Program Income Reporting: What You Need To Know Coordinator’s Life Easier!”

Program Income Reporting:
What You Need To Know
Or “How to Make Your Regional
Coordinator’s Life Easier!”
Karen Droze, MS
Regional Coordinator, Region IV-South
The Hemophilia Alliance
Membership Meeting, Pre-Conference
October 1, 2008
Baltimore Marriott Waterfront
Goals of Presentation
„ Provide brief background of 340B Program
„ Define Program Income
„ Overview Program Income Reporting
„ Provide Samples of Reporting
„ Discuss Appropriate Uses of Program Income
„ Address MCHB and Grant Requirements
„ Question/Answer
Overview of 340B Program
„ 340B Drug Pricing Program – PL 102-585,
Veterans Health Care Act of 1992
(aka Section 340B of the Public Health Service Act)
„ Limits the cost of covered outpatient drugs to certain
federal grantees, federally-qualified health center
look-alikes and qualified disproportionate share
„ hospitals.
Significant saving on pharmaceuticals may be
What This Means in Plain Language
„ Section 340B requires drug manufacturers to
provide outpatient drugs to eligible health
care centers, clinics and hospitals (termed
“covered entities”) at a reduced price
„ The 340B price is a “ceiling price,” meaning it
is the highest price the covered entity would
have to pay for select outpatient and OTC
drugs and minimum savings the manufacturer
must provide
- The PHS Section 340B Drug Pricing Program In Basic Language, Katheryne
Richardson, Pharm.D. (2002)
Examples of Covered Entities
(not an exhaustive list)
„ Federally-qualified health centers (e.g., Migrant)
„ Disproportionate share hospitals (DSH)
„ Comprehensive hemophilia diagnostic treatment
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centers (receiving grant $ under section 501 of SSA)
Grantees under Part C of Ryan White
State-operated AIDS Drug Assistance (ADAP)
Black lung clinics
Urban Indian organizations
Native Hawaiian Health Center
HTCs as Covered Entities
„ Via Federal Maternal Child Health Bureau
(MCHB) funds
„ Other HTCs exist, but if not federally-funded –
NOT covered as 340B entity
Program Income Definitions
„ DHS Definition: “Program Income means gross
income earned by the recipient that is directly
generated by a supported activity or earned as a
result of the award”
- 45 CFR 74 (Code of Federal Regulations)
„ Further, “Costs incident to the generation of program
income may be deducted from gross income to
determine program income, provided these costs
have not been charged to the award”
- 45 CFR 74.24(f)
„ This results in a net number
Stipulations for Calculating
Administrative Costs
„ Per MCHB, it is inappropriate to use Factor
Replacement Product (FRP) Costs as part of a
methodology for determining FRP Sales Program
Administrative Costs
„ The June 17, 2003 Office of Inspector General’s
(OIG) Report “Review of Hemophilia Treatment
Centers’ Disposition of Program Income and Patient
Choice for Factor Provider for Calendar Year 2000
(A-03-01-00350),” stated that “the cost of a drug does
not drive the administrative costs of operating a
pharmacy.”
