an analysis of 340b solutions - sentry data...

White PaperWhite Paper

An Analysis of

340B Solutions

A White Paper by

Michael J. Sovie, Pharm.D., MBA © Copyright 2012 Sentry Data Systems, Inc. This White Paper is published, presented and

distributed by Sentry Data Systems, Inc. Any reproduction or distribution without a prior written

permission from Sentry Data Systems, Inc. is strictly prohibited.

May 2012

05/25/12 09:41:10 Page: 1 Job: 831101Artwork that is meant to go to the edge of the finished piece needs to extend to the red bleed line.

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August 2012

11

An Analysis of 340B Solutions A White Paper by Michael J. Sovie, Pharm.D., MBA © Copyright 2012 Sentry Data Systems, Inc. This White Paper is published, presented and distributed by Sentry Data Systems, Inc. Any reproduction or distribution without a prior written permission from Sentry Data Systems, Inc. is strictly prohibited.

An Analysis of 340B Solutions

Part I

Overview

This White Paper is the first of a three-part series that covers 340B software solutions

for hospitals and contract pharmacies from a variety of perspectives.

Part I is a review of the 340B program and a look at hospital use of 340B software.

Part II is a look at contract pharmacy partnerships with 340B covered entities and the

complexities of these relationships. (Estimated release date of summer 2012)

Part III is an evaluation of compliance, audit-preparation, and documentation needs

related to the 340B program. (Estimated release date of fall 2012)

Abstract of Part I

Purpose: Review 340B program compliance requirements and facilitate an

understanding of existing hospital data sources and available software solutions to

provide a foundation that is intended to enable hospitals to accurately evaluate current

or future 340B solutions.

Summary: Hospital data environments are complex due to multiple departments using

data for different purposes, which leads to challenges with integrating those data sets.

The data necessary to maintain compliance and maximize savings under the 340B

program in all hospitals will need to come from multiple data sets if detailed compliance

and savings maximization is going to be realized.

Adding to the situation’s complexity, many tools being used as 340B software were not

initially designed for 340B compliance or even use as a 340B solution. Solutions not

specifically designed for 340B have limitations caused by being retrofitted from their

primary intended use. Furthermore, many companies that provide 340B software

solutions are not solely focused on the hospital market for 340B and are not dedicating

their energies to supporting the hospital market’s specific and evolving needs. Lastly,

with the expansion of 340B during 2010, the industry has seen an influx of new vendors

and “experts” that, intentionally or not, often spread confusion and inaccurate

information.

Conclusion: It is imperative to understand each hospital’s unique limitations related to

data and operations as well as the limitations of those systems being considered and

evaluated for use in a hospital.

Technology is absolutely essential for 340B tracking, but not all solutions deliver the

same capabilities. It is imperative that hospitals define their needs and have a list of

minimum and desired requirements when deciding how to participate and comply with



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Part I

Overview








Abstract of Part I


















information.









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Overview








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340B. The program’s benefit is significant to all qualified hospitals, and compliance is a

must in order to protect the integrity of the program and the assistance it delivers to

Safety Net providers and the communities they serve.

Older software often referred to as “split billing” solutions were not typically built for

340B compliance and are not capable of delivering the necessary requirements to

maintain 340B program integrity. Split billing solutions on their own cannot support a

compliant program or optimize desired results. The newer solution of rules-based

compliance engines provides a significantly improved opportunity for regulatory

compliance and compliant capture of benefit related to 340B.

About the Author

Michael J. Sovie Pharm.D., MBA, is a pharmacist and former Hospital Director of

Pharmacy. Michael's background and experience includes: pharmacy management and

operations, installation of bedside barcoding, administration billing, electronic

medication administration records, and CPOE as a hospital pharmacy leader.

He has combined his clinical, hospital pharmacy operations and business background in

his current role as a Senior Vice President of Sales at Sentry Data Systems helping

hospitals achieve 340B understanding and compliance.

Michael’s professional activities include participation in the healthcare industry as:

• Adjunct instructor at Wilkes University School of Pharmacy.

• Member of various hospital pharmacy associations and participant on

pharmacy association boards.

• Past regional president for a chapter of the Florida Society of Health-system

Pharmacists (FSHP).

• Presenter on various pharmacy topics at national meetings such as the

American Society of Health System Pharmacists (ASHP) and other healthcare

conferences across the country.



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Part I

Overview








Abstract of Part I


















information.









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SECTION 1: Basics of 340B

This section’s intent is to provide a foundation on 340B so the reader can follow the

flow of content. A basic level of hospital industry understanding is assumed and some

pharmacy knowledge is preferable, but this was written to be as inclusive as possible.

340B Overview

The 340B Drug Pricing Program enables certain eligible healthcare organizations,

referred to as Covered Entities (CEs), to receive discounts on drug prices. The program

was part of government legislation designed to ease the financial burden on “Safety

Net” institutions that serve a disproportionate amount of patients who are unable to

pay for the services they receive. The program is budget neutral for the federal

government. The healthcare services provided by these Safety Net entities are of vital

importance to their local communities and patients. This ambitious program has been

immensely successful in helping CEs meet their Safety Net missions in underserved

communities.

What types of facilities qualify for this benefit?

For purposes of this white paper, the focus will be on qualified hospital entities,

including Disproportionate Share Hospitals (DSH), Sole Community Hospitals (SCH),

Rural Referral Centers (RRC), Critical Access Hospitals (CAH), Children’s Hospitals, & Free

Standing Cancer Centers.

