[Federal Register Volume 59, Number 106 (Friday, June 3, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-13463]
[[Page Unknown]]
[Federal Register: June 3, 1994]
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DEPARTMENT OF HEALTH AND HUMAN SERVICES
Public Health Service
Notice Regarding Section 602 of the Veterans Health Care Act of
1992 Inclusion of Outpatient Hospital Facilities
AGENCY: Public Health Service, HHS.
ACTION: Notice.
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SUMMARY: Section 602 of Public Law 102-585, the ``Veterans Health Care
Act of 1992'' (the ``Act''), enacted section 340B of the Public Health
Service Act (``PHS Act''), ``Limitation on Prices of Drugs Purchased by
Covered Entities.'' Section 340B provides that a manufacturer who sells
covered outpatient drugs to eligible entities must sign a
pharmaceutical pricing agreement (the ``Agreement'') with the
Secretary, Department of Health and Human Services, in which the
manufacturer agrees to charge a price for covered outpatient drugs that
will not exceed the amount determined under a statutory formula.
Section 340B(a)(4) lists the entities eligible to receive discount
outpatient drug pricing (i.e., certain disproportionate share hospitals
(DSHs) and PHS grantees). The definition of a disproportionate share
hospital found in section 340B(a)(4)(L) provides criteria to determine
which such hospitals are eligible to participate in the program.
However, the definition does not include criteria to determine which
outpatient facilities (including off-site or satellite clinics) working
in conjunction with the eligible hospital would be considered part of
the hospital for purposes of eligibility for section 340B drug
discounts. The Office of Drug Pricing, which administers this program
with PHS, is proposing certain procedures to determine which outpatient
hospital facilities are included as part of an eligible
disproportionate share hospital.
DATES: The public is invited to submit comments on the proposed
procedures by July 5, 1994. Subject to consideration of the comments
submitted, the Department intends to publish a final notice regarding
these procedures.
ADDRESSES: Submit comments to Ms. Alvarez at the address listed below.
FOR FURTHER INFORMATION CONTACT: Marsha Alvarez, R. Ph., Chief Pharmacy
Officer, Attn: Drug Pricing Program, Bureau of Primary Health Care,
East West Towers rm. 10-3A1, Bethesda, MD 20814, Tel: (301) 594-4354.
SUPPLEMENTARY INFORMATION: Section 340B(a)(4) of the PHS Act lists the
various groups of entities eligible to receive the section 340B
discount pricing. Section 340B(a)(4)(L)1 describes a subset of
``hospitals'' as defined in section 1886(d)(1)(B) of the Social
Security Act as eligible to participate in the program. Because section
1886 addresses Medicare payment for hospital inpatient services only,
the scope of the term ``hospital'' has been limited to the hospital
inpatient services. However, section 340B deals exclusively with
outpatient drugs. Although Congress clearly intended that this narrow
definition be used to identify Medicare disproportionate share
hospitals which are eligible for section 340B drug discounts, we do not
believe it is reasonable to use this same definition to limit where the
section 340B outpatient drug can be used. Some disproportionate share
hospitals offer outpatient services in off-site or satellite outpatient
facilities. Further, the movement of nonprofit hospitals in recent
years has been to reorganize and offer a variety of services other than
traditional inpatient hospital services through separate divisions,
lines of business, or entities. Therefore, for purposes of section 340B
drug discounts, a more inclusive interpretation of ``hospital'' is
needed.
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\1\Section 340B(a)(4)(L) of the PHS Act defines as a covered
entity--
``A subsection (d) hospital (as defined in section 1886(d)(1)(B)
of the Social Security Act) [42 U.S.C. section 1396ww(d)(1)(B)]
that--(i) is owned or operated by a unit of State or local
government, is a public or private non-profit corporation which is
formally granted governmental powers by a unit of State or local
government, or is a private non-profit hospital which has a contract
with a State or local government to provide health care services to
low income individuals who are not entitled to benefits under title
XVIII of the Social Security Act [42 U.S.C.A. section 1395, et seq.]
or eligible for assistance under the State plan under this title;
(ii) for the most recent cost reporting period that ended before the
calendar quarter involved, had a disproportionate share adjustment
percentage (as determined under section 1886(d)(5)(F) of the Social
Security Act) [42 U.S.C.A. section 1395ww(d)(5)(F)] greater than
11.75 percent or was described in section 1886(d)(5)(F)(i)(II) of
such Act [42 U.S.C.A. 1395ww (d)(5)(F)(i)(II)]; and (iii) does not
obtain covered outpatient drugs through a group purchasing
organization or other group purchasing arrangement.''
The Health Care Financing Administration (HCFA) submitted to the
Office of Drug Pricing a list of hospitals that met the first two
requirements (i.e., 340B(a)(4)(L)(i) and (ii)). HCFA will update
this list periodically.
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The Office of Drug Pricing Program is proposing to recognize as
part of an eligible DSH outpatient facilities (including off-site and
satellite clinics) which meet the following standard:
The outpatient facility is considered an integral part of the
``hospital'' and therefore eligible for section 340B drug discounts if
it is a reimbursable facility included on the hospital's Medicare cost
report.
For example, if a hospital with one Medicare provider number meets
the disproportionate share criteria and this hospital has associated
outpatient clinics whose costs are listed on the Medicare cost report,
these clinics would also be eligible for section 340B drug discounts.
However, free-standing clinics of the hospital that submit their own
cost reports using a different Medicare number (not under the single
hospital Medicare provider number) would not be eligible for this
benefit.
This test, using the single Medicare provider number, is proposed
for three reasons. First, Congress referred to section 1886 of the
Social Security Act, part of the Medicare statute, for the definition
of a DSH in section 340B(a)(4)(L) of the PHS Act. We believe,
therefore, that it is reasonable to utilize existing Medicare rules to
determine eligibility for the drug discount program. The proposed
Medicare cost report test was developed by Medicare officials and is
used, in part, to determine whether a facility is part of a hospital.
If an outpatient facility does not share in the hospital cost report,
it is properly viewed as an independent, free-standing facility.
Second, the relative administrative burden of the proposed test
(i.e., obtaining sufficient documentation to verify the inclusion of
these off-site facilities) should be minimal. Hospitals seeking
Medicare reimbursement are required to submit annual cost reports
including all hospital units (e.g., on site and off-site clinics);
therefore, the information necessary to determine facility eligibility
is available and needs no further analysis by the Office of Drug
Pricing.
Third, the test incorporates criteria (i.e., the Medicare cost
report) that form an independent and objective basis upon which to
determine eligibility. Therefore, this test should provide fair and
easy administration.
If DSHs have difficulty accessing PHS pricing for eligible
outpatient clinics, they should contact the Office of Drug Pricing (not
HCFA) for assistance. If manufacturers have questions concerning the
eligibility of certain DSH outpatient clinics, they should also contact
the Office of Drug Pricing for a determination of eligibility.
Dated: May 27, 1994.
Ciro V. Sumaya,
Administrator, Health Resources and Services Administration.
[FR Doc. 94-13463 Filed 6-2-94; 8:45 am]
BILLING CODE 4160-15-P
