340B Corrective Actions and Sustaining the Gain

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340B Corrective Actions and Sustaining the Gain

Is perfection attainable? Join our 340B Solutions team as they explore diversion, duplicate discounts, root cause analysis, and more.


Healthcare organizations are no strangers to risk mitigation, continuous quality improvement (CQI), root cause analysis (RCA), and failure mode and effects analysis (FMEA). But do these principles apply to all aspects of a healthcare organization?

Risk mitigation and CQI principles are generally not part of the 340B landscape, but the dollars attributed to the hospital’s operations from the 340B program can measure in the tens of millions. Within the 340B environment, the discussion of corrective actions often focuses on a very small subset of the overall program and not on the larger picture. As such, corrective actions are limited in scope and often not sustained to prevent future reoccurrence. We will explore the application of principles of the continuous quality improvement process to one covered entity’s journey to achieve excellence within their 340B program.

Preventing Diversion and Duplicate Discounts

It is well known that 340B covered entities (CE) must prevent diversion of 340B drugs to ineligible patients1 and duplicate discounts which occur when the covered entity purchases drugs at the 340B discounted price and the state Medicaid program receives a rebate for the same drug.2 The Health Resources & Services Administration (HRSA) does not specify how a covered entity should prevent program integrity issues or how corrective actions should be defined and implemented when errors occur. HRSA does stipulate that corrective actions should be implemented to make manufacturers of the identified drugs “whole.” Manufacturer notification and repayment may be necessary to fully correct some of the compliance errors identified within a covered entity’s 340B program.

To effectively oversee the 340B program, HRSA performs random audits of more than 200 covered entities each year. HRSA provides the covered entity with a corrective action plan template for any findings resulting from the audit, which must be submitted within 60 days of receipt of the final report. Six months after HRSA approves the plan, the covered entity must demonstrate that all corrective actions have been completed, manufacturers have been notified, and repayment settled when applicable. HRSA reserves the right to re-audit a covered entity and may remove the covered entity from the 340B program if previous findings are not corrected.

Basic Tenet of Root Cause Analysis (RCA) Process

The root cause analysis (RCA) process is an important tool in defining the scope of an identified compliance breach. CMS defines RCA as a “structured facilitated team process to identify root causes of an event that resulted in an undesired outcome and develop corrective actions.”3 While the RCA steps may vary slightly depending upon the version of the process used for reference, the basic function is the same and the steps are described in the following points.

  • Identify the problem(s) or event(s) that triggered the non-compliance
  • Gather data relevant to the area(s) of non-compliance
  • Identify the key stakeholders who will be working on the project
  • Review the data and identify those factors that contributed to the problem
  • Evaluate each of the contributing factors to determine the actual cause: the root cause
  • Identify process changes to eliminate the root cause
  • Implement corrective actions and measure the success of those actions
    at preventing any further reoccurrence

Addressing Non-Compliance

Whether a 340B non-compliance event is triggered by a HRSA audit, an independent external audit, a manufacturer audit, or routine internal monitoring is not relevant. The auditing activity revealed non-compliance.

During an independent external audit in 2018, the CPS® 340B team uncovered gaps in the 340B policies and procedures, incomplete internal monitoring procedures, missing elements in contract pharmacy services agreements, high WAC spend for certain drugs, errors with replenishment using an 11-digit NDC match and other replenishment non-compliance, and an 80% compliance rate for mixed-use transaction testing.

Covered entities view risk within the 340B program in different ways, with some prioritizing overall compliance higher or lower than non-compliance that may require manufacturer repayment. Regardless, covered entities should strive to achieve complete compliance with all 340B program requirements. This covered entity engaged CPS 340B consultants to assist with process improvements resulting in a complete reversal of all non-compliance findings over three years. This covered entity had a 340B spend in 2018 of over $30M and a WAC spend of just over $10M over six months. Savings attributed to the 340B program were over $6M for the same six months. The covered entity is a large facility with multiple specialty practices, nearly 40 child site clinics, and over 100 contract pharmacy locations. The relative risk of non-compliance within the 340B program is significant for the overall operations of this covered entity and the programs supported with the drug cost savings from the 340B program.