Other entities such as Community Health Centers (CHC), and Federally Qualified Health

Centers (FQHC), also qualify for 340B. However, the software and technology needs of

these environments are much different from hospitals and will not be explored in this

white paper.

What is the benefit?

Reduced cost of goods (typically medications) for eligible Outpatient (OP) areas of a

hospital. These price reductions typically result in 25-50% savings on eligible OP

pharmaceutical purchases for covered entities. (This program also benefits hospitals’

safety net mission through contract pharmacy relationships, a topic that will be

addressed in Part II of this white paper series.)

Where does the cost savings come from?

Pharmaceutical manufacturers provide price reduction savings. The government

requires drug manufacturers to give 340B pricing to CEs in order for manufacturers to

participate in other programs such as Medicaid drug reimbursement.



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BINDING SIDE

4

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Part I

Overview








Abstract of Part I


















information.









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BINDING SIDE

pharma

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of this white pa

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in part two

aper series.


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340B Solution Type #2: Split Billing – Manual Solution

These solutions are usually called software solutions, but are more accurately described

as some sort of manual aggregation of a few files that are sent to a consultant or other

group. These solutions, like homegrown solutions, are not optimal compliance or long-

term solutions and have a degree of risk due to the manual interpretation of the outside

parties involved. Also, this solution is rarely deployed by entities that have a focus on

compliance and program maximization. They are more often used as an add-on when an

existing relationship or other partnership exists with a consulting firm.

Strengths – Split Billing – Manual Solution

• Can be installed quickly.

• Requires a relatively simple data set.

Weaknesses – Split Billing – Manual Solution

• Driven by charge codes, not NDCs.

• Fails to provide NDC-level compliance.

• Provides limited reporting.

• Reliant on third-party involvement.

• Requires ongoing manual intervention.

• Carries high end cost due to lost opportunity.

• Loses capture of mixed use environments (ER, OR, Cath Lab) where patient was

admitted.

• Involves fluctuating prices as consulting fees may exceed software costs over

the term of the contract.

340B Solution Type #3: Split Billing – Software Solution

During the 1990s, split billing software was cutting edge and dominated conversation in

340B. In this time period, “Split Billing” became a standard term for the industry when

referring to 340B software. Some people still view it as a comprehensive solution that

addresses all of their 340B needs.

Most split billing solutions started as, or still are, a foundation intended for inventory

management. Inventory management solutions are charge code driven, not NDC driven,

which is a standard of pharmacy inventory management.

In inventory management, what is important is how many acetaminophen 325mg a CE

has, not necessarily each specific different NDC of acetaminophen 325mg. It is a

function of totals versus discrete manufacturers or NDCs.

Strengths – Split Billing – Software Solution

• Requires a relatively simple data set.



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• Implements in a time frame of less than 60 days in most cases.

• Instills a sense of confidence because the term is well known and widely used

in the industry.

Weaknesses – Split Billing – Software Solution

• Driven by CDM data rather than specific NDC data.

• Purchases specific NDCs without data on use of specific NDCs.

• Tracks single NDCs or is limited to a specific manufacturer at any one point in

time regardless of purchasing practices.

• Relies on the hospital to report OP CDM usage.

• Misses some mixed-use opportunity due to hospital IT billing limitations and

split billing software intended use.

• Is not specific to actual NDC use in compliance reporting.

• Incurs high cost due to lost capture opportunity.

• Carries added costs due to consulting fees needed to maintain compliance.

• Does not enable incorporation of federally mandated Policies & Procedures

(P&Ps).

340B Solution Type #4: Rules-Based Compliance Engine

The newest and most advanced type of 340B software is a Rules-Based Compliance

Engine. A rules-based engine is a software program that is set up based on a specific

set of rules – in this case, P&Ps. A rules-based engine is focused on enabling an entity to

automate its processes to execute the exact same way every day regardless of who

places orders.

This type of solution was built specifically for 340B compliance. That concept also

enables an entity to have the maximum compliant capture of opportunity. While this

type of solution was ahead of its time and came out in the early 2000’s, today it has

reached a point of necessity if compliance is a priority, especially with Congressionally-

demanded audits by HRSA and increased manufacturer audits.

Strengths – Rules-Based Compliance Engine

• Built for 340B compliance.

• Provides comprehensive reporting focused on regulatory compliance.

• Includes audit preparation capabilities.

• Maximizes compliant savings capture.

• Driven by NDC data.

• Captures mixed use setting eligibility with accuracy.

• Incorporates federally mandated P&Ps.

• Delivers best overall ROI in most cases.

• Should adapt to changes in operations or regulations.



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Weaknesses – Rules-Based Compliance Engine

• Involves an upfront investment of entity resource time compared to less

sophisticated solutions.

• Mandates entity time for initial set up of compliance policies.

• Necessitates more data to facilitate true compliance.

• Requires an installation timeline that is typically longer than other 340B

solutions.

• Includes initial investment that may be more than up-front costs for split billing

software.

SECTION 3: Key Compliance Factors & Capture Maximization

This section reviews basic compliance requirements and provides some background on

why hospital information systems can create challenges with these requirements. This

section also includes some self-assessment questions that will help in determining a

current level of compliance. Finally, this section will contrast split billing and rules based

compliance engines as they relate to each of these points.

