Children’s Hospital of Michigan |
October 19, 2009 – Children’s Hospital of Michigan is the first children’s hospital to be officially enrolled in the 340B drug discount program. It took the 225-bed hospital more than three years and a re-submittal of its application, but now that it’s all said and done, hospital employees who pushed hard for the designation are both pleased and relieved.
As a subsidiary of Detroit Medical Center, located in an area with high poverty and unemployment, the children’s hospital diligently pursued enrollment because it saw the benefits that the 340B program afforded its sister hospitals, said Dave Bach, the health system’s executive director of pharmacy services.
With the Oct. 1 admission into the program, the hospital will finally be able to purchase pharmaceutical products for its youngest patients “at payment rates that will ensure significant savings and thereby strengthen its ability to provide care to all children, including the sickest and poorest,” Bach said.
The Office of Pharmacy Affairs (OPA) gave Children’s Hospital of Michigan the official stamp of approval exactly one month after the agency published final guidelines giving children’s hospitals access to the $5-billion-a-year 340B drug market. Those guidelines implemented provisions of the Deficit Reduction Act of 2005 that qualified children’s hospitals with adjusted disproportionate-share percentages of at least 11.75 percent.
Under normal OPA procedures, no additional children’s hospitals would be admitted until the first day of the next calendar quarter, which is Jan. 1, 2010. But the agency has indicated it may enroll children’s hospitals before then through a flexible policy in effect under the health care emergency the federal government declared to deal with the H1N1 virus.
So OPA is encouraging children’s hospitals to continue to submit applications for enrollment over the next three months — or to resubmit applications if they, like Children’s Hospital of Michigan, did so before the application rules changed under the final guidelines. (See MonitorAugust 2006.)
The agency “will work with eligible children’s hospitals to expedite registration as much as resources and program requirements permit,” says a note on the OPA Web site.
Jumping through the hoops
To qualify for enrollment, an applicant must have a 3300 series Medicare provider number identifying it as a children’s hospital that meets statutory conditions. Children’s hospitals that have not filed Medicare cost reports can show they meet the 11.75-percent threshold by providing verification by an independent auditor that it would exceed 11.75 percent were it to file such a report.
In addition, a children’s hospital must certify and include documentation showing that it’s a public or private nonprofit entity. If a private nonprofit, it must be formally granted governmental powers or have a contract with a state or local government to provide health care services to low-income individuals not eligible for Medicare or Medicaid.
The guidelines require children’s hospitals to be recertified annually and to demonstrate that they continue to meet the 11.75-percent threshold. The OPA plans to provide additional guidance on how it plans to recertify the hospitals.
Retroactive Manufacturer Discounts?
The guidelines allow children’s hospitals to seek retroactive discounts from manufacturers for the period beginning Feb. 8, 2006 — the day that the Deficit Reduction Act made it legal for children’s hospitals to participate in the 340B program — and ending on the first day the hospital is enrolled. But the hospital must meet a series of conditions, including compliance with the legal prohibition against purchasing covered outpatient drugs through a group purchasing organization (GPO) during any period for which retroactive discounts are sought.
Some analysts believe that unless the hospital is willing to invalidate all prior GPO purchases through a credit and rebilling process, the prohibition against group purchasing would likely preclude most — if not all — children’s hospitals from recovering any retroactive discounts.
To seek retroactive manufacturer discounts at all, a children’s hospital will have to be registered in the OPA database by August 31, 2010. A hospital will have only 30 days from its first date of program enrollment to seek retroactive rebates from manufacturers, and it will be only be able to collect retroactive discounts for the calendar quarters when it did not use a group purchasing organization to purchase any outpatient drug.
Alathea Wilson, associate general counsel for Detroit Medical Center, said in an e-mail that the hospital has not yet decided whether to pursue retroactive discounts, and she declined to comment on such deliberations.
“We are, of course, very pleased to have our Children’s Hospital of Michigan participating in 340B,” she wrote. With its new designation, “I am confident the savings will be significant,” she added.