offers the following estimates, concerning 340B covered entities: 62% are rural and 38% are urban. Forty-five percent are general acute care hospitals and forty-five percent are critical access hospitals.

Understanding the 340B program’s eligibility requirements for hospitals.

To qualify for Covered Entity status under the 340B program, most hospitals must meet all of the following requirements. That said, Rural Hospitals are required to meet only the first two.

• Government-controlled or government-owned hospitals
• Disproportionate Share Hospitals
• DSH hospitals, children’s hospitals and free-standing cancer hospitals meeting the first two criteria.

Understanding requirements for eligible drugs in the 340B program.

Which drugs are eligible for 340B price discounts?

The drugs available for discounted 340B prices are typically offered through a 340B hospital’s wholesaler unless, in the case of a specialty drug distributor, a particular manufacturer requires that certain medications be purchased through other channels. VytlOne’s proprietary software system tracks every prescription drug eligible for 340B savings.

How do manufacturer restrictions affect 340B program savings?

The 340B ESP website, which launched in June, 2020, has inspired unlawful manufacturer restrictions on numerous 340B-eligible prescriptions — leading many 340B-eligible health systems to abandon their right to participate in the 340B drug program altogether.

340B health systems can overcome manufacturer restrictions.

To see an outline of our process for overcoming manufacturer restrictions, Click Here.

What patients are eligible for 340B program discounts?

Covered entities can dispense 340B-eligible prescriptions to patients who meet the following qualifications: 1) They have an established relationship with the covered entity. IE: The entity maintains records of the individual's care by the health system; 2) They receive healthcare from a provider who is either employed by the 340B health system, or is under contract or some other arrangement (For instance: Through referrals for consultation) with the 340B health system. In all cases, responsibility for the care remains with the covered entity; and 3) They receive health services for which grant funding has been provided to the covered entity.

Can you trust your TPAs to optimize 340B discounts on your behalf?

Not always. Every TPA has its own methodologies and capabilities, and all are subject to occasional User Errors. When Covered Entities use multiple TPAs to gain access to contract pharmacies used by their patients, the problem is compounded.

It’s important to note that there is no 340B Third-Party Administrator alternative, and VytlOne is not a TPA. That said, we carefully monitor the activities of TPAs serving our 340B-eligible health system clients — to ensure they uphold the same 340B compliance standards that we do.

Always be aware of common TPA 340B data mismatches.

There are so many factors causing TPA 340B data mismatches. One of the most common causes is Patient Date Of Birth being recorded differently from one entry to the next. Moreover, the more complex your 340B program is, the likelier you’ll have flawed data submissions — which can lead to a significant number of 340B savings opportunities being missed.

340B Best Practices Every Health System Should Know

How to ensure 340B program compliance.

It goes without saying that VytlOne offers you full 340B compliance support, including, when necessary, HRSA audit prep. Below is an abbreviated checklist of tips for ensuring compliance with 340B program requirements. For the complete list, please refer to our blog post on the topic.

• You should have detailed 340B policies and procedures in writing, and they should be consistent with your health system’s existing policies and procedures.
• You should ensure that your provider files are accurate at all times. This includes National Drug Code crosswalks and location maps for all of the 340B contract pharmacies in your network.
• You should use software that’s been specifically developed to manage your 340B program.
• You should conduct regular checks on your inventory management and tracking procedures, to ensure that you’re always in compliance.
• You should also conduct internal audits of your health system’s 340B program on a regular basis.

You should optimize your 340B program savings, but not maximize them.

Again, VytlOne maintains a policy of aggressively pursuing 340B savings for every prescription that’s worth pursuing. In other words, the market price of many prescriptions is simply too low to justify the effort needed to generate the eligible savings.

A 340B program that is optimized generates net savings from every 340B-eligible prescription claimed.

Maintain an active Meds-To-Beds prescription delivery program

In our experience, 340B health systems that don’t offer Meds To Beds patient-support believe that the service is simply too expensive to staff and administer. Nothing could be further from the truth. Here’s one example: VytlOne implemented a Meds To Beds program in a single Mississippi hospital, and — in its first 12 months of operation — our team filled over 18,000 discharge prescriptions. As a result, the hospital’s pharmacy revenues increased 125%, and its readmissions were reduced by seventy-nine percent.

Implement an effective readmission reduction program

Meds To Beds is just one component of a well-executed, effective readmission reduction program.

For Further Reading:
Reducing Hospital Readmissions, One Patient At A Time.
How One Clinical Pharmacist Can Impact Hospital Readmissions

Build and own an onsite 340B specialty pharmacy.

As we’ve detailed, in depth, in one of our blog posts, every 340B health system should have its own on-campus specialty pharmacy. To learn how VytlOne can help you build, fund and prepare a successful specialty pharmacy for accreditation, visit the specialty pharmacy page on our website.

Make every effort to improve your 340B contract pharmacy network.

Since 2019, VytlOne has managed the 340B programs of 21 health systems, and we have never served (or seen) a 340B health system with adequate in-house resources to optimize the quality or the number of contract pharmacies in its network. To learn more, visit our blog post on the topic.

How can we support your mission through 340B?

CONTACT US NOW.
Howard Hall, CHFP
Vice President of Growth
C: 214.808.2700 | howard.hall@vytlone.com