„ The Health Resources and Services Administration
(HRSA) concurred with the recommendations
presented in the OIG’s Report
General Calculation
+ Total Revenues
- Less Factor Cost
- Less Contractual Fees, if applicable
- Less Total Pharmacy Operating Costs
- Less Indirects (may be based on:
All/portion of Operating Costs,
Medicare cost report step down, e.g. hospitals,
Various methodologies)
= Net Program Income
General Calculation
+ Total Revenues
- Less Factor Cost
- Less Contractual Fees, if applicable
- Less Total Pharmacy Operating Costs
- Less Indirects (may be based on:
All/portion of Operating Costs,
Medicare cost report step down, e.g. hospitals,
Various methodologies)
= Net Program Income
Pharmacy Operating Costs
Can include:
„ Pharmacy personnel (on staff or contracted)
„ Personnel fringe (health/retirement)
„ Office supplies
„ Medical supplies
„ Equipment maintenance and repair
„ Shipping
„ IT (consulting, hardware, support)
„ Insurance (liability, worker’s comp, licenses)
General Calculation
+ Total Revenues
- Less Factor Cost
- Less Contractual Fees, if applicable
- Less Total Pharmacy Operating Costs
- Less Indirects (may be based on:
All/portion of Operating Costs,
Medicare cost report step down, e.g. hospitals,
Various methodologies)
= Net Program Income
Indirect Cost (Overhead) Calculations
„ Various methodologies apply
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„
May be based on percentage of all/portion operating expenses
May be institutionally driven
Medicare cost report step down, e.g. hospitals
„ MCHB suggests same indirect cost rate as the
grant (e.g., 8%) versus your institution’s
negotiated indirect cost rate
„ NO written PHS policy to support this currently.
However, many institutions have this
requirement as part of their program income
policy.
„ Check with your institution regarding PI policy
Calculation Example #1
„ Total 340B Factor Sales
„ Less 340B Factor Cost
„ Less Direct Pharmacy Cost
„ Less Indirect Cost Allocation@8%
„ Program Income
$1,000,000
$ 800,000
$ 40,000
$
3,200
$ 156,800
Determining Allowability For Use
Of Federal Funds
‰ Reasonableness (including necessity)
‰ Allocable to grant goals and objectives
‰ Allowable under the Cost Principles
- “Understanding HRSA Grants Management Requirements,”
Helen Harpold, Health Resources Services Administration (June, 2008)
Allowability
„ Per CFR 74.2, Project Costs means:
“All allowable costs, as set forth in the
applicable Federal cost principles, incurred by
a recipient and the value of the contributions
made by third parties in accomplishing the
objectives of the award during the project
period.”
„ That is, do the costs further the goals and
objectives of the grant?
„
Allowability: Cost Principles
„ Program Income outlined in the Code of
Federal Regulations (CFR) 74.24
„ Allowable Costs, CFR 74.27
„
“For each kind of recipient, there is a particular
set of Federal principles that applies in
determining allowable costs. Allowability of
costs shall be determined in accordance with
the cost principles applicable to the entity
incurring the costs.”
Allowability: Cost Principles
(Continued)
„ Cost Principles per Entity Type:
Educational Institutions OMB Circular A-21
„ Non-Profit Organizations OMB Circular A-122
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„
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(cross references Circular A-110)
Hospitals 45 CFR 74 (Appendix E)
-Prepared by George M. Uber, Cost Allocation and Indirect Cost Specialist,
prepared for The Hemophilia Alliance, Inc.
Suggested Uses of Program Income
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HTC core center and support staff salary
Outreach staff salary
Consultant fees (e.g., Ortho, PT)
Chapter support (made in form of financial assistance
agreement - “donations” are not allowable)
Staff travel/training
Client Assistance/Uninsured support
Community education
Patient activities and educational materials
Association Dues
“Public Relations” (per A-122 guidelines)
Unallowable Uses of Program Income
„ Endowments
„ Salary for personnel already covered by grant
„ Travel expenses already covered by grant
„ Clinical Research (may be considered)
„ Donations to chapters, unless in form of
financial assistance agreement
Sample Financial Assistance
Agreement
FINANCIAL ASSISTANCE AGREEMENT
THIS FINANCIAL ASSISTANCE AGREEMENT, dated the ___ day of ___________, 20__, by and between (INSERT HTC NAME
HERE, a (INSERT STATE NAME HERE) non-profit corporation (“INSERT ANY ABBREVIATION OF HTC HERE”) and
______________________, a (INSERT NON-PROFIT’S STATE OF INCORPORATION HERE) non-profit corporation
("Corporation").
