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“Breaking Down the Proposed Omnibus Guidance – Child Sites”

To Be or Not To 340B By Alyce C. Katayama and Elizabeth R. Gebarski

It is coming down to the wire – comments are due on the 340B Drug Pricing Program Omnibus Guidance (“Guidance”) in about two weeks! On October 28, 2015 the comment period will be closed and there will be nothing left to do but sit back and wait.

This post will focus on an aspect of the 340B Program that could undergo significant changes under the proposed Guidance – child sites. What are we talking about here? Currently and under the proposed Guidance, all offsite outpatient facilities, clinics, eligible offsite location, or associated health care delivery sites (collectively referred to as “offsite facilities”) not located at the same physical address as the “parent” covered entity (“CE”) must be registered in the 340B Program, if the offsite facilities intend to purchase and use 340B drugs for their eligible patients. Easy enough. But, as tends to be the case in the 340B Program, the devil lies in the details.

Determining just which offsite facilities are eligible to register in the 340B Program can be quite a headache. For non-hospital entities, a facility is an eligible child site if it receives Federal funds and is performing services within the scope of its grant. For example, if a STD grantee clinic demonstrates that an off-site location receives Federal funds, and is performing services within the scope of the STD grantee clinic’s grant, HRSA will list that off-site location on its database as a child site of the main clinic.

Hospitals, on the other hand, demonstrate child site eligibility by showing that each facility is listed on a line of the parent hospital’s Medicare cost report that is reimbursable under Medicare, and that the services provided at each of the facilities have associated outpatient costs and charges on the cost report. This procedure is slightly different for children’s hospitals, which do not file Medicare cost reports. Children’s hospitals that do not file Medicare cost reports must demonstrate that the requested outpatient facility: (1) is an integral part of the hospital, and (2) would be correctly included on a reimbursable line with associated Medicare costs and charges on a Medicare cost report, if filed.

Every child site must register separately by service line. This means that if a hospital has another hospital offsite, each service in that offsite hospital must register separately in the 340B Program. As you can imagine, the registration process gets rather tedious in this situation, requiring the CE to register, for example, the oncology, radiology, and anesthesiology departments of the offsite location separately.

But, all is not lost – concerned stakeholders may be able to influence this process. The proposed Guidance indicates that HRSA has been struggling with the issue of child site eligibility specific to hospitals. HRSA talks about several options – provider-based designation and CMS Form 855A (Medicare Enrollment Application for Institutional Providers) – and closes by actively seeking comments on alternatives to demonstrating such eligibility.

Another significant change the proposed Guidance makes regarding child sites is that it permits a child site to enter into its own contract pharmacy agreement independent of its parent. This presents a business opportunity for contract pharmacies and a potential compliance risk for CEs. The parent retains ultimate responsibility for program compliance so the parent should ensure the child site follows CE and Program requirements.

If you want to be heard on this issue, you need to submit comments to HRSA on or before October 27, 2015 – make sure to include the Regulatory Information Number, 0906–AB08. The To Be or Not to 340B Blog will continue to break down other sections of the proposed Guidance in upcoming posts. Stay tuned for more details!