OIG Report Overview: Hospitals Did Not Comply with Medicare Requirements for Reporting Cardiac Device Credits

Why The OIG Did This Audit

The Office of Inspector General (OIG) OIG’s objective was to determine whether hospitals have complied with Medicare requirements for reporting manufacturer credits associated with recalled or prematurely failed cardiac devices.

Concerns stemmed from prior OIG audits with audit periods ranging from 2005 through 2016, which found that hospitals did not always comply with Medicare requirements for reporting credits received from manufacturers for medical devices that were replaced. Specifically, hospitals did not always report to CMS the device manufacturer credits that they received.

One prior audit estimated that services related to the replacement of seven recalled and prematurely failed cardiac medical devices cost Medicare $1.5 billion during calendar years 2005 through 2014.

How the OIG performed this Audit

OIG obtained a list of warranty credits from the device manufacturers and matched the device recipients to the Medicare enrollment database to determine which recipients were Medicare beneficiaries. Next, they matched the beneficiaries to the Medicare National Claims History to identify claims that had a cardiac device replacement procedure for which the date of service matched to the device replacement procedure date on the credit listing. Finally, they evaluated compliance with selected billing requirements.

What the OIG Found

For 3,233 of the 6,558 Medicare claims that the OIG reviewed, hospitals likely did not comply with Medicare requirements associated with reporting manufacturer credits for recalled or prematurely failed cardiac medical devices.

Device manufacturers issued reportable credits to the hospitals for these devices, but the hospitals did not adjust the claims with proper condition and value codes to reduce payments as required. As a result, 911 hospitals received payments of $76 million rather than the $43 million they should have received, resulting in $33 million in potential overpayments.

Medicare contractors made these overpayments because they do not have a post-payment review process that would ensure that hospitals reported manufacturer credits for cardiac medical devices.

What the OIG Recommends and CMS Comments

OIG recommends that CMS:

  1. Instruct Medicare contractors to recover the portion of the $33 million in identified Medicare overpayments that are within the reopening period.
  2. Notify hospitals associated with potential overpayments outside the reopening period so that they can exercise reasonable diligence to identify, report, and return any overpayments in accordance with the 60-day rule.
  3. Require hospitals to use condition codes 49 and 50 on claims.
  4. Instruct Medicare contractors to implement a post-payment review process.
  5. Obtain device credit listings from manufacturers and determine whether providers reported credits as required.
  6. Direct Medicare contractors to determine whether hospitals, which we have identified as having billed incorrectly in both this audit and our prior audit (A-05-16-00059), have engaged in a pattern of incorrect billing after our audit period and, if so, take appropriate action in accordance with CMS policies and procedures.
  7. Consider eliminating the current Medicare requirements for reporting device credits by reducing the payments for cardiac device replacement procedures.

CMS concurred with three of our seven recommendations and described the actions it planned to take to address them. For the four recommendations that CMS did not concur with, OIG maintains that CMS should require the use of condition codes; implement a post payment process; acquire the credit listings from manufacturers; and determine whether providers identified as having billed incorrectly continued to do so after the audit period.


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The Strange Case of Vanishing Invoices

Written By: David Hewitt

The Problem

Are you missing some of your vendors’ invoices?  Is your RNI balance growing month after month?

If you’re like most AP departments, you’re probably missing some percentage of your vendor invoices and this slow leak is creating enough Dark Data to lead to millions of dollars in unseen risk and liability that must be resolved.

Most of these items will make their way into your monthly RNI report, but not all of them. An RNI report represents all known transactions that are received by the facility but have no complementary supplier invoice to offset the receipt in your accounting system. Additional to these items, there will also be instances of unseen and unpaid invoices in your supplier’s records. They hold as much risk, and they are equally important to resolve.

Unseen and unpaid indicate risk, liability, and imperfect processes. There are multiple reasons for the occurrence of these balances beyond simply unmatched invoices, purchase orders, and receiving information.

Without corrective action, the problem steadily gets worse due to the ever-growing levels of complexity in your financial suite; your prioritized attention to other compliance matters; and a constant procession of changes facing your AP department.

The Cost of the Problem

The inability to address unpaid vendor invoices whether it is due to a lack of time, access, or visibility can cost you in many ways.

Non-payment of invoices can put you at odds with your suppliers.  This creates unnecessary supplier abrasion, which is both uncomfortable and will at some point, in some way, require your staff’s time and attention to address and resolve. It’s best to get ahead of the issue.

Unpaid suppliers make unproductive partners, and they may also choose to put you on credit hold and potentially shut down a critical supply line.  Just consider the impact of neglecting to pay your staffing provider and coming to work to find one of your facilities experiencing a shortage of qualified nurses, for example.

There is also a major bottom-line implication to this matter.  Failure to see all your invoices means you aren’t paying all your transaction on time.  As a result, you could be missing critical discounts, rebates, volume price breaks, and more.

Finally, without proper visibility into all missing invoices, your RNI report may not be completely accurate and could impact, and call into question, the accuracy of your monthly accruals.

Exploring the Different Ways to Address the Problem

You can dedicate resources to review problem vendors to get to the root cause.  You can also investigate why PO’s are not automatically matching to invoices and receipts, and you can correct those issues in an attempt to avoid them from happening in the future.

You can also perform a manual evaluation of your largest open purchase orders against unmatched receipts.  Assuming you find any connected items, you can associate them together and pay the invoice.

Unfortunately, these types of reviews are quite manual and time-consuming and you may find it is hard to draw associations between the mismatched line items with your internal resources because… remember it was your internal process that missed the match in the first place.

You may choose to go in another direction altogether and write off the RNI items which could provide a temporary solution, but the overall balance will continue to grow, and you won’t gain any root cause