HRSA 340B Audits: Quantity vs. Quality in the Audit Process

The Health Resources and Services Administration (HRSA) is responsible for overseeing the 340B Drug Pricing Program, ensuring that covered entities are running compliant programs. The Affordable Care Act (ACA) of 2010 authorized HRSA audits of covered entities and manufacturers. 

Since 2012, HRSA has conducted hundreds of audits. However, over recent years, it is our opinion that HRSA’s audits of these covered entities appear to focus more on the quantity of findings rather than the quality, raising concerns about the purpose of the audits and how they are achieving the intended goals. 

Here’s a closer look at why the number of audit findings with no real consequences undermine the program overall.

1. Increased Pressure on Covered Entities

   HRSA conducts audits to ensure compliance with the 340B Program requirements, but the focus on high-volume findings may put undue pressure on covered entities. Auditors frequently document minor technical issues, such as small discrepancies in documentation or minor procedural oversights, as violations. While compliance is crucial, an emphasis on racking up numerous small findings can be overwhelming for covered entities, especially those with limited resources, and may detract from their ability to focus on their core mission of serving vulnerable populations. In short, report outs on total number of findings
   

2. Quality Findings Drive Meaningful Program Improvements

   Effective oversight is key to a robust 340B Program, and quality findings—those that address significant risks to program integrity—can be a powerful tool for improvement. Quality findings would ideally focus on issues that indicate larger patterns of non-compliance. But, by prioritizing findings to registration preferences, Medicaid Exclusion File listings (with no evidence of duplicate discounts) and differences in suite numbers, what impact is this having on the program? For example, as of October 28, 2024, 70 audits have been posted for FY2024 and 20, or a little less than one-third, have an “Incorrect 340B OPAIS record.” As someone who sees these audits, registration errors are easily fixable and rarely have any meaningful impact.

   The mere publication on the HRSA site that an entity has “findings” is misleading about the severity or impact of the issues. In some cases, covered entities are cited for highly technical violations that do not directly affect program compliance or patient care. This approach may increase the audit findings, but it’s unlikely to improve the overall quality of care provided by the 340B Program.
   

3. Compliance vs. Administrative Burden

   As the often-quoted House report that accompanied the PHS Act says, the 340B Program was created to “enable covered entities to stretch scarce resources and provide greater access to affordable medication and healthcare services for underserved populations.” When a covered entity receives findings, they must create Corrective Action Plans (CAPs) that are sadly often trivial, thus substantially increasing the administrative burden on these entities. For instance, spending time and resources addressing numerous minor findings—often related to documentation or process adherence rather than actual misuse of funds—divert resources from 340B teams. As a recent example, Rx|X spent an hour on the phone with a hospital client and their outside counsel discussing a single Medicaid claim that was missing a modifier due to a rebilling issue. The drug in question was $.12—way under the cost of a postage to notify the manufacturer and certainly less than the billable hours from the professionals called in to consult on this tricky CAP. 

   Context matters. When I know this is what is going on behind the scenes, it is upsetting to see the claims of rampant duplicate discounts. In sum, my clients spend too much time managing audit outcomes. 
   

4. Erosion of Trust and Perception of the 340B Program

   Covered entities report feeling that HRSA audits are more about “checking boxes” than truly evaluating their program efficacy. This emphasis on quantity can create a sense of distrust between HRSA and covered entities. Instead of being seen as a partner in improving healthcare access, HRSA may be perceived as a regulatory body focused more on enforcement than support.

   In today’s environment, it appears that HRSA is more interested in increasing audit statistics to demonstrate agency oversight rather than genuinely improving compliance. This weaken the program’s reputation, which is already in a fragile and often misunderstood position.
   

5. Potential Solutions to Refocus Audits on Quality Findings

   Shifting HRSA’s audit approach to prioritize quality over quantity would require changes in both policy and practice. Some potential steps include:

   • Risk-Based Audit Approach: By focusing on entities or areas within entities with a higher risk of non-compliance, HRSA can target audits more effectively and emphasize findings with greater impact on program integrity.

   • Educational Interventions: Rather than focusing solely on audit findings, HRSA could implement more training and support to help covered entities maintain compliance. Providing resources and guidelines to navigate complex program requirements would foster a proactive approach to compliance. For example, since “incorrect OPAIS record” is the number one finding, publish clear guidance on Registration expectations. We are currently challenging a negative HRSA audit finding where the hospital registered too many services. 

   • Tiered Findings Framework: A tiered approach to findings, where minor technical issues are clearly distinguished from major compliance risks, would help HRSA convey the severity of issues without overwhelming entities with minor citations.
     

Conclusion

Focusing on quantity in HRSA’s 340B audits may undermine the overall objectives of the 340B Program. Quality-driven audits would better serve HRSA’s mission to enhance program integrity, empower covered entities, and provide confidence to other stakeholders that the program is working. By prioritizing findings that carry the most impact and reducing the administrative burden of managing minor, low-impact findings, HRSA can promote a more sustainable, effective, and mission-driven 340B Program.