Following an audit, the covered entity evaluated all findings of non-compliance to prioritize which presented the most risk and required immediate action. Some items, such as updates to the Office of Pharmacy Affairs Information System (OPAIS), were quickly resolved and resulted in an immediate correction. For events of operational non-compliance, those that would result in a potentially significant manufacturer repayment were determined to be of the highest risk. We will review one event to
demonstrate the use of RCA to build meaningful and sustained improvements. For purposes of anonymity, some details of the event are purposefully omitted.

The audit identified a significant number of injectable drugs purchased at the WAC price. In certain circumstances, accumulations were moved from one NDC to another, representing a clear deviation from the 340B program rules. The covered entity took the following steps to rectify non-compliance:
  • Identified the problem(s) or event(s) that triggered the non-compliance
    Drug accumulations were being moved from one NDC to another NDC to facilitate purchases representing non-compliance with the 11-digit NDC replenishment requirement for 340B drugs.
  • Gathered data relevant to the area(s) of non-compliance
    The order build in the electronic health record was completed independent of pharmacy operations, where larger vials were regularly used to batch prepare sterile compounds.
  • Identified the team of individuals who will be working on the project
    The 340B team, IV admixture supervisor, and pharmacy IT staff were identified as key stakeholders. Finance could also be considered a key stakeholder, as the drug administered to the patient was not the same NDC as the drug billed to the patient’s insurance. The compliance issues reached far beyond just the 340B program.
  • Reviewed the data and identified those factors that contributed to the problem
    The pharmacy order entry and billing systems were built using smaller vial sizes. The IV admixture staff would select vial sizes based on the volume of end products being compounded, which varied over time. For some drugs, the compounding was performed using the largest bulk vial available. Drug shortages were having a significant impact on the availability of injectable drugs, causing the buyer to change NDC numbers and vial sizes regularly.
  • Evaluated each of the contributing factors to determine the actual cause: The root cause
    There was a mismatch between the drug accumulated, which was fed from the covered entity’s electronic health record, and the drug used for compounding. The ability to change the electronic health record build was difficult and would not allow for frequent changes to the drug products
    being used for compounding. The use of small vials for sterile compounding represented a significant negative impact on workflow and inserted patient safety risks into the process.
  • Identified process changes to eliminate the root causes
    Through extensive research and evaluation of options, it was determined that the IV admixture service in the pharmacy needed an electronic method to capture batch preparation data. A system was identified that could communicate with the hospital’s electronic health record, resulting in the NDC used for compounding being captured by the 340B accumulator software.
  • Implemented corrective actions and measured the success of those actions at preventing any further reoccurrences
    The software was implemented, and monitoring continued for several months to validate that 11-digit NDC mismatches were no longer occurring and that accumulations were not being moved to facilitate the purchase of 340B drugs.
Though the issues seemed simple, they were very complex and fraught with internal politics. The RCA structure assists with maintaining an organized approach to process improvement. However, the RCA focuses on the future state and preventing reoccurrence. A 340B corrective action plan must also consider historical non-compliance to make the manufacturer whole.

Addressing Issues of Diversion

Consider non-compliance where 340B purchased drug is diverted to ineligible persons. During an audit, three transactions may be identified where the patient was an inpatient and therefore ineligible for drugs purchased at the 340B price resulting in diversion. The drug administered to the ineligible patients should have been purchased at the GPO price, not the 340B price.


Identify the problem(s) or event(s) that triggered the noncompliance

Evaluating events can be like finding a needle in a haystack. When you are presented with three transactions out of a list of thousands, the actual triggering event is difficult to define. And, with a random or targeted transaction pull, the likelihood of additional undetected similar errors is high.

When errors are identified, each should be thoroughly evaluated to determine exactly how the event was classified as eligible when it should not have been. You may need to request assistance from your split billing software support staff and your hospital IT staff to identify the root causes. Trace the transaction chronologically through the process down to the minutes and seconds when each step occurred. This will assist in finding root causes.

Gathered data relevant to the area(s) of non-compliance

This is the step where you begin to determine how wide to cast your net to identify other historical transactions of a similar nature where an error occurred. It is strongly recommended the 340B oversight committee be involved with these discussions. Recall that HRSA does not mandate how long the lookback period should be. Your policy should define your 340B record retention period. While HRSA will only audit data from the previous two completed quarters, manufacturers may go back seven years and payers may go back several years when they audit.

