At a time when healthcare executives are being asked to stretch scarce federal resources as far as possible, the 340B Drug Pricing Program is a much-appreciated lifeline. Despite the program being around for over three decades, the need for its key benefits—providing critical services to geographical areas in the most need, passing along drug savings to the patient, and expanding clinical service offerings to the most vulnerable populations—feels more critical now than ever.
On paper, the program’s short statute, binary eligibility, and simple regulatory requirements depict a low-maintenance, straightforward solution; however, in reality, 340B is a complex and compliance-heavy financial savings engine that requires dedicated management and operational alignment to be successful.
To maintain compliance and optimize program performance, health systems must address three core areas:
- Provider deployment
- Governance oversight
- Compensation structure.
Otherwise, they risk losing eligibility at a time when they can’t afford to.
1. Provider Deployment
The first aspect of 340B program compliance focuses on how prescribing providers are deployed and governed within the structure of the qualifying nonprofit health system, typically referred to as the “covered entity.” A prescription’s ability to qualify for 340B pricing hinges on two requirements:
- The prescribing clinician must be an employee or contracted provider of the covered entity.
- The prescription must be generated as part of a service at a 340B-eligible location.
Therefore, the strategic deployment of eligible providers—which includes ensuring they practice at registered sites and under appropriate affiliation structures—is critical for maintaining compliance, enhancing savings capture effectiveness, and maximizing the program’s benefits and its ability to support patient access.
Additionally, as 340B-eligible health systems grow, strategically expand, or prepare for and react to market and regulatory pressures, provider structure, compensation, and governance must continually be taken into consideration. Executive leadership, pharmacy operations, 340B compliance, finance, and physician leadership must be in concert, as these decisions drive compliance with the program and efficient oversight of it.
Each of these organizational decisions ultimately alters how providers are deployed across eligible and ineligible sites. Because deployment determines whether prescriptions qualify for 340B, even small shifts in duties, clinic locations, or reporting structures can create compliance risk if not managed intentionally.
2. Governance Oversight
Governance oversight refers to the organizational structures and decision‑making bodies responsible for ensuring the 340B program operates in a compliant and well‑controlled manner. 340B program operations are generally led by the hospital’s pharmacy, with support from finance and compliance; however, these three departments should not be the only areas involved in 340B endeavors. Broader organizational governance bodies, such as physician compensation committees, should be engaged to enforce compliance with policies and procedures related to compensation methodology and provider coverage, two primary areas of compliance risk.
For example, hospitals are required to provide the 340B Office of Pharmacy Affairs Information System (OPAIS) with various details to help determine whether they are eligible to purchase 340B drugs. This includes care delivery sites, as eligibility could be forfeited if a physician is not actually providing services at the 340B location reported. For this reason, the accuracy of provider coverage obligations must be maintained by administrative teams and overseen through governance processes to ensure alignment with what is reported to OPAIS.
3. Compensation Structure
Finally, from a financial standpoint, hospital leadership must ensure that physician compensation structures are in no way tied to 340B activity. Specifically, hospitals should not compensate physicians based on the number of patients seen at a 340B site of service, as this could inadvertently encourage physicians to provide medically unnecessary services or prescribe medically unnecessary prescriptions and trigger Stark law violations.
Although we have not encountered hospitals explicitly compensating physicians based on 340B patient volume, the question surfaces often enough to signal a misconception. While leaders may assume 340B-eligible encounters can be incorporated into compensation formulas like any other production metric, any structure that ties compensation to 340B activity creates a clear volume-to-value connection and raises Stark concerns.
Other noncompliant incentive structures include compensation based on revenue from 340B drugs, production bonuses tied to 340B-eligible locations, and clinic growth tied to 340B-eligible sites.
Oversight Is Imperative for Success
Including 340B oversight within the organization’s governance framework strengthens awareness of program requirements and reinforces policies that reduce exposure to compliance risk, protect eligibility, and mitigate the potential for violations of federal fraud and abuse laws. Embedding these controls at the enterprise level provides the foundation for aligning operational changes with provider deployment, governance, and compensation structures, ensuring that all provider roles and payment arrangements remain compliant, support retention, and ultimately enhance the health system’s financial stability and patient care outcomes.
