1.800.360.0603

GE Healthcare Camden Group Insights Blog

340B Program Omnibus Guidance: Definition Of A Qualified Patient

Posted by Matthew Smith on Aug 31, 2017 4:30:33 PM

By Scott Drugan, Pharm. D., Senior Manager, GE Healthcare Camden Group

The Health Resources and Services Administration released its 340B Program Omnibus Guidance on August 27, 2015, which was published in the Federal Register on August 28, 2015. This 90-page document contains the most comprehensive set of clarifications that have been proposed since the initiation of the act in 1992. The public comment period will extend for 60 days from the date it was published in the Federal Register, or October 27th, and it is anticipated that there will be a considerable amount of comments, both pro and con, to review and consider prior to the final publication of this guidance. The information that follows is not meant to be a comprehensive review nor a legal interpretation and reflect only some of the highlights as viewed by the author on proposed guidance changes to the qualified patient definition.

Definition of a Qualified Patient

As anticipated, the proposed guidance seeks to clarify the qualified patient definition. Currently, the 1996 guidance is a two-part test to determine if the individual is a patient of the covered entity for enrolled hospital qualified entity types, which states the following:

  1. The covered entity has established a relationship with the individual, such that the covered entity maintains records of the individual’s healthcare
  2. The individual receives healthcare services from a healthcare professional who is either employed by the covered entity or provides healthcare under contractual or other arrangements (e.g., referral for consultation) such that responsibility for the care provided remains with the covered entity

The proposed guidance for defining if an individual is a patient of the covered entity for enrolled hospital qualified entity types would be the following:

  • The individual receives a healthcare service at a facility or clinic site which is registered or the 340B Program and listed on the public 340B database
  • The individual receives a healthcare service provided by a covered entity provider who is either employed by the covered entity or who is an independent contractor for the covered entity, such that the covered entity may bill for services on behalf of the provider
  • An individual receives a drug that is ordered or prescribed by the covered entity provider as a result of the service described in statement above
  • The individual’s drug is ordered or prescribed pursuant to a healthcare service that is classified as outpatient
  • The individual’s patient records are accessible to the covered entity and demonstrate that the covered entity is responsible for care

Proposed New Patient Definition Impact on Hospital 340B Programs

The proposed guidance is very clear that the drug ordered or prescribed must be for a healthcare service that is classified as outpatient. The guidance specifically states, “An individual is considered a patient if his or her healthcare service is billed as outpatient to the patient’s insurance or third party payor.” There is also the expectation that for self-pay or charity care patients the classification of the service will follow the same guidelines as for billing a third party payer. Additionally, the encounter between the provider and the patient that generated the prescription or drug order must have taken place at the covered entity; there are appropriate provisions to allow for telemedicine/telepharmacy. Therefore, the following type of prescriptions that may have qualified to be filled with 340B priced drugs within hospital covered entities will no longer qualify for this discounted pricing:

  • Discharge prescriptions
  • Medication utilized in an outpatient setting for which the healthcare service is billed as an inpatient service, e.g., drugs administered in the emergency room for a patient who is admitted as an inpatient
  • Infusion Center drugs in which prescription or drug order does not originate from the covered entity provider – patient encounter

Discharge Prescriptions

Capturing discharge prescriptions within a hospital based retail pharmacy and being able to purchase these drugs at 340B Program discounted prices is very beneficial for these qualified hospital entities. If this were no longer allowed, based on the new proposed guidance, in most cases these prescriptions would be filled with drugs purchased at Wholesaler Acquisition Cost, since the majority of these same pharmacies are filling 340B priced prescriptions for their outpatient population. This would be a very substantial financial hardship potentially leading to the closure of these outpatient pharmacies which benefit the patient’s transition of care. Additionally, the simple fact that discharge prescriptions cannot be filled utilizing 340B priced drugs may be particularly troubling for hospital covered entities with a large population of medically indigent patients. Many of these institutions were able to supply these necessary stop gap medications prior to an outpatient clinic visit. This additional cost to the hospital for these patients may cause them to limit the supply given to these patients.

Additional Outpatient Billable Healthcare Service Considerations

Most covered entity hospitals administer drugs in both an inpatient and outpatient setting, referred to as a mixed use setting, and have software/technology and/or a 340B administrator partner who assists them to determine the amount of their hospital administered drugs are eligible to be purchased at 340B Program pricing. Most systems work by determining if the drug was administered in a setting that is identified as outpatient in the charge master and then accumulating these units until enough was administered to enable an entire package to be purchased at the 340B Program price. However, the new proposed guidance will make this process a bit more complicated as it will not be as simple to merely accumulate the amount of drugs given in an outpatient setting as qualified due to the fact that the healthcare service which is billed for this patient will determine if the drugs utilized while in the outpatient location will qualify for 340B program pricing. A simple example is the patient who is seen in the emergency room, which is identified as an outpatient setting, where he or she has drugs administered, but is also admitted as an inpatient. Although some of the drugs were administered in an outpatient setting, since the only billable healthcare service will be for inpatient, there will be no drugs qualified for 340B Program purchases. Therefore, this aspect of the proposed guidance will reduce the amount of drugs that qualify for 340B Program pricing and lead to an additional level of complexity to an already challenging process to maintain program compliance in a mixed use hospital care setting. 

