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Drug Diversion & Patient Definition in 340B - What are they & how can you prevent issues?

With the recent Genesis Healthcare, Inc. v. Becerra ruling, the 340B world has been thrown into a little bit of chaos with many people asking “what should we do now”.

While we are not lawyers and therefore cannot provide legal advice, we can at least clear up what the technical term of patient definition is, how that might apply to your facility, and how to prevent drug diversion from becoming an issue.

Diversion, by definition, means to turn from one course to another. In 340B, diversion is defined as when a Covered Entity (or Contract Pharmacy) resells or otherwise transfers a drug purchased through 340B to an individual who is not considered an eligible patient of that entity.

That opens the door for the big question; “How do I define ‘eligible patient’ for 340B?”

We’re here to help.

According to HRSA, in order for an individual to be defined as a patient of the covered entity (with the exception of State-operated or funded AIDS drug purchasing assistance programs[ADAP]), that individual must:

  • Have an established relationship [for care] with the individual, such that the covered entity maintains records of the individual’s health care; and

  • The individual receives health care services from a health care professional who is either employed by the covered entity or provides health care under contractual or other arrangements (e.g. referral for consultation) such that the responsibility for the care provided remains with the covered entity; and

  • The individual receives a health care service from the covered entity which is consistent with the service, or range of services, for which grant funding or Federally Qualified Health Center Look-Alike status has been provided to the entity. Disproportionate Share Hospitals (DSH) are exempt from this requirement; AND

  • An individual WILL NOT be considered a “patient” of the entity for purposes of 340B if the only health care service received by the individual from the covered entity is the dispensing of a drug or drugs for subsequent self-administration or administration in the home setting.

For State-operated or funded AIDS drug purchasing assistance programs [ADAP]

  • An individual registered in a State-operated or funded ADAP, receiving financial assistance under the title XXVI of the Public Health Service [PHS] Act, will be considered a “patient” of the covered entity for purposes of this definition is so registered as eligible by the State program.

That’s a whole lot of words with very little meaning, right?

Well, not exactly. It sets up the “bare bones” outline for how you must structure your 340B program around YOUR patient definition. That’s right, I said YOUR patient definition.

What I mean by that is that within the hard and fast rules set up by HRSA, at this point in time, you get to determine the other methods of determining patient eligibility. Having said that; there are some rules that you should follow for the best results.

Always clearly define “patient” in your 340B Policies and Procedures

This goes beyond just copying & pasting the HRSA definition of an eligible patient. You should be setting specific and definable rules to determine your own patient eligibility.

Examples include:

  • Patient has had a visit, in an eligible location, within the last XX number of months/years

  • An eligible patient must be an outpatient at the time of dispensation or administration of medication.

With the ruling of the Genesis lawsuit being handed out, there are three ways things could be taken or how they could go in regard to defining “eligible patient”

  1. Covered Entities can keep a patient definition very broad, particularly in the number of months or years since that patient has been seen at the eligible facility.

  2. HRSA will rewrite and restrict the patient definition

  3. Nothing changes.

As you saw, the patient definition goes beyond just the patient and delves into both provider eligibility and location eligibility. While these have their own requirements for what is “eligible” as defined by HRSA, you still have to clearly define the process that you use to determine if the provider and location is eligible. Let’s delve into those a little bit.

Clearly define “Provider” in your Policies and Procedures

Just as with patient definition, Provider definition has some “wiggle room” in what you can define as an eligible provider. There are also some unique things you need to keep in mind with your eligible providers, however.

In order to consider a provider as eligible, they must have some type of contractual agreement, employment record, or other referral record on file and available within your facility.

Providers generally fall into three categories:

  • Exclusive Providers = providers who only work for your facility, and only in 340B eligible locations of your facility

  • Non-Exclusive Providers = providers that work in BOTH eligible and ineligible locations for your 340B Program.

i.e. Provider works in your Parent site but also works part time at a clinic that is NOT 340B eligible, they would be considered non-exclusive.

  • Referral Provider* = this is a provider that is not working within one of your 340B eligible locations, but through patient records can be tied to a patient’s care.

*Be careful with these, there are specific rules that you have to follow with referrals, particularly that you must “maintain care” of that patient’s health records (aka you need to get the referring notes of patient care BACK from that provider and into your EHR system).


Clearly define “Eligible Location” in your Policies and Procedures

Finally, we have come to the eligible location portion of defining a patient for your 340B Program. Because there are so many different types of 340B entities, we couldn’t possibly go through everything so we are going to keep this pretty simple.

As always, you need to include the HRSA definition of an eligible location for your facility type, in your 340B Policies and Procedures. But you should go beyond just that. The locations that you define as eligible will directly impact your 340B claims determination, for better or worse.

You can do everything from listing your inpatient only locations as ineligible for an encounter, to excluding different departments like the Lab for eligibility.

In Conclusion

By no means is this an all-inclusive guide to diversion and patient definition, but it’s a good place to start a conversation with your 340B committee on how you're defining your patients as eligible.

Finally, while HRSA doesn’t clearly define every single rule that you will have to have in place for you to determine patient eligibility, you must define the methods that your facility uses for such determination in your written Policies and Procedures, and we strongly recommend you “keep it real and reasonable”.

“Real and reasonable” is going to look different for every single entity, which is only one of the many things that can make the 340B Program difficult to manage.

The good news is that you don’t have to do it alone!

We can be here to be your 340B experts in everything from creating Policy & Procedures, to increasing your 340B Program savings, and overall making your 340B life way easier than you ever thought possible.

Reach out to us today to learn how we will get you A Better 340B. For You. For Your Community.

Schedule a call with our CEO | Call us: 866-678-3402 | Email us:


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