Hospitals Still Fall Short in Pursuing Claims for Recalled CRM Devices

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.

Implant Management to Address $25.4B Supply Chain Savings Opportunity

Response to Navigant Report

November 27, 2018

Focus on Implant Management to Address a $25.4 Billion Supply Chain Savings Opportunity


Craig Lan
Craig Lan
Vice President,
Product Management

According to Navigant's October 2018 Healthcare Supply Chain Report1, hospitals can safely reduce their supply chain expenses by an average of 17.7% or $11 million annually. This represents an increase of 10% from 2017 and equates to an annual cumulative savings of $25.4 billion. The analysis further reveals that equal savings opportunities exist across multiple hospital characteristics, including size, location, and for-profit or not-for-profit status.

The clear takeaway from Navigant's findings is that despite current efforts by hospitals and health systems to optimize supply chain processes and product utilization, creative tactics and solutions are still needed -and I couldn't agree more.

Implants, though just one segment of the overall supply chain, can represent up to 30% of a hospital's total supply spend2. Expensive on their own, sometimes accounting for more than 50% of the cost of procedures, implants can be a major source of additional expenditures if not managed closely. According to the Global Healthcare Exchange, hospitals and suppliers nationwide lose up to $5 billion in implantable devices annually because of waste and ineffective processes3.

From my experience working with hospitals and supply chain leaders across the country, I see tremendous opportunity to improve the management of implantable tissues and devices in three key areas - to both yield financial savings and to improve the quality and safety of patient care:

  1. Reduce waste
    Many hospitals continue to use homegrown systems in an effort to track implants, from receipt of items through use in patient procedures. While these solutions perform the job of detailed tracking, they typically do not highlight areas where waste is excessive. For implants, common sources of waste include Expiration, Loss, and Items Used but not Billed for. Software that monitors inventory closely can greatly reduce these types of waste.
  2. Optimize inventory levels
    Hospitals need to manage inventory levels to avoid the risk of stock-outs and to avoid carrying too much inventory. By effectively tracking inventory, supply chain managers can stay within optimal inventory levels, simultaneously minimizing the risk of running out of items, and avoiding an unnecessary quantity of expensive implants.An additional inventory consideration, specific to implants, is the need for hospitals to diligently monitor device recalls. By ensuring the facility is notified of recalls quickly, supply chain managers can remove items from stock to avoid threatening patient safety scenarios.
  3. Reduce clinical variation
    Variation in implants used exists in every complex health system. With the sheer number of options for implant types available to clinicians, different implants that serve the same clinical purpose are used. Sometimes this variation is warranted when a strong clinical reason exists, but other times clinicians may not realize there are lower cost and equal value alternatives. By tracking implants used for identical procedures and comparing these over time, supply chain managers can better inform clinicians about the cost side of the equation when such expensive variability exists.

To address the above opportunities, hospitals will need to invest in a software solution that enables the unique tracking and management requirements of tissue and device implants. A solution with strong predictive analytics and reporting, recall matching, and monitoring of device usage and variation are just a few fundamental features to look for. It is the right time for the status quo of supply chain management to be challenged-and implants are an important place to start.

1. "Hospitals' Supply Chain Savings Opportunity Jumps to $25.4 Billion a Year," Navigant, October 2018
2. Taken from the Navigant 2018 report (1), total supply chain spend includes: medical and implantable device costs, medical/surgical and pharmaceutical supplies charged to patient care departments, and supplies related to buildings/fixtures, maintenance, and plant operations
3. "Industry's Achilles Heel: The Supply Chain," Global Healthcare Exchange (GHX), 2013

Champion Gives Back to Celebrate Customer Service Week 2018

Champion Healthcare Technologies joined with customer service professionals in all 50 states and over 60 countries in celebrating Customer Service Week, October 1st-5th!

The week provided an opportunity for us to focus on the importance of customer service to our organization and to the individuals we serve each day. Equally important, it was a time to recommit to our customer support mission - Deliver world class customer support and training with integrity and simplicity that will meet and exceed our customers' expectations

To celebrate the end of the week we were lucky enough to join Feed My Starving Children, a non-profit organization, that let us volunteer to pack scientifically formulated meals for malnourished children. Feed My Starving Children distributes to over 200 partners in 50 countries and Champion's team completed packing 12,960 meals that will feed 35 children for one year!

A huge thank you to every department who is committed to making our customer's feel appreciated and heard day in and day out. It was a wonderful week and our staff was exemplary of this years theme, "Excellence Happens Here"!