Infusion Center

Many hospital infusion centers service the healthcare community as a whole and it is very common for these centers to administer therapy to patients who have been referred to them by outside providers. Many of the outside providers may even have privileges with the covered entity hospitals that contain these infusion centers. However, the proposed guidance seeks to clarify that in order to purchase the drugs through the 340B Program for these patients, the prescriptions or drug orders must have been a result of a provider – patient encounter at the covered entity. This may not be the case with all 340B Program purchased drugs in the hospital covered entity infusion center environment today, which may warrant careful consideration moving forward. The proposed guidance change to the patient definition as well as the above highlighted impact to hospital 340B Programs are only some of the considerations that this 340B Omnibus Guidance contains. 

Non-Labor Expense Reduction


ScottDrugan_headshot.jpgMr. Drugan is a senior manager with GE Healthcare Camden Group with more than 30 years’ experience. He helps clients across the country improve their pharmacy costs, profitability, and operating efficiency. His background in pharmacy leadership enables him to bring deep understanding and subject-matter expertise to every project. Mr. Drugan possesses an outstanding record of accomplishment as a pharmacy leader and healthcare executive. His engaging, collaborative leadership style makes him an ideal partner for clients seeking to improve their pharmacy operations, ensure regulatory compliance, implement a complex 340B program, optimize their employee pharmacy benefits, or establish a retail pharmacy.He may be reached at [email protected].

Topics: Pharmacy, Non-Labor Expense Reduction, 340B, Scott Drugan

Battling Extreme Drug Price Increases

Posted by Matthew Smith on Aug 31, 2017 4:04:03 PM

By Scott Drugan, Pharm. D., Senior Manager, GE Healthcare Camden Group

Top of mind for nearly every hospital or health system CFO is the roughly 10% annual increase in the cost of pharmaceuticals. Many of these healthcare executives might be surprised to learn that the main reason isn’t due to new novel therapeutics, but rather to older medicines with extraordinary price increases. These drug manufacturers are not trying to recoup the research and development cost of bringing a drug to market. Instead, as discussed in many news articles including this one by Consumer Reports, they are simply capitalizing on little to no competition for drugs that have an entrenched use in the healthcare environment. Therefore, CFOs and Pharmacy executives must explore every effort to limit the use of these drugs to those cases with no viable alternatives and to compound, dispense and administer in dosage forms developed to minimize the waste.

Limiting the use of these older drugs with the new costly price tags will require the assistance and cooperation of the affected clinical departments. Often the clinicians ordering these agents have no idea that these commonplace drugs are now today’s pharmacy budget-busters. Educating them on this new reality will probably lead to engaged clinical champions. The following two strategies, which we originally shared with Becker’s Hospital Review readers as a Supply Chain Tip of the Week, should significantly lower the overall cost of these expensive medicines:

  1. Develop and implement guidelines that limit the use of these pharmaceuticals to cases in which a less costly alternative is not clinically appropriate.
  2. Develop a means to dispense the optimal amount of drug that minimizes waste upon administration.

Case Study: Multi-Pronged Approach Reduces Drug Costs

These price increases for older injectable drugs with little competition greatly affected one of our clients, a multi-hospital system. This negatively impacted the inpatient pharmacy expense budget more than all the new or novel therapeutic medicines combined. To drive down these costs, we partnered with the Pharmacy Director to identify the fact that many of these drugs had a very high usage rate in the procedural areas, such as the operating suites and EPS Lab.

We worked closely with the key clinical stakeholders in these procedural areas to educate them about these tremendous price increases. This motivated the team to identify less costly therapeutically equivalent alternatives for some of the existing use. Although this did provide savings, the remaining usage still resulted in a substantial expense budget challenge due to the high cost of these drugs.

To continue to drive down savings, the project team reviewed the doses dispensed versus the actual doses administered for these identified drugs. Our goal: to understand if there was an opportunity to reduce the amount of waste. We identified many drug administrations that had a dose substantially less than the dose dispensed, resulting in considerable waste. For example, one drug was dispensed in a 1 mg vial when the dose administered rarely exceeded one-tenth of that dose. This created the opportunity for the pharmacy to compound doses in smaller increments to minimize waste. Importantly, the pharmacy leaders did not try to address these changes in a silo; rather, they partnered with clinical and technical staff to implement the compounding of these drugs in smaller doses, enabling the team to achieve additional savings.

The compounding of these smaller, unique dosages by the pharmacy, while providing savings, started from the same injectable drug with the very high price. Was there a way to produce these same new dosage sizes without using the high-cost injectable drug? The pursuit of this answer ultimately led to the addition of a 503B manufacturer who could produce several of these drugs for a considerably lower cost.

By battling extreme drug price increases in a variety of ways, we helped our client save more than $3.3 million annually. Our client is able to use these very expensive drugs in a cost-effective manner while maintaining exceptional patient care.


ScottDrugan_headshot.jpgMr. Drugan is a senior manager with GE Healthcare Camden Group with more than 30 years’ experience. He helps clients across the country improve their pharmacy costs, profitability, and operating efficiency. His background in pharmacy leadership enables him to bring deep understanding and subject-matter expertise to every project. Mr. Drugan possesses an outstanding record of accomplishment as a pharmacy leader and healthcare executive. His engaging, collaborative leadership style makes him an ideal partner for clients seeking to improve their pharmacy operations, ensure regulatory compliance, implement a complex 340B program, optimize their employee pharmacy benefits, or establish a retail pharmacy.He may be reached at [email protected].

Topics: Pharmacy, Non-Labor Expense Reduction, 340B, Scott Drugan

Subscribe to Email Updates

Value Model, Health Analytics

Recent Posts

Posts by Topic

Follow Me