The following key concepts will be reviewed:

• 11- digit NDC Compliance and Tracking Multiple NDCs

• Policies & Procedures (P&Ps)

• Reporting

11-Digit NDC Compliance and Tracking Multiple NDCs

Background

Following 340B guidelines requires that the drug (exact 11-digit NDC) being replenished

is the same drug (exact 11-digit NDC) that was dispensed in eligible OP situations.

Exceptions to the 11-digit rule are very limited and can be replenished only in the case

where only a 9 digit match is available. NDC matches of less than 9 digits cannot be

legally replenished.

IT Challenge

Today’s hospital information and billing/financial systems were not set up to bill at the

exact NDC level, but they were set up to bill at the drug level or charge code. Today’s

pharmacy information systems do recognize multiple NDCs, but that information is

transmitted to the financial system as a charge code for that item, not as an NDC.

Entities that barcode are often under the impression that the NDC is tracked throughout

their information systems, this is not the case. Typically the NDC is used only to verify



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that it is representative of the entered charge code or drug, also called an alias. The

charge code and primary NDC, if any NDC, is what makes it to the billing side.

Operational Challenge

Due to drug shortages, wholesaler short supplies and manufacturer back orders, it is

very common that multiple NDCs are purchased for the same item or charge code and

that multiple different NDCs for the same item or charge code are in a hospital and used

on any given day. Most pharmacy directors report that up to 10% of medications

ordered seem to be short or unavailable for some reason and require a substitute NDC.

Items for Consideration

1. Check wholesaler invoices for a few common items such as Acetaminophen

325mg and validate how many different NDCs were purchased in the last 120

days for the same drug item.

2. Check to see how many “alias” NDCs are recognized under a CDM or charge

code in the pharmacy charge master or order entry system.

3. Check to see how many NDCs are in the financial billing system.

4. Check to see how many NDCs are tracked in 340B software at the same exact

time and if it is possible to differentiate the usage of each of those to equal the

total amounts that have been purchased.



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Review a simple example comparison of how multiple

NDCs are handled by split billing software and a

rules-based compliance engine:

EXAMPLE

ACTION STEP

SPLIT BILLING

RESPONSE

RULES-BASED

ENGINE RESPONSE

1. 5 different NDC

packages of

Acetaminophen 325mg

are purchased

(5 separate NDCs with a

quantity of 1,000).

Tracks purchases of 5

different NDCs.


different NDCs.

2. Replenishment

eligibility is

accumulated.

Accumulates replenishment

eligibility by the OP charge

code used and does not

track specific NDC use except

for the NDC linked, in this

case 1 NDC is accumulated.

Accumulates and tracks

replenishment

eligibility based on an

11-digit NDC and the

mapped OP charge

code used, in this case

5 different NDC’s.

3. 5,000 dispensations

have been accrued.

Tracks 5,000 dispensations

(based on OP charge code)

of Acetaminophen 325mg

and “bundles” all of the

dispensations under 1

“bucket” for replenishment.

Tracks eligibility for 5

distinct and separate

NDCs, each of which

has reached the full

package size and can be

replenished only based

on the actual NDC

usage.

4. A replenishment order

is placed.

Creates a 340B purchase

order for Acetaminophen

325mg packages totaling a

quantity of 5,000 without

regard to the specific NDCs

used. The accumulator or

bucket can apply to any

similar item.

Creates a 340B

purchase order for

each of the 5 specific,

11-digit NDCs that have

earned replenishment

eligibility. This activity

would be documented,

illustrating 340B

compliance.



BINDING SIDE

11


Review a simple example comparison of how multiple

NDCs are handled by split billing software and a

rules-based compliance engine:

EXAMPLE

ACTION STEP

SPLIT BILLING

RESPONSE

RULES-BASED

ENGINE RESPONSE

1. 5 different NDC

packages of

Acetaminophen 325mg

are purchased

(5 separate NDCs with a

quantity of 1,000).


different NDCs.


different NDCs.

2. Replenishment

eligibility is

accumulated.

Accumulates replenishment

eligibility by the OP charge

code used and does not

track specific NDC use except

for the NDC linked, in this

case 1 NDC is accumulated.

Accumulates and tracks

replenishment

eligibility based on an

11-digit NDC and the

mapped OP charge

code used, in this case

5 different NDC’s.

3. 5,000 dispensations

have been accrued.

Tracks 5,000 dispensations

(based on OP charge code)

of Acetaminophen 325mg

and “bundles” all of the

dispensations under 1

“bucket” for replenishment.

Tracks eligibility for 5

distinct and separate

NDCs, each of which

has reached the full

package size and can be

replenished only based

on the actual NDC

usage.

4. A replenishment order

is placed.

Creates a 340B purchase

order for Acetaminophen

325mg packages totaling a

quantity of 5,000 without

regard to the specific NDCs

used. The accumulator or

bucket can apply to any

similar item.

Creates a 340B

purchase order for

each of the 5 specific,

11-digit NDCs that have

earned replenishment

eligibility. This activity

would be documented,

illustrating 340B

compliance.



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SomeWh

NDC i

K

prac

dif

due

soft

tra

si

ething to Cat should happ

is purchased fo

in a mixe

Key Term: B“Bundling” r

ctice of adding

aggregate t

fferent NDCs.

e to the limitat

tware systems

ack multiple ND

ingle charge co

Consider pen if a new

or utilization

ed use area?

Bundling refers to the

g together in

the usage of

This is done

tion of some

that cannot

DCs under a

ode or CDM.


