With the exception of the COVID-19 pandemic timeframe, HRSA has long required hospital child sites to be reflected on a Medicare Cost Report prior to registration. A federal court now disagrees.
Dating back to 1994, HRSA has required hospital covered entities to register child sites only after appearing as reimbursable on a Medicare Cost Report. No 340B Program drugs could be used at these sites prior to this cost report inclusion and subsequent registration on HRSA’s database. During the COVID-19 pandemic, HRSA permitted an expedited enrollment process that relaxed this cost report requirement. In May 2023, HRSA withdrew this expedited process. Hospital groups pushed back and sued HRSA in October 2023. A ruling in this case was announced on March 3, 2026.
A federal judge for the U.S. District Court for the District of Columbia found that the child site registration requirement is unlawful as it imposes an eligibility condition that is not written into the 340B statute. Based on the lack of rulemaking authority granted to HRSA related to the 340B Program, the judge indicated that HRSA has no authority to add new prerequisites to eligibility requirements for covered entities.
HRSA has not publicly responded to the court ruling to indicate if it will accept the ruling and permit child sites to register prior to cost report inclusion or if it plans to appeal the ruling. For hospital covered entities that have been awaiting cost report inclusion prior to registering child site locations, this ruling has potentially large implications. However, until HRSA’s next actions are known, Blue & Co. recommends caution with expediting this process.
Contact Us
Blue & Co. will continue to update covered entities on developments regarding this situation and welcomes clients to contact one of our 340B ACE-certified experts to discuss specific child site registration questions or concerns.
Kyle Smith, CPA, 340B ACE, Director
Jason Prokopik, PharmD, 340B ACE, Senior Manager
