Cloud 340B Auditing Process

Executive Summary

Despite solid growth in the world economy, the healthcare and life sciences sectors – medical services, manufacture medical equipment or drugs, provide medical insurance, bioengineering, pharmaceuticals, diagnostics, bioinformatics, and biocomputing, etc., are growing at an annual rate of nearly thrice that of any other sector.  For these organizations, data is their most valuable asset – and the potential for mishandling it is their greatest risk. Here I’m describing the Information (a.k.a data) risk management within healthcare enterprises.  Managing information risk calls for covered entities (a.k.a Hospitals) not just to understand the nature and content of their data but also to prove its accuracy and efficiency.

Most of the momentum is managing the risk and reducing costs incurred while operating in a ponderously regulated environment.  Even more, risk resides in possible non-compliance with 340B regulations.  340B Legislation and Regulatory Authority (a.k.a HRSA) capture several issues from 340B operating body such as Non-Eligibility, Missing Audits, Violation in Disproportionate Share Adjustment Percentage, Unable to adopt Duplicate Discount Prohibition, Entities Sanctioned for non-compliance, GPO Prohibition and No Diversion.

HRSA audited (see details here) 51 covered entities during FY12, encompassing over 410 outpatient facilities/sub-grantees and over 860 contract pharmacy locations. Based on the audit results, it has been clearly identified that 39% of non-hospitals identified with “Incorrect Database Records,” 33% of them were dispensing drugs to ineligible Individuals, and 33% of them were billing contrary to the MEF (a.k.a Medicaid Exclusion File). This is a clear indication that any reactive implementation of the 340B compliance program is bound to be far more costly and less versatile than a planned, prepared, and fully scoped engagement.

This blog examines some of the issues around implementing technologies to increase compliance in the healthcare sector.  It also recommends creating or leveraging Cloud-based 340B to bring a covered entity’s systems into compliance and deliver the efficiency and productivity benefits of Cloud340B.

What does 340B Compliance Mean?

340B Compliance with currently accepted procedures helps protect a covered entity, manufacturers, or a contract pharmacy from risks from many different directions such as dissatisfied drug manufacturers, secretary of HRSA, patients, or staff might take action against a covered entity for some perceived misdemeanor. So companies must need to address the improvements in the 340B program integrity listed in the 340B Public Health Service Act for both manufacturers and covered entities. All these acts demand that covered entities or manufacturers not only prove the accuracy and authenticity of their 340B data but, in many cases, also how it was derived and on what information conclusions were based.

Non-compliance of 340B could even lead to the invalidation of entire business functions. Failure to retain appropriate documentation or data may also lead to uncertainty regarding agreed contractual terms or difficulties with responding to information requests under Sec. 340B PUBLIC HEALTH SERVICE ACT. Above all, any publicized failure to comply puts the covered entity’s reputations and commercial standing at risk.  For manufacturers, HRSA is authorized by enactment to impose civil monetary penalties on companies that knowingly and intentionally overcharge covered entities for 340B drugs.

Why should You Comply?

Risks are extremely high if you don’t comply with HRSA’s 340B Compliance requirements.  They include loss of credibility, reduced industry confidence, and significant adverse publicity. Both covered entities and manufacturers are subject to penalties if they violate 340B program requirements. The penalty for failing to comply with the 340B program’s diversion prevention and duplicate discount provision is forfeiture of the discounts back to the drug manufacturer for covered entities. Covered Entities will pay a huge penalty along with interest on the discounts or the possibility of disqualification or revocation from 340B participation to be determined by HRSA. In fact, HRSA makes a case-by-case evaluation of whether to pursue regulatory action against companies or covered entities that are viewed as out-of-compliance.

How to Prove Secretary that you are Compliance?

