Response to OIG Report

January 8, 2019

Hospitals Still Fall Short in Pursuing Claims for Recalled CRM Devices


Paul Cicciarelli, Product Manager, Champion Healthcare Technologies

In 2018, the Office of Inspector General (OIG) published a report citing that 210 hospitals did not always comply with Medicare requirements for reporting certain cardiac device manufacturer credits.

Specifically, all 296 payments reviewed by the OIG for recalled cardiac medical devices did not follow Medicare requirements for reporting manufacturer credits. Medicare contractors incorrectly paid hospitals $7.7 million for cardiac device replacement claims rather than the $3.3 million they should have been paid, resulting in potential overpayments of $4.4 million. The OIG contributes these overpayments to Medicare controls not being sufficient to ensure that hospitals properly reported manufacturer credits for cardiac devices.

Though an eye-opening report, this is not the first time the OIG has highlighted its concern about medical device credits. OIG estimated that from 2005 to 2014, services related to the replacement of recalled and prematurely-failed medical devices cost Medicare $1.5 billion. Given the widespread nature and heightened attention to noncompliance, hospitals need to take notice or otherwise risk facing substantial overpayment fines in an audit.

Hospitals’ path towards compliance, however, does not come without challenges. Below are some challenges that my colleagues and I at Champion have observed for hospitals to properly identify, track, and report credits to Medicare:

  1.     The process for identifying, tracking, and reporting medical device credits on Medicare claims requires many different hospital departments and staff disciplines (materials management, accounts payable, clinical departments, etc.). For example, separate hospital personnel are responsible for contacting the manufacturer, tracking the availability of the credit, and determining whether an adjustment claim needs to be submitted to pass along the credit to Medicare. Staff need to ensure very close coordination and open communication to be successful.
  2.     It is the hospital, not the manufacturer, that is responsible for initiating the warranty credit process. However, complex documentation make this difficult for staff. For instance, hospitals are faced with many types of submission forms, as each manufacturer has a distinct device return authorization process that requires details in varying formats. Furthermore, hospital staff submitting Medicare claims must be aware of credits that are at least 50 percent of the price the facility paid for the replacement device, and must report the credit as a deduction on a submitted claim.
  3.     Another challenge is that hospitals often do not know whether they will receive a credit or how much that credit will be at the time of billing for the device replacement procedure. In these ambiguous situations, the hospital has two options. First, the hospital may hold the claim until a determination is made about the credit and then submit the claim with the appropriate condition code and value code or modifier if it receives a reportable credit. Or, the hospital may submit the claim immediately without a condition code and value code or modifier, and if the hospital receives a reportable credit later, submit an adjustment claim with the appropriate condition code and value code or modifier. Either option may work, but they both underscore how onerous pursing credits can be, particularly if hospitals do not have policies and procedures in place.

Ensuring compliance and reducing audit risk for hospitals is paramount, but it’s clear from these examples that challenges and confusion around pursuing credits still exist.

I encourage you to read more about the complexities of medical device warranty credits in Champion’s 3-part white paper series:

  • Part 1: Awareness and Understanding (download here). Discover the challenges of the process, the cost of noncompliance, and critical components to reduce audit risk.
  • Part 2: Policy and Oversight (download here). Read about the importance of developing a device warranty policy, as well as tips and pitfalls for overseeing the claims process.
  • Part 3: Standard Processes and Procedures (coming soon). Leveraging knowledge from Parts 1 and 2, understand the processes and procedures needed to comply with device warranty claims requirements.