As each NDC

should neve

The use of 3

340B invent

If a CE exper

eligible use,

engine woul

historical us

accrued elig

This issue is

may (intenti

brand name

An example

equivalent d

own 11-digit

multiple ma

The issue wi

when the or

is, effectivel

preserve 340

Conclusion

Finding a so

isn’t just a “l

compliant 34

document si

versus just o

and maximiz

Policies

Backgroun

Policies & Pr

present its P

actual opera

IT Challeng

Today’s hosp

340B, thus t


C is purchased

r use a previou

40B pricing is

ory that can be

riences a short

the NDC shou

ld consider it 3

e of that NDC

ibility.

critical becaus

onally or unint

versions of a s

would be gene

drugs, but in di

t NDC. A CE wo

nufacturers, to

th Bundling is

riginal eligibility

y, non-complia

0B program int

lution with 11-

luxury” option

40B software t

ite activity. It’s

one manufactu

zation of benef

& Proced

d

rocedures (P&P

P&Ps for review

ations and deci

ge

pital informati

he need for a t



for the first tim

us NDC’s reple

reserved for re

e tracked.

tage and neede

ld be treated a

340B virtual inv

before. The ND

se of the non-c

tentionally) bu

similar item – t

eric drugs, whe

fferent packag

ould be “bundl

o earn replenis

that it may for

y came from a

ant, and neces

tegrity.

-digit NDC com

or a bonus fea

that will maxim

s key to under

urer or using a

fit.

dures

Ps) are federal

w with its data

isions related t

on systems do

third party solu


me, it should b

nishment eligi

eplenishment o

ed to buy a new

as 340B invent

ventory for fut

DC’s use would

compliant prac

undle different

to accrue eligib

ere multiple m

ge sizes – each

ling” if they us

shment eligibil

rce one manuf

nother manufa

sitates the 11-

mpliance and th

ature – it’s a vi

mize program p

stand the diffe

bundling proce

lly mandated.

related to 340

to the program

o not have the

ution.


be bought at no

bility to order

of 340B drugs

w NDC under 3

tory. A rules-b

ure use since t

d then be track

ctice of NDC “b

t drugs – includ

bility for one d

manufacturers c

of these varia

ed a variety of

ity for one spe

facturer to give

acturer’s medi

-digit NDC mat

he ability to tra

ital, necessary

participation a

erence betwee

ess, as this wil

If audited, a C

0B. A CE’s P&P

m.

ability to do w


on-340B pricin

it at 340B pric

or establishing

340B before it

ased complian

there would be

ked until it had

bundling.” Som

ding generic an

drug.

commonly ma

tions would ha

f NDCs, from

ecific 11-digit N

e a savings ben

ication. This pr

tch to avoid it a

ack multiple ND

component of

nd accurately

en tracking all N

l impact comp

CE will be asked

Ps should follow

what is necessa

ystems, Inc. d.

g and

cing.

g a

has

nce

e no

d

me CEs

nd

ke

ave its

NDC.

nefit

ractice

and

DCs

f any

NDCs

liance

d to

w its

ry for



BINDING SIDE

12

SomeWh

NDC i

K

prac

dif

due

soft

tra

si

ething to Cat should happ

is purchased fo

in a mixe

Key Term: B“Bundling” r

ctice of adding

aggregate t

fferent NDCs.

e to the limitat

tware systems

ack multiple ND

ingle charge co

Consider pen if a new

or utilization

ed use area?

Bundling refers to the

g together in

the usage of

This is done

tion of some

that cannot

DCs under a

ode or CDM.


As each NDC

should neve

The use of 3

340B invent

If a CE exper

eligible use,

engine woul

historical us

accrued elig

This issue is

may (intenti

brand name

An example

equivalent d

own 11-digit

multiple ma

The issue wi

when the or

is, effectivel

preserve 340

Conclusion

Finding a so

isn’t just a “l

compliant 34

document si

versus just o

and maximiz

Policies

Backgroun

Policies & Pr

present its P

actual opera

IT Challeng

Today’s hosp

340B, thus t


C is purchased

r use a previou

40B pricing is

ory that can be

riences a short

the NDC shou

ld consider it 3

e of that NDC

ibility.

critical becaus

onally or unint

versions of a s

would be gene

drugs, but in di

t NDC. A CE wo

nufacturers, to

th Bundling is

riginal eligibility

y, non-complia

0B program int

lution with 11-

luxury” option

40B software t

ite activity. It’s

one manufactu

zation of benef

& Proced

d

rocedures (P&P

P&Ps for review

ations and deci

ge

pital informati

he need for a t



for the first tim

us NDC’s reple

reserved for re

e tracked.

tage and neede

ld be treated a

340B virtual inv

before. The ND

se of the non-c

tentionally) bu

similar item – t

eric drugs, whe

fferent packag

ould be “bundl

o earn replenis

that it may for

y came from a

ant, and neces

tegrity.

