Nearly every healthcare CFO whose organization participates in the 340B Drug Pricing Program is familiar with (and understands) the risks associated with non-compliance. What most misunderstand is the severity of the cost of non-compliance. For example, the U.S. Health Resources & Services Administration requires 340B Program participants to ensure pharmaceutical makers aren’t giving duplicate discounts on drugs provided to 340B covered entities. If a 340B covered entity unwittingly submitted such claims the organization would have to pay back, potentially, millions of dollars to the drug maker.
A penalty hurts for two reasons: 1) the possible size of the repayment, especially since most covered entities run on a thin profit margin, hovering around three percent, and 2) the time lapse between the claim error and discount repayments (i.e., the covered entity has generally closed its books for the financial period within which an error occurs, yet learns of the mishap in the next financial terms). Since HRSA auditors focus on what has happened, covered entities that get flagged in audits for duplicate discounts have typically spent the savings. So, there’s not only the shock of having to make a repayment to a pharmaceutical company after the error but also paying for it out of razor-thin profits. Imagine cutting into profits to pay back a multi-million-dollar loss. The ultimate risk, though, is having the HRSA auditor find a combination of things that together are severe enough to jeopardize the 340B Program’s existence.
A conversation worth having
Are you able to see right now if your 340B Program is compliant? If you ask your program manager, you’re likely to hear one of two responses:
- The team is on top of things, and welcomes question because it’s an opportunity to describe what a great job the 340B Program team is doing despite the challenges, including the need for more resources, or
- There’s a nervous, perhaps incoherent, response that conveys there’s no immediate way to demonstrate compliance.
Compliance is often burdensome, manual work that saps resources and time. Even when a 340B Program manager is on top of any issues, the state of compliance can shift in a week, days, or even hours. All CFOs know the 340B Program helps patients and brings financial benefits. But some chief financial officers view 340B simply as a purchasing contracting program. 340B is not like that. Still other CFOs might understand being out of compliance could lead to a penalty, but they surmise it’s not a big penalty. Regardless of which group you fall into, CFOs tend to think their 340B Program is fine. If you feel this way, can you prove it?
With a manual process, sooner or later you’re noncompliant
Any 340B Program manager, including a pharmacy director, would eagerly explain to you that a manual process alone can’t maintain around-the-clock compliance. The complexity and scrutiny of the program has only grown. For most organizations, management of the compliance program is fragmented, manual, and precarious. You may think you’re covered because a 340B Program manager has long watched over compliance. What happens when that manager leaves or retires? Will the manager’s replacement be able to slide into a program with evolving regulations and reporting, while maintaining compliance around the clock?
In fact, maintaining compliance with HRSA regulations by hand, instead of technology, would probably cause a program to be noncompliant a few days after successfully passing an audit. Something as simple as missing an address change for a contract pharmacy in the OPAIS portal could send a program from compliant to noncompliant.
With the right compliance software, a 340B Program manager can stay compliant with HRSA. And, with an online dashboard, managers can spot and solve issues at any time, all year long. Compliance software gives you a real-time look at the status of the program and helps a 340B Program manager justify resources when needed.
According to Garrick Stoldt, chief financial officer for Saint Peter’s University Hospital, the HRSA regulatory environment is complex, extremely challenging, and constantly in motion. With compliance software, says Stoldt, he is confidently managing his 340B Program’s different aspects in an easy-to-use, centrally located platform explicitly built for HRSA audit readiness. Compliance software also enables a 340B Program manager or pharmacy director to pinpoint explicit compliance issues and show why they might need more resources to fix issues. The resources could include 340B healthcare consultants or program administrative resources.
Compliance software offers consultants insight, too. A covered entity who hires a consultant can tap into its compliance software to flag problems, helping the 340B consultant to quickly bring their expertise to bear in resolving issues. Compliance software with logic-based, 340B-specific workflows also gives you a way to run annual mock audits with consultants to determine a program’s integrity. As the software uncovers issues, consultants can help a covered entity update its policies or Medicare cost reports.
Managing financial risk like clinicians
As a CFO, you owe it to yourself to manage your 340B Program like the clinical side of a healthcare organization practices medicine: Create standardized processes for predictable outcomes. This approach achieves good outcomes by identifying and mitigating risk. That, in turn, leads to a favorable result whether for the health of a patient or a 340B Program.
Ultimately, there are only three things you can tap to protect your profit and program: People, processes, and technology. All covered entities have people managing their 340B Program; many employ a manual process. Are you also applying compliance software to ensure you have real-time, around-the-clock situational awareness about the state of your 340B Program? The risks are too great not to.