Change of Entity Type from Rural Hospital to DSH

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Change of Entity Type from Rural Hospital to DSH

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Does your hospital qualify as more than one type of 340B entity?  Is your hospital a Sole Community or Rural Referral Hospital with a DSH percentage that has risen above 11.75%?

Making the change is not as scary as you think and the possibility of additional savings to help your hospital’s indigent is well worth it.

Here are a few things to consider and an account of my experience of changing entity type from SCH to DSH:

  • The First thing your C-Suite will want to know is that this change of status will be for 340B purposes only and will NOT change the classification of the hospital or the ability to bill as a sole community hospital.  Hospital 340B entity type eligibility is based on the DSH percentage and ownership classification only.
  • Ownership classification is according to the following: Owned or operated by a state or local government.  A private, non-profit hospital with a valid contract with a state or local government to provide health care services to low- income individuals.  A public or private non-profit hospital that has been formally granted governmental powers.
  • If your hospital’s DSH% is solidly above 12% (line 33 wksht A), I would recommend the change.
  • My entity hired a consultant to confirm the DSH was solid and there are other things a hospital can do to help maintain a DSH above 11.75%.  When recertifying your AO attests to the DSH% as reported for that previous year.  So, the hospital will qualify as DSH for one full year if your most recently filed MCR has a qualifying DSH.
  • The ability to Carve in.  If unable to carve in, consider the percentage of outpatient Medicaid orders that would need to be purchased as WAC.  If significant, this may be a reason not to make the change, however the benefit of purchasing orphan products will also need to be factored in.
  • GPO vs. WAC pricing for oncology products: Oncology products may not have a beneficial GPO price, so if these drugs have to be purchased on WAC there might not be that great of difference.  (WAC purchasing would apply for first purchases on all drugs when DSH and items ineligible due to carve out.)  The benefit lies in being able to purchase all oncology products regardless of indication that qualify based on current patient definition as 340B.  One can estimate that the savings of an entity associated with an infusion center would DOUBLE as a DSH entity.
  • Consider number of outpatient infusions and the current status of orphan drug exclusion and how many manufacturers are offering ‘340B like’ pricing.
  • 340B omnibus guidance – what will happen to patient definition?  Are your infusion orders coming from a majority of providers that work in areas that are on the MCR?  Or, does your hospital rely on referral relationships.
  • Reliability of split billing software – Once set up, I feel the reliability of split billers to triple split (340B, GPO, WAC) exceeds the level of risk to a site subject to the orphan exclusion.  Split billers have a hard time maintaining an accurate orphan drug list and filtering capabilities to capture timely diagnosis codes. I have also experienced a set up delay even when given a 3-month advance notice of entity type change. (I would ask that the vendor ensure the QA process is complete prior to go live date.)
  • When considering a change remember that GPO exclusion violations can lead to removal from the 340B program.
  • The ability to have auditable records at clean site or the ability to match all dispensations against purchases.
  • Bundling practices at organization.  See Apexus FAQ 1355 GPO prohibition and bundled drugs.
  • Borrow/lend policy that is followed as the change to DSH makes this even more important to avoid GPO violations.
  • Non COD list (A significant bulk of time will be dedicated to the creation of this list. Each organization will have a unique list.)  Work with the split biller to set filters so items are not ordered on the 340B or WAC account. Reference: Section 1927 of the Social Security Laws, Limiting Definition of “Covered Drug”
  • Allow for ample time for wholesaler to set up new accounts and make sure loaded correctly to split biller and then set to split correctly.  There will be various different bill to ship to accounts that need to be mapped correctly by the split biller. Accounts will need to be set up for Contract Pharmacies as well.
  • Remember to notify the hospital business office of account changes as to avoid a delay in ACH payments and associated discounts or an inability to reconcile invoices.
  • Update prime vendor account and ensure new contracts loaded.  If you have several child sites you will need to submit information for each one. Then make sure to follow up with wholesaler that the contracts are loaded prior to going live.  (I did not follow up and had to wait 45 days to get prime vendor contracts loaded.)
  • Educate staff on change – Pharmacy Staff will need to be aware of the importance of ordering under the correct account to avoid a GPO exclusion violation.
  • Nova plus or private label items – research what your wholesaler can do to give you ‘private label like’ pricing on items and if the auto sub feature at the wholesale level should be turned off.  This could help prevent private label items from being purchased as 340B and so that the best price items are available for inpatients even if the best price given is not private label.
  • Buy up accumulations prior to software change
  • Expect first two to three months of savings to be low as first package items are purchased WAC.
  • When registering with OPA to make the entity type change, you will need email verification from the state/local GO and most hospitals did not need to do this step when originally registering.  There is a chance the GO may have changed and a new contract may need to be set up.  This could eat up the registering open window time, so best to know ahead of time that this is needed.
  • Direct purchase accounts – all direct purchases will need to have a 340B, GPO, and WAC account or some documentation that the pricing available is non GPO or that GPO like pricing is all that is available.
  • Pharmedium-503B compounding companies do not provide covered outpatient meds and therefore GPO purchases are allowed
  • Lead time with data analyst – in case your entity has a special set up to provide data that is pre-filtered based on entity type.  For example, do you pre-filter Medicaid or eligible locations.  Are these accurate?
  • Review the Apexus minimize WAC exposure tool

About Author

Jennifer Hagen, PharmD, 340B ACE

Jennifer Hagen joined the Turnkey Pharmacy Solutions team in October of 2016. She has served in various pharmacy leadership positions including Director of Ambulatory Pharmacy Services for CentraCare Health for over 5 years. Dr. Hagen had operational responsibility for Infusion Pharmacy Services, the Health System’s four retail pharmacies, and was responsible for 340B compliance at St. Cloud Hospital, a 489 bed regional medical center. Jennifer has served as a HRSA peer-to-peer mentor for the past two years and has presented numerous times for 340B University and chaired round table events for 340B Health. Jennifer is a member of our 340B independent auditing team. Her perspective involves rural health program administration.

1 Comment

Alexsandra Soto

April 4, 2019at 3:10 pm

Hi Jenn,

Do you have more information on going the other way from DSH to a rural referral?

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