In addition to defining the lookback period, it is important to determine the locations where these errors may occur. Perhaps they are confined to one or two units within the hospital, or all mixed-use areas, or possibly all 340B locations. Some errors may be confined to procedural areas of the organization or possibly just the operating room. The errors themselves should contribute to the details as a basis for this discussion with the oversight committee. At the end of the day, the covered entity is tasked with defining an appropriate lookback period to determine the scope of the errors.

Identify the team of individuals who will be working on the project

This is your workgroup, so limit the team to those key stakeholders who can assist with developing the corrective action plan. Determine who influences the processes that failed. Consider this a subcommittee of the oversight committee and report progress regularly. For automated processes such as patient classification, your team will likely include more technical staff. When the errors involve a lack of documentation, include more clinical and IT staff. If there are billing implications beyond the 340B program, include someone from the billing department.

Review the data and identify those factors that contributed to the problem

With the scope (lookback) defined and the stakeholders identified, you can begin to look at the data to determine what factors contributed to the problem. For patient classification issues, external forces will require those patient reclassifications. The staff required to perform the reclassifications after discharge are likely not aware of the impact on the 340B program, indicating that processes were not developed to prevent errors from occurring. Whether manual or automated, it is important to have a process in place to properly classify all transactions for correct or accuracy accumulation.

For situations where dispenses occur before the status change and drug administration, several factors are involved that should be clearly defined to determine the corrective action.

Evaluate each of the contributing factors to determine the actual cause: The root cause

With the problem well defined and the scope determined, the team can more readily identify the root cause and begin the task of defining corrective actions

Identify process changes to eliminate the root causes

The team of key stakeholders is now tasked with determining the actions which will correct for historical errors as well as to prevent reoccurrence. It is important to identify
process changes that will either fit nicely into existing workflows or that existing workflows be redesigned to prevent errors. When possible, try to implement corrections that do not require significant
manual work. When manual work is required, document it clearly with standard operating procedures so that the processes are performed consistently and do not erode over time, especially when staffing changes occur.

Documenting Actions and Outcomes

Considernon-compliance where 340B purchased drug is diverted to ineligible persons. During an audit, some transactions may be identified where the patient was an inpatient and therefore ineligible for drugs purchased at the 340B price resulting in diversion. The drug administered to the ineligible patients should have been purchased at the GPO price, not the 340B price

So How Do We Document?

HRSA does not mandate how any of this is documented, only that corrective actions are documented. Following an audit, HRSA will provide a template for the corrective action plan.

Here are some key points to documenting a corrective action plan that can be helpful:

Who is responsible?

When listing who is accountable for particular aspects of the corrective actions, list the title of the person within the organization instead of the specific person’s name. There are likely to be several key steps in the process for which a specific job title is responsible within the organization. Listing the job title helps to ensure longitudinal success. The performance improvement process does not rest with persons, and it should not stop if those persons leave their positions

What is occurring?

Describe the steps and the root cause of the problem(s). Note, there may be several root causes for some problems. The “what” may include a list of statements regarding the corrective actions to include policy revisions, procedural changes with the development of or revision to standard operating procedures, staff training/education and possibly competency assessment, and ongoing monitoring which will occur to determine the success of the process improvements

When were the changes implemented and/or when will events take place?

Because this is an ongoing process, some events will have dates of completion, others may have future dates. The document should be fluid. Maintain the targeted implementation dates, but also document the dates on which the implementation occurred. For ongoing monitoring, including the frequency of monitoring and key milestones which will alter the frequency of monitoring.

How will corrective actions be implemented?

Each root cause will have a series of corrective actions. Define corrective actions and how they will be implemented. Define ongoing monitoring for compliance. Referencing policies and procedures or standard operating procedures is acceptable. Include references where
staff education will be provided and who will be included in that education

The “why” may not be important

Why a non-compliance event occurred under the 340B program may or may not be important. HRSA expects that the program is compliant. Avoid including discussion of staff turnover, extended absence of key individuals, ineffective software, and other similar “why” events. Regulators like HRSA expect that the 340B program and essentially any program for
which there are regulatory requirements will achieve and maintain compliance. When errors occur, regulators expect to see a proactive process in place to detect and correct errors in order to maintain compliance.

Even the largest, most complex 340B programs can be in full compliance with all requirements. An effective team will proactively and thoroughly evaluate all aspects of the program and make improvements to eliminate any defects. This is a very time-consuming process, but when millions
of dollars in cost savings are at stake, the price of the time involved is justifiable.

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