-digit NDC com

or a bonus fea

that will maxim

s key to under

urer or using a

fit.

dures

Ps) are federal

w with its data

isions related t

on systems do

third party solu


me, it should b

nishment eligi

eplenishment o

ed to buy a new

as 340B invent

ventory for fut

DC’s use would

compliant prac

undle different

to accrue eligib

ere multiple m

ge sizes – each

ling” if they us

shment eligibil

rce one manuf

nother manufa

sitates the 11-

mpliance and th

ature – it’s a vi

mize program p

stand the diffe

bundling proce

lly mandated.

related to 340

to the program

o not have the

ution.


be bought at no

bility to order

of 340B drugs

w NDC under 3

tory. A rules-b

ure use since t

d then be track

ctice of NDC “b

t drugs – includ

bility for one d

manufacturers c

of these varia

ed a variety of

ity for one spe

facturer to give

acturer’s medi

-digit NDC mat

he ability to tra

ital, necessary

participation a

erence betwee

ess, as this wil

If audited, a C

0B. A CE’s P&P

m.

ability to do w


on-340B pricin

it at 340B pric

or establishing

340B before it

ased complian

there would be

ked until it had

bundling.” Som

ding generic an

drug.

commonly ma

tions would ha

f NDCs, from

ecific 11-digit N

e a savings ben

ication. This pr

tch to avoid it a

ack multiple ND

component of

nd accurately

en tracking all N

l impact comp

CE will be asked

Ps should follow

what is necessa

ystems, Inc. d.

g and

cing.

g a

has

nce

e no

d

me CEs

nd

ke

ave its

NDC.

nefit

ractice

and

DCs

f any

NDCs

liance

d to

w its

ry for



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Operational Challenge

One challenge is tracking and the other is ordering. Since people take vacations and

multiple people often perform similar tasks, it is very difficult to ensure 100%

compliance with a CE’s P&Ps related to 340B since they are complex and information

outside of the pharmacy system itself is required to determine eligibility.

Items for Consideration

1. Are P&Ps for 340B in place today?

2. If P&Ps are in place, is there a way to audit or track that they are enforced?

3. Does the current system allow for P&Ps to be electronically enforced or are

they dependent upon the person ordering that day?

Conclusion

It is optimal to find a solution that incorporates P&Ps into the system so that no matter

who is executing a CE’s 340B program, the decisions are made automatically the same

way every day. The savings received by an entity and the potential of audits are too

great to risk manual variation or changes based on employee understanding or

knowledge related to the 340B program.

Reporting

Background

Reporting is especially important since 340B requires data from multiple hospital IT

systems. Reporting enables a CE to track and understand its data environment,

communicate success to executives, find areas for improvement or added savings,

perform regular internal audits, and provide information for external auditors. Auditors

evaluating covered entities based on Congressional scrutiny have (as of publication of

this paper in May 2012) been asking for very detailed data sets related to 340B

compliance.

The ability to respond to an audit appropriately is entirely dependent on the type of

340B software in place. Each audit situation differs based on the source of the audit, but

it is likely that an audited CE will be requested to show that 340B purchases match

actual dispensations, down to 11-digit NDC detail.

IT Challenge

Information that enables compliance comes from multiple sources, both internal and

external to the hospital. An internal example could be drug charges or admission,

discharge, and transfer data (ADT) while an external example would be wholesaler

purchases and pricing files.



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Operationa

Reporting fo

purchase an

concern or o

Items for C

1. What re

a. b. c. d. e.

2. It is an a

a. b. c. d. e.

Reporting ca

It may be he

demonstrate

solution.

Entity Chal

The difficulty

hospital pha

usually stum

Examp

Proa

Penny B

These “

availabl

hospita

tell a CE


al Challenge

or 340B could b

d should be as

opportunity re

Consideration

eports are avai

GPO, 340B, &

IP & OP Utiliz

A report of sa

A report of p

A list of items

added benefit

Comparison o

Audit reports

Alerts when n

Notifications

Specific audit

an impact both

elpful to take a

e the need for

llenge

y for a CE is de

armacy buyer h

mbles on these

ple #1

ctive repo

Buys are drugs

“penny buys” c

le at this price

l system or inv

E if these price



be as simple as

s complicated a

lated to compl

n

lable today? A

& Wholesale Ac

zation reports.

avings based o

otential saving

s ready to be r

if these report

of purchases v

s demonstratin

new CDMs are

when penny b

t functionality

h savings maxim

deeper look a

robust and co

etermining whe

has tens of tho

items during t

orts can a

s that sometim

can come and g

is crucial to a C

ventory manag

es are available


s identifying w

as being able t

liance and savi

At a minimum,

cquisition Purc

on each distinct

gs.

replenished.

ts exist

vs. utilizations f

ng compliance

e added or NDC

buy opportunit

by NDC, time f

mization and c

and review a fe

mprehensive r

en these penny

ousands of cont

this process, if

ssist in sa

mes become av

go with no not

CE’s full and m

gement system

e.


hat medication

to point out po

ings.

a CE should ha

chase reports.

t NDC.

for all IP/OP m

with patient d

Cs are purchas

ties exist by ND

frame, patient

compliance wit

ew examples to

reporting from

y buy items ar

tracted items t

they have eve

avings max

ailable for liter

tice. The ability

maximized 340B

m has the ability


n is ready for 3

otential areas o

ave:

medications.

definitions.

ed.

DC.

t, etc.

th 340B regula

o better

m any technolog

e available. A t

to sift through

er seen one.

ximizatio

rally pennies.

y to know wha

B participation

y to proactivel

ystems, Inc. d.

340B

of

tions.

gy

typical

and

n

at is

n. No

y



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Items for C

1. Doe

2. Can

are

3. If th

tho

A solution th

added savin

is key to max

Entity Chal

The hospital

or dispensat

solution is a

Having acces

pharmacy st

but only 100

opportunity

further rese

building inve

in the charge

Why does th

theft, this is

tool to maxi

Items for C

1. Doe

ind

Examp

Track

impr

Purchas

it is pro

maximi

Access t

340B pr



Consideration

es a CE have a

n the CE’s curre

available?

he CE procures

ose items track

hat can proacti

gs for a CE. Ha

ximized partici

llenge

l environment’

tions does not

ble to aggrega

ss to real time

taff are able to

0 have been ch

for added sav

arch on that sp

entory on the s

e master, pilfe

his matter for 3

a lost opportu

mize savings a

Consideration

es the 340B so

ividual NDCs?

ple #2

king drug

roves trou

ses vs. Utilizat

obably one of t

zation.

to accurate, up

rogram particip


n

history of purc

ent or future s

s these for an a

ed?

ively alert an e

ving the ability

ipation.

