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GAO Issues Recommendations on 340B Program Oversight

A new Government Accountability Office (GAO) report calls for increased oversight of nongovernmental hospitals in the 340B Drug Pricing Program.

To qualify for the 340B program, nonprofit, nongovernmental hospitals must have a contract with a state or local government for the provision of health care services to low-income patients who are ineligible for Medicaid or Medicare. As part of its review of 258 nongovernmental hospitals and their contracts, GAO found that the Health Resources and Services Administration (HRSA) was not adequately reviewing these hospitals for compliance with 340B program requirements.

Specifically, GAO found that HRSA does not review whether nongovernmental hospitals had actual binding contracts with their state or local governments; that it has allowed hospitals to enter into contracts with retroactive start dates to avoid findings of noncompliance; and it does not evaluate the contracts to ensure they require the hospital to provide care to the low-income population specified in statute. Moreover, GAO found that HRSA’s auditors do not consistently document their review of hospital contracts.

GAO made six recommendations to HRSA:

  • ensure the use of reliable data to verify hospitals’ nonprofit status;
  • implement a process to verify all nongovernmental hospitals have contracts in place, including throughout hospitals’ audit periods;
  • change contract integrity check procedures to include a review of whether hospitals’ contracts require the provision of health care services to the required low-income population;
  • provide more guidance to auditors on how to determine that hospital contracts require the provision of care to low-income individuals not eligible for Medicare or Medicaid;
  • provide better guidance on contract reviews to its auditors and require them to document their assessments of the completeness of hospital contracts; and
  • require nongovernmental hospitals demonstrate they have contracts with state or local governments in effect before the beginning of their audit periods.

HRSA agreed with five of the recommendations but disagreed with the recommendation to implement a process to verify that all nongovernmental hospitals have contracts in place, arguing it would be burdensome to verify this information for all hospitals. HRSA noted plans to begin collecting contracts of all hospitals registering for the first time in the 340B program.

Contact Senior Director of Policy Erin O’Malley at eomalley@essentialhospitals.org or 202.585.0127 with questions.

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About the Author

Shahid Zaman is a senior policy analyst at America's Essential Hospitals.

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