340B Participation body need not only to follow best practices and standards in complying with HRSA regulations but also be able to prove they are doing so.
Legal cases against a 340B Participation—whether brought by a government body or by a drug manufacturer—are won or lost on the weight of evidence.
Covered Entities or drug Manufacturers that can readily access all relevant documents to action, and prove their validity, are likely to see an action dismissed or settled at a far earlier and less damaging stage. The more easily you can supply the required information, the better your chance of being viewed as a compliant 340B participant.  Following options are widely recommended and practiced with the 340B community when it comes to auditing.

1) Self Assessment:- This method is to enable entity leaders to quickly assess the basic level of 340B program integrity resources provided by contract pharmacy vendors to help the entity achieve 340B compliance?. HRSA provides a 340B Compliance Self-Assessment that helps participants estimate the level of 340B integrity in identifying the eligibility of 340B Patient definition, deliver no duplicate discounts, and replenish inventories adequately, and able to provide the proper fee structure that aligns with 340B Program.

2) Full Third Party Auditing:-  There are many advantages in performing audits using third-party 340B auditors. This type of audit would be performed on-site by a third-party audit team including pharmacists, analysts, and specialists in pharmacy benefits. The evaluation report would prepare a covered entity for an actual HRSA audit and indicate areas to be addressed which may compromise the covered entities participating in the 340B program. Although the coverage of the third party is pretty wider, it is an expensive process.

3) Proactive Assessment through SaaS:- Several software products in the market reviews the program policies, procedures, and processes about 340B medications. However, a few SaaS-based solutions like Cloud 340B that perform the Verification of internal controls to prevent diversion and duplicate discounts identify the effectiveness of procedures in place over procurement, inventory, distribution, and dispensing and billing of 340B drugs.  Most importantly, this method proactively captures if the program is not implemented following the requirements of the 340B program. This procedure is widely accepted as one of the best practices as it saves plenty of time and money to the 340B participant.

Benefits of 340B Compliant

Cloud 340B Compliance Process
Cloud 340B Compliance Process

1) Greater Reputation:- Being compliant to 340B builds trust and brand loyalty to HRSA, 340B program participants, employees, patients, and every stakeholder. Also, a good 340B compliance program can have significant, positive, secondary benefits on business operations.

2) Quality Improvements:-  A good 340B compliance program should help prevent errors or failures before they occur or detect at an infancy stage. It reduces the need to do lots of rework. High levels of quality are an essential ingredient to achieve a hospital’s service objectives. Quality, a source of competitive advantage, should remain a hallmark of a covered entity’s services. High quality is not an added value, but it is an essential basic requirement. Quality not only relates solely to the end services a Hospital provides but also relates to how the hospital employees do their job and the work processes to produce products or services.

3) Greater Efficiency: It is common to all industries but especially in Healthcare. Increasing the ROI to stakeholders of the covered entities or any 340B program participants is the fundamental agenda. Through better quality and compliance will improve the efficiency of the overall program.

4) Finest Brand and Loyalty:- Being a 340B Compliant is a solid indication to your stakeholders that compliance is the utmost priority of your organization. It endorses your ethics and commitment to your business. Most importantly, patients, vendors, and employees trust you, and that builds your brand loyalty.

5) Competitive Differentiation:- As a 340B Participant and a service provider to the Healthcare sector, we have found that good compliance is a key differentiator that helps patients drive better outcomes more efficiently while reducing risk.

Platform for Compliance

The most effective approach is to consider all disparate systems and create a unified integration platform that brings all relevant data and puts it into a common and widely usable format. Cloud 340B is an extremely flexible and efficient approach to solving compliance challenges to track metadata and integrate information from multiple systems in a Service Oriented Architecture.  It is easily deployed, and smart shared data services help eliminate data silos and simplify integration efforts for consistent information across the covered entities.

Finally, the result is increased flexibility to develop integration solutions quickly and easily evolve them to adjust to 340B Program change—, including changes in regulations that require a covered entity to alter its business processes.

Contact our team for onboarding Cloud 340B

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