’s tracking of p

allow for much

te the disparat

purchase and

o quickly determ

harged, this ale

ings. Knowing

pecific item an

shelf, missed c

rage, or somet

340B? If an ND

unity. This exam

nd compliance

n

lution offer cle

detail for

ubleshoot

tions may seem

he most impor

pdated details

pation.


chasing penny

oftware proac

area such as on

entity when pe

y to know they

purchases (by p

h direct compa

te sources of in

utilization com

mine that they

erts them to a p

g a specific plac

d aids in deter

charges in a ho

thing else.

DC is not being

mple of report

e.

ear comparison

r purchase

ting

m like an odd 3

rtant compone

on purchases


buys?

ctively tell them

ncology prior t

enny buys are a

y exist and resp

pharmacy buye

arison, unless a

nformation an

mparison is vita

y purchased 50

potential comp

ce to look for i

rmining the iss

ospital location

g replenished b

ing is a simple

ns of purchase

es and uti

340B reporting

ents of 340B co

and utilization


m what penny

to use, how are

available can le

pond appropri

ers) and utiliza

an outside soft

d match them

ally important

00 units of an N

pliance issue o

nformation en

sue, whether it

, a wrong mult

because of erro

yet very effect

es to utilization

ilizations

g requirement,

ompliance and

ns is a vital piec

ystems, Inc. d.

buys

e

ead to

ately

tions

tware

up.

. If

NDC

or

nables

t is

tiplier

or or

tive

ns for

but

d

ce of

15



BINDING SIDE

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information.









BINDING SIDE

16


2. How much time does pharmacy staff have to dedicate to troubleshooting and

locating potentially missing inventory?

3. Can data be accessed tying a purchased NDC to a dispensation?

After practicing compliance and compiling the right data for it, reporting purchases and

utilizations may be the next most important factor a CE has to maintain both

compliance and savings maximization. If the correct reporting and detail of data does

not exist, a CE will be significantly hindered in an audit situation and it will likely achieve

less savings overall.

Conclusion

Reporting enables a CE to perform regular audits, understand their performance, and –

in the event of an audit – provide the appropriate information auditors would require to

determine compliance with 340B regulations. From a day-to-day operational aspect,

these are the key to understanding how a CE is doing from a management level.

SECTION 4: What is an ideal 340B solution?

An ideal 340B software solution will demonstrate the characteristics described for each

of the key components just reviewed as well as added features that assist in a CE’s

understanding and maximization of its program. For a further breakdown of 340B

solutions, compare rules-based engines to split billing software in the areas of

compliance, capture of savings, and workflow – all key areas to a CE’s overall 340B

success.

Compliance

With the increased focus on compliance and new congressionally mandated audits

already taking place, it is imperative that 340B software is able to incorporate policies

for compliance.

As indicated before, split billing software was designed from inventory management

systems and was developed at a time when audits were not a concern for CEs. Split

billing was not designed to incorporate an entity’s P&Ps, a core element for ensuring

compliance.

Because a rules-based engine is built around and executes on rules, it should provide

100 percent compliance with P&Ps and enables a CE to meet all 340B requirements in

an automated fashion, especially since the rules are part of the system and they are not

people-dependent or manual. If audited, any entity using a rules-based compliance

engine will have documented P&Ps that the technology is acting on as directed. This

rules-based foundation provides a consistent and replicable approach to compliance

and audit reporting.



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Mixe

loc

loca

lab, a

op

them w

oppor

W

mixed-used-use areas co

IPs and OPs i

cation. Exampl

tions include th

and OR. These

source of conf

understandin

components a

perations asso

will determine

rtunity will be c

What is a

se area? ontain both

in the same

les of these

he ER, Cath

areas are a

fusion, and

ng the data

nd hospital

ciated with

if eligibility

captured or

missed.


Split billing s

charges (CD

recent chang

Rules based

either regula

dispensation

The complia

Split billing s

of the more

are from the

NDCs using d

unrealistic a

pharmacy op

A rules-base

hospital’s ov

feature integ

built with a

down to the

Capture

Most hospit

capturing eli

capture this

consider the

missed othe

340B medica

doing this, th

when in real

use area or t

area.

One weakne

billing system

patients who

admitted. T

an OP record

they were n

tracking.

