CMS overpaid hospitals $4.4 million due to unreported cardiac device credits

Cardiac device credits came under scrutiny in an Office of Inspector General (OIG) report that found all 210 hospitals audited failed to adjust claims to reflect certain cardiac device manufacturer credits, leading to $4.4 million in overpayments from CMS, the report said.

The review looked at 296 payments totaling $7.7 million for recalled cardiac medical devices. In some cases, a medical device must be replaced because the device is defective or recalled by the manufacturer or is replaced while it is still covered by the manufacturer’s warranty. In such cases the hospital might receive a full or partial credit from the manufacturer. These credits must be reported to CMS with condition code 49 (product replacement within product lifecycle) or 50 (replacement for a known recall of a product) with value code FD (a credit of 50% or greater was received from the manufacturer for a replaced medical device) to correctly adjust the Medicare payment.

Previous OIG reviews suggested that hospitals did not always follow Medicare requirements for reporting manufacturer credits, prompting the agency to launch a focused review, the report said.

The review identified several hurdles to both providers and CMS for identifying, tracking, and reporting credits. Multiple hospital departments must be involved in tracking and reporting the credits. Hospitals are responsible for initiating the warranty credit process with the manufacturer and navigating each manufacturers’ distinct credit process.

In addition, hospitals often do not know the amount of the credit they will receive, or whether they will receive a credit, at the time of billing, the report said. These operational challenges are often compounded at hospitals by insufficient policies and procedures for reporting manufacturer credits, lack of awareness of warranties and credit availability, and misapplication of the credit amounts, the OIG found.

However, CMS also failed to ensure hospitals were compliant with device credit reporting regulations, the report said. CMS’ guidance and MAC edits do not ensure that hospitals appropriately report manufacturer credits. In prior reviews, MACs stated that they have no way to know that a device was subject to recall or under warranty and that they rely upon hospitals to ensure these credits are reported.

The OIG recommends that CMS recoup the $4.4 million overpayment, review its reporting requirements for device credits, and educate providers on current device credit regulations. The OIG also reiterated a previous recommendation to require hospitals to report condition codes 49 or 50 on claims for reporting a device replacement procedure for all procedures that resulted from a recall or premature failure. The OIG’s recommendation would see this applied regardless of whether the hospital reports value code FD.

CMS generally agreed with the OIG’s recommendations but does not agree that it should require reporting of condition codes 49 or 50.