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Managing 340B Without Split Billing Software: A Risky Venture

Today’s Blog is about managing 340B in Mixed-use areas without using a Split Billing Software.

But before I get into the ‘meat’ of the article, so to speak, I must honor the Curmudgeon Coalition and apologize for not including sufficient levels of corny irony or humor in the last blog.  I’ll see if that can be resolved today at the end of the article, as I show how 340B without split billing software relates to Aesop’s Fable, Perry #346: the dog and the wolf.


It is possible to manage a 340B mixed-use program without split billing software.  Especially for any type of entity outside of DSH, Children’s Hospitals, and Free Standing Cancer centers.  That is because DSH, PED and CAN are subject to the GPO Prohibition and mandatory WAC use, and that adds a challenging layer of complexity. We’ll look at both categories and see how they can manage 340B without split billing software, and see how risky that can be.


So: you are NOT one of the entities subject to the GPO Prohibition.  You can ‘cherry-pick’ and use GPO or 340B for outpatients (never use 340B for an inpatient!).  The key benefit is that you do not need to use a WAC account.  How do you manage without a split billing software?  It is not very difficult.  Consider that you are using a virtual inventory replenishment model.

HRSA regulations requires collection and retention of the following information:

  1. Patient Demographics;
  2. Inpatient/Outpatient/Observation status at the time of dispense/administer;
  3. Payer information (critical for Carve-Out Status);
  4. Clinic location;
  5. Provider;
  6. Drug info, including the eleven digit NDC HRSA Data

Maintain the data in an Excel Spreadsheet.   (If you need help setting one up, contact your CPS 340B Consultant). Tally up the doses weekly, or at whatever interval meets your needs, then purchase replenishment from your 340B account, and document the invoice number and date on each line so you are able to track what purchased item replenished what used item.  You are now at 100% compliance so long as you audit this regularly (we suggest monthly) to be sure your process is working. You can select which 340B discounts you use, and do not need to track drugs with lesser savings.

Story Time:

We worked with a CAH in a remote location, say on the far side of the moon. 

They used an Excel Spreadsheet to manage just eight drugs, as they were unable to afford split billing software. The Savings grew to an annual net of over $250,000, allowing the facility to Continue to provide infusion services, something they could not afford without the 340B Savings.

DSH, PED, CAN Facilities

On April 7, 2013 HRSA issued Policy Release 2013-1, which alerted DSH, CAN and PED entities that violation of the GPO prohibition could result in removal from the 340B program.  The complexity of managing WAC/340B/GPO accounts, and the potential loss of 340B eligibility via violation of the GPO Prohibition makes managing 340B, without split billing software, in one of these three account types, very risky.

You will need to maintain a spreadsheet as discussed above, or have a similar report writing capability from your Hospital Information System. But even then, you may find a virtual inventory very challenging to manage in a compliant manner.

The major risk is the inherent challenge in accumulating usage into the proper ‘bucket’ – WAC, GPO or 340B.  Some of the challenges include;

  1. It is difficult to ensure first time buys of a new NDC will be on WAC;
  2. Demonstrating a specific purchase link to 340B or GPO usage.

The first step in managing 340B mixed use without split billing software is a robust and comprehensive Policy and Procedure. It should include;

  1. The procedures used for;
    1. Ensuring first time purchase of a new NDC, or inventory build, is from a WAC account (remember that for virtual inventory, HRSA insists on a replenishment model)
    2. How the entity ensures that 340B is exclusively used on outpatient, and
  2. How GPO is used exclusively inpatient.
  3. Demonstration of staff education on the above procedures;
  4. Documentation that demonstrates compliance with the Policies and Procedures.

Some entities consider it easier to manage a physical inventory rather than virtual inventory without a split billing software.  If so, then the same considerations apply.  There must be a comprehensive P&P that covers the same items as mentioned above. Consider your general inventory to be GPO, with a segregated 340B inventory. There is no need for a WAC inventory, but you will need to be able to demonstrate that 1st time purchases or inventory builds of an NDC are made via your WAC account.

One approach would be to use the daily utilization report from your Hospital Billing Report.  Train your staff to replenish mixed use areas with doses from the appropriate physical inventory.  For example:  say your Med/Surg unit cared for an Observation patient who used 4 doses of Vancomycin IV, and two inpatients using a total of 8 doses of Vancomycin  – your staff should pull four matching NDC units of Vancomycin from the 340B inventory, and place them into your general IV room inventory for later use. This assumes you treat your general inventory as GPO.

In this model, doses missing from the Dispensing Cabinets, but without a matching charge for either inpatient or outpatient, presents a specific need.  In many cases this will represent a lost charge or wasted medication, or perhaps an inventory build, which would require replenishment buying from your wholesaler WAC account.

HRSA Integrity Audit

You’ve taken all the steps mentioned above.  And this morning you get an email letting you know that in six weeks HRSA will send an auditor out to perform an Integrity audit.  As you prepare for this audit, one of the data request items is a file with your 340B transactions for a six-month period. The odds are that your IT department can help generate a report with all Outpatient doses dispensed for the six-month time frame.  This meets the HRSA requirement, and you use this report. Your external auditing team assists, and you release the data to HRSA.  One thing we strongly recommend: practice generating this report, and be sure you can generate it within a day or two as needed. 

On audit day, the auditor will proceed as usual, with the transaction review no different than any other audit with a split billing software.  The major difference will be the time the auditor spends discussing your Policy and Procedures and how they ensure no duplicate discounts (if you are carved out) as well as how you manage WAC purchases.  They are also going to go into more depth in staff interviews to determine if in fact your staff understands the procedures and follow them.

Will you pass with no Corrective Action Plan?  Good Question. The answer depends on how well you and your staff implement the actions recommended above.

And in Closing

As promised, 340B without split billing software relates the Aesop’s Fable, The Dog and the Wolf, which is Perry Index #346.  It compares risk aversion to risk taking.

A famished wolf meets a well-fed dog and compliments him on his sleek appearance. The dog describes his life of ease and invites the wolf to join him. As they go on their way, the wolf asks why the fur about the dog's neck is worn away. He replies that it is merely caused by the collar he has to wear at home. The wolf then leaves him, declaring that a full belly is a poor price to pay for liberty.[1]

In this fable, the wolf is willing to take the risk of life in the wild versus a safer existence, but for a specific pay-off.  Although it is risky to manage 340B in a DSH, CAN or PED Entities without benefit of a split billing software, there are those who need the savings to fund programs, and so they are willing to take the extra steps and risk involved in managing this complex program.

If you are one of the risk takers, and need assistance, please contact your CPS 340B consultant!

[1] Wikipedia

Posted: Tuesday, June 19, 2018

Tags: 340B, CPS Blog Posts, Split Billing Software