Since most s

by any OP d

IP status is lo

and the spit



software is abl

Ms). While thi

ges to the 340

engines shoul

atory updates

n to billing on t

nce software n

software, being

advanced split

e same manufa

different CDM

nd will still not

perational reas

ed engine that

verall program

grated tools th

hospital pharm

e exact NDC lev

e of Saving

als with a split

igibility in mixe

area, so they a

e entire mixed-

er areas of eligi

ations for adm

hey simply ass

lity they might

they could be m

ess of split billin

ms will change

o are admitted

This means that

d is now an IP

ot an OP, as th

split billing syst

ispensations th

ost. If an OP re

billing system


e to handle sim

is is simple, it m

B landscape.

d be able to ac

or operational

the administra

needs to provid

g CDM driven,

t billing system

acturer. Althou

s, often referre

t be compliant

sons. This core

includes audit

participation a

hat were design

macy operation

vel for complia

gs

billing mecha

ed-use areas. S

avoid doing an

-use area as eli

bility and it wi

mitted ER patien

ume they are g

t be earning un

missing legitim

ng systems in t

e a patient’s sta

d have their rec

t any record up

record in the h

his is purely for

tems take batc

hat occurred in

eceives a dispe

receives a bat


mple operation

may not be ad

ccommodate c

l changes such

tion.

de audit repor

will typically t

ms, it may allow

ugh some will c

ed to as a 1 to

t for any hospit

e issue results i

preparation to

and complianc

ned specifically

n in mind. This

nce.

nism take one

Some assume i

ny 340B there a

igible because

ill even out; in

nts, a direct vio

getting their e

njustified eligib

mate eligibility

the mixed-use

atus. Based on

cords changed

p to 72 hours p

hospital inform

r billing purpos

ch records, the

n the 72 hours

nsation at 11:4

tch report at 1


ns, such as spli

equate for you

changes that w

as switching f

rting in detail.

track only a sin

w tracking of m

claim it’s possi

1 relationship

tal to consider

in compliance

ools should ins

ce. Ideally, the

y for auditing p

s allows for det

of two differe

it is impossible

at all. The othe

they assume t

other words, t

olation of 340B

ntire capture w

bility from inpa

from outpatie

area relates to

n the “72 hour

d to reflect IP st

prior to their a

mation system.

ses, but it crea

e replenishmen

prior to a pati

45pm, is admit

1:59pm, those


tting OP and IP

ur entity given

would result fro

from billing on

ngle NDC. With

multiple NDCs i

ble track multi

. This approac

r for a number

risk for a CE.

still confidence

software will

purposes and w

tailed reportin

ent approaches

e to accurately

er approach is

they might hav

they knowingly

B regulations. B

with split billin

atients in a mix

nts in a mixed-

o the way hosp

rule” for billing

tatus once

admission that

This does not

tes issues for

nt eligibility acc

ent’s admissio

tted at 11:55p

e OP dispensati

ystems, Inc. d.

P

the

om

the

some

f they

iple

ch is

of

e in a

were

g

s to

to

ve

y use

By

g,

xed-

-use

pital

g,

was

mean

crued

on to

m,

ions

17



BINDING SIDE

Mixe

loc

loca

lab, a

op

them w

oppor

W

mixed-used-use areas co

IPs and OPs i

cation. Exampl

tions include th

and OR. These

source of conf

understandin

components a

perations asso

will determine

rtunity will be c

What is a

se area? ontain both

in the same

les of these

he ER, Cath

areas are a

fusion, and

ng the data

nd hospital

ciated with

if eligibility

captured or

missed.


Split billing s

charges (CD

recent chang

Rules based

either regula

dispensation

The complia

Split billing s

of the more

are from the

NDCs using d

unrealistic a

pharmacy op

A rules-base

hospital’s ov

feature integ

built with a

down to the

Capture

Most hospit

capturing eli

capture this

consider the

missed othe

340B medica

doing this, th

when in real

use area or t

area.

One weakne

billing system

patients who

admitted. T

an OP record

they were n

tracking.

Since most s

by any OP d

IP status is lo

and the spit



software is abl

Ms). While thi

ges to the 340

engines shoul

atory updates

n to billing on t

nce software n

software, being

advanced split

e same manufa

different CDM

nd will still not

perational reas

ed engine that

verall program

grated tools th

hospital pharm

e exact NDC lev

e of Saving

als with a split

igibility in mixe

area, so they a

e entire mixed-

er areas of eligi

ations for adm

hey simply ass

lity they might

they could be m

ess of split billin

ms will change

o are admitted

This means that

d is now an IP

ot an OP, as th

split billing syst

ispensations th

ost. If an OP re

billing system


e to handle sim

is is simple, it m

B landscape.

d be able to ac

or operational

the administra

needs to provid

g CDM driven,

t billing system

acturer. Althou

s, often referre

t be compliant

sons. This core

includes audit

participation a

hat were design

macy operation

vel for complia

gs

billing mecha

ed-use areas. S

avoid doing an

-use area as eli

bility and it wi

mitted ER patien

ume they are g

t be earning un

missing legitim

ng systems in t

e a patient’s sta

d have their rec

t any record up

record in the h

his is purely for

tems take batc

hat occurred in

eceives a dispe

receives a bat


mple operation

may not be ad

ccommodate c

l changes such

tion.

de audit repor

will typically t

ms, it may allow

ugh some will c

ed to as a 1 to

t for any hospit

e issue results i

preparation to

and complianc

ned specifically

n in mind. This

nce.

nism take one

Some assume i

ny 340B there a

igible because

ill even out; in

nts, a direct vio

getting their e

njustified eligib

mate eligibility

the mixed-use

atus. Based on

cords changed

p to 72 hours p

hospital inform

r billing purpos

ch records, the

n the 72 hours

nsation at 11:4

tch report at 1


ns, such as spli

equate for you

changes that w

as switching f

rting in detail.

track only a sin

w tracking of m

claim it’s possi

1 relationship

tal to consider

in compliance

ools should ins

ce. Ideally, the

y for auditing p

s allows for det

of two differe

it is impossible

at all. The othe

they assume t

other words, t

olation of 340B

ntire capture w

bility from inpa

from outpatie

area relates to

n the “72 hour

d to reflect IP st

prior to their a

mation system.

ses, but it crea

e replenishmen

prior to a pati

45pm, is admit

1:59pm, those


tting OP and IP

ur entity given

would result fro

from billing on

ngle NDC. With

multiple NDCs i

ble track multi

. This approac

r for a number

risk for a CE.

still confidence

software will

purposes and w

tailed reportin

ent approaches

e to accurately

er approach is

they might hav

they knowingly

B regulations. B

with split billin

atients in a mix

nts in a mixed-

o the way hosp

rule” for billing

tatus once

admission that

This does not

tes issues for

nt eligibility acc

ent’s admissio

tted at 11:55p

e OP dispensati

ystems, Inc. d.