Recitals:
WHEREAS, Corporation is engaged in the provision of services to support the needs of hemophilia patients and their families;
and
WHEREAS, (HTC ABBREVIATION OR NAME) desires to provide financial assistance to Corporation to assist Corporation in the
furtherance of these goals upon the following terms and conditions.
NOW THEREFORE, in consideration of the mutual covenants contained herein and intending to be legally bound hereby, the
parties agree as follows:
1.
Charitable Service. The parties agree that (HTC ABBREVIATION OR NAME) shall provide financial assistance to
Corporation in order to provide needed funding for the Corporation to undertake a charitable endeavor(s) to be provided to
persons with or affected hemophilia or related bleeding disorder and described at Schedule 1, attached hereto.
2.
Financial Assistance. (HTC ABBREVIATION OR NAME ) shall provide financial assistance (the “Financial
Assistance”) to Corporation in the amount set forth at Schedule 2, attached hereto, and pursuant to the payment terms provided
therein.
3.
Terms of Agreement. This agreement shall commence as of _____________, 20__, and shall continue in effect for one
(1) year until ______________, 20__. Notwithstanding the foregoing, either party may terminate this agreement at any time upon
giving the other party hereto at least thirty (30) days’ prior written notice.
4.
Oversight. (HTC ABBREVIATION OR NAME) shall have the right to receive an accounting of the Financial Assistance
to ensure that the funds received by Corporation are actually utilized for the charitable purposes for which they were provided.
Corporation shall provide (HTC ABBREVIATION OR NAME) with a full accounting of the Financial Assistance. Upon reasonable
notice, (HTC ABBREVIATION OR NAME)’s auditors will be provided with the accounting to confirm and verify that the Financial
Assistance was utilized properly.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed the day and year first above
written.
(HTC ABBREVIATION OR NAME):
CORPORATION:
By __________________________________
By _________________________________
__________________________________
_________________________________
TITLE
TITLE
Calculation Example #2
„ Revenue
- Factor
- Contract Fees
- Pharmacy Cost
Personnel ($44,500)
Fringe ($8,900)
Supplies ($1,800)
Printing ($504)
- Indirects (8% of $55,704)
Program Income
$1,500,000
$1,173,000
$ 50,000
$ 55,704
$
4,456
$ 216,840
Calculation Example #2 (Continued)
„ Program Income
$216,840
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$150,000
$ 10,000
$ 6,000
$ 5,000
$ 2,000
$173,000
Staff Salaries
Association Dues
Staff Travel
Chapter Support
Patient Educational Activities
Total Program Income Used
„ Fund Balance
„ Previous Fund Balance
„ Total Balance Available
$ 43,840
$ 50,000
$ 93,840
MCHB and Grant Timelines
„ MCHB grant runs June 1 – May 31
„ Subgrantee Financial Status Report (FSR)
due with or shortly after final invoice
„ Grantee FSR due 90 days after close of grant
period (usually August 31)
„ Program Income back-up not consistently
required in years past
„ Moving forward, back-up will be required
u
a
l
Financial Status Report
(Long Form 269)
FSR: Program Income Fields
MCHB suggests Additive Method, found on Line r., rather
than Deduction Method
MCHB Data Collection Form
MCHB Data Form Submissions
„ Recently passed OMB clearance process
„ Likely required as back-up with 08/09
program income report
„ Become familiar with form
„ Direct questions to your regional coordinator
and host institution
Other Federal Audit Requirements
„ OMB Circular A-133
„ Applicable to:
Educational institutions
„ Non-profit organizations
„ Hospitals
„
„ Can be required per consortium agreement
„ Part of regional core center oversight
Summary
„ Understand 340B enabling legislation
„ Know program income definition, regulations
„ Be prepared to demonstrate methodology utilized in
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calculating program income, including institutional
policies
Maintain all back-up information
Be aware of both allowable and unallowable uses of
program income
Be mindful of regional and federal timelines
Keep your regional coordinator happy…
He or she is your best ally!