Your 340B Report for Friday Jan. 10, 2020

BREAKING: GAO Says HRSA Should Strengthen Oversight Over Private-Nonprofit Hospitals’ 340B Eligibility

The Health Resources and Services Administration’s (HRSA) oversight of 340B private, nonprofit hospitals should be significantly strengthened, the Government Accountability Office (GAO) found in a report released this morning. Private nonprofit hospitals make up most of hospitals in the 340B program and they are required to have contracts with state or local government to serve low-income patients ineligible for Medicaid and Medicare. GAO, Congress’s watchdog agency, found 13 contracts reviewed did not appear to require hospitals to serve the specified low-income population but nonetheless these hospitals have been permitted to participate.

The report made six recommendations, including that HRSA:

  • verify that all nongovernmental hospitals have contracts in place, including throughout hospitals’ audit periods

  • amend its contract reviews to include an assessment of whether contracts meet statutory requirements

  • provide better guidance on contract reviews.

HRSA disagreed with the recommendation that it implement a process to verify that all nongovernmental hospitals have contracts. It noted that the Office of Management and Budget is currently reviewing its request to begin collecting contracts from hospitals upon their registration in 340B. Beyond that, HRSA said it lack resources “to collect, review, and verify that every participating nongovernmental hospital” has such a contract. HRSA added “it would create a significant burden” on hospitals to submit such contracts for review.

In response to HRSA’s non-concurrence, GAO said it “continues to believe this action is needed to ensure that only eligible hospitals are allowed to participate in the 340B Program.”

In HRSA’s general comments on the report, the agency says it has already stepped up its oversight and will be taking more steps. However, the agency reiterated its belief that Congress should give it explicit regulatory authority to strengthen its enforcement capability.

How Might Capitol Hill Respond?

The report comes amid wrangling in Congress over competing bills aimed at addressing rising drug prices. At present, none of the main bills under consideration would affect 340B significantly. Members of Congress who say 340B is too big and should be scaled back might cite today’s report as justification for adding 340B “reform” language to any bipartisan, bicameral compromise on drug pricing that reaches the White House. However, it is highly doubtful that Democrats would agree to any legislation that would hurt 340B providers. 

GAO’s Findings

The GAO report focuses on the approximately 1,700 nongovernmental hospitals that qualify for

340B based, in part, on having contracts with state or local governments to care for low-income individuals who are ineligible for Medicaid or Medicare. GAO said these hospitals account for more than two-thirds of the approximately 2,500 hospitals in 340B. For the report, GAO examined contract documentation from all 258 nongovernmental hospitals HRSA reviewed in 2017 and 2018; and HRSA’s policies, procedures, and guidance related to 340B hospital eligibility.

The GAO found:

Most of the contracts it examined obligated hospitals to care for low-income individuals. However, few of the contracts reviewed included details about those obligations.”

“HRSA’s processes do not provide reasonable assurance that participating nongovernmental hospitals meet eligibility requirements. For example, HRSA primarily relies on hospitals’ self-attestations to verify the existence of contracts with state and local governments. The agency reviewed contract documentation for less than 10 percent of nongovernmental hospitals per year in 2017 and 2018.”

“HRSA does not conduct reviews to determine whether the documents submitted by nongovernmental hospitals are actual contracts, namely that they are mutually binding agreements to provide services or supplies in exchange for something of value. GAO found that 18 of the 258 hospitals reviewed submitted documents that did not appear to be contracts, such as descriptions of community programs, yet all of these hospitals were permitted to participate in the program.”

“When audits have identified hospitals that did not have contracts in place throughout the audits’ periods of review, HRSA has allowed hospitals to avoid audit findings by, for example, entering into new contracts with retroactive start dates. This practice undermines the integrity of HRSA’s audits.”

“HRSA’s contract reviews do not always include assessments of whether contracts are consistent with the statutory requirement to provide health care services to the 340B-specified low-income population and HRSA’s guidance for conducting such assessments, when required, lacks detailed instructions. As a result, GAO found that contracts for 13 hospitals reviewed did not appear to require hospitals to serve the 340B-specified low-income population. Despite this, these 13 hospitals were permitted to participate in the program.”

GAO’s Six Recommendations

The GAO said HRSA should:

  1. ensure that the information it uses to verify nonprofit status for all nongovernmental hospitals that participate in 340B—for example, by requiring and reviewing the submission of official documentation hospitals must already maintain or by ensuring the reliability of the data the agency uses.

  2. implement a process to verify that every nongovernmental hospital that participates in 340B has a contract with a state or local government as required by statute.

  3. amend its contract integrity check procedures for 340B to include a review of whether hospitals’ contracts with state and local governments require the provision of health care services to low-income individuals not eligible for Medicaid or Medicare as required by statute, and provide guidance for staff to conduct these reviews.

  4. provide more specific guidance for 340B program auditors on how to determine if nongovernmental hospitals’ contracts with state and local governments require the provision of health care services to low-income individuals not eligible for Medicaid or Medicare.

  5. revise its 340B audit procedures to require auditors to document their assessments of whether nongovernmental hospitals’ contracts with state and local governments are appropriately signed, cover the time periods under review, and require hospitals to serve low-income individuals not eligible for Medicaid or Medicare, such as by requiring auditors to separately affirm and record their review of each of these elements.

  6. require nongovernmental hospitals participating in 340B to demonstrate that they have contracts with state or local governments in effect prior to the beginning of their audits’ periods of review and should apply consistent and appropriate consequences for hospitals that are unable to do so.