P

the

om

the

some

f they

iple

ch is

of

e in a

were

g

s to

to

ve

y use

By

g,

xed-

-use

pital

g,

was

mean

crued

on to

m,

ions

17



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Overview








Abstract of Part I


















information.









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18


will be lost because the system reflects the IP status only. Even if the patient’s status is

pulled from an automated dispensing cabinet, that status will still reflect the status as

IP, the most recent update when the report was run for OP billing.

In contrast, a rules-based engine considers only primary sources of disparate data to get

the true status and eligibility information. A good rules-based engine will receive a real-

time ADT feed directly from the hospital information system that indicates IP/OP status.

It will need to catalog the chronological order of messages and retain all pieces of data

in order to be effective. This way the system can match dispensation or administration

data to an exact point in time that clearly defines what the patient’s IP/OP status was

and if the dispensation was pre- or post-admission.

Workflow

Workflow is another major consideration when evaluating 340B programs. The price of

the software is directly related to the amount of work and manual intervention required

after installation.

A rules-based engine may require some initial oversight and preparation, but the

benefits from these early efforts will reduce ongoing work flow concerns and the

proactive alerts and reporting will save many hours down the road.

Using a rules-based engine often requires staff education on 340B rules and regulations,

but this training is both needed for accuracy of mapping and will result in a 340B

program managed by informed, committed staff.

SECTION 5:

Choosing a 340B hospital software solution –

Final Thoughts

While each CE may have its own unique operations, processes, and needs, there is one

key element going forward: compliance. With HRSA/OPA audits mandated by Congress

already taking place (as of February 2012), the vital importance of program integrity is

apparent. Compliance is no longer an optional or a “Cadillac” feature offered by rules-

based engines. It is a critical component of any successful and audit-ready participation

in the 340B program.

Whether a CE has a current system in place or is new to 340B and looking at options, it

is important to understand the systems available and the limitations they bring when

determining how to comply and participate.

Any solution is viable if you are willing to accept its shortcomings, and no “one size fits

all” solution exists, as each CE has unique needs and issues to address. Evaluating the

true cost of a 340B solution should consider fixed cost, lost savings, compliance, and



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Overview








Abstract of Part I


















information.









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risk. In other words, the return on investment is more than just what was paid up front;

it is a function of the whole picture.

Analyzing a 340B solution requires acknowledging that unplanned costs may result

based on the limitations of a given solution. These unexpected costs could occur and

might not be seen in up-front fees:

• Lost or missed savings capture

• Cost of consultants

• Risk in an audit for payback or fines

• Poor data that requires entity time in locating information or generating

reports

• Time spent managing the solutions such as steps required to place an order

An example evaluating the cost of a 340B solution:

• If option 1 costs $10 and savings is $50, the return is $40.

• If option 2 costs $50 but savings is $200, the return is $150.

Which option is actually costing the entity more?

Clearly, the initial cost of an option is not the only factor that affects the overall “value”

it brings. What about compliance, risk, and hard-to-gauge costs? They matter too.

While split billing is a popular solution and has become a common term in 340B, it alone

will not meet a CE’s needs for 340B compliance. However, if split billing’s limitations are

understood, it is possible that these solutions may work for a hospital if the entity using

it invests in additional staff, pays for regular consulting services, and maintain a variety

of internal databases. However, when considering the alternative rules-based

compliance engines available today, it would be difficult to justify the time, resources,

extra cost, or lost opportunity that would be associated with a split billing solution.

In the current healthcare data environment, rules-based compliance engines are the

best choice to deliver compliance with a CE’s policies, maximization of their compliant

capture, comprehensive pharmacy visibility, full audit preparation and a reduction of

the entity’s risk and liability related to 340B.



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Overview








Abstract of Part I


















information.









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About Sentry

Sentry Data Systems, Inc. is a healthcare intelligence company offering technology

solutions that address a wide variety of workflow, compliance, technical and financial

challenges. Sentry’s products serve hundreds of hospitals and pharmacies across the

country and have saved clients millions of dollars to date. Sentry processes millions of

eligibility, financial, clinical, and pharmacy transactions per day on over 15 million

patients.

To contact Sentry about our industry-leading technology solutions, go to

www.SentryDS.com/contact.



BINDING SIDE

Sentry Data Systems, Inc.

600 Fairway Drive, Suite 201

Deerfield Beach, FL 33441

t: 800.411.4566

f: 866.221.4337

© Copyright 2012 Sentry Data Systems, Inc. This White Paper

is published, presented and distributed by Sentry Data Systems, Inc.

Any reproduction or distribution without a prior written permission

from Sentry Data Systems, Inc. is strictly prohibited.



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an analysis of 340b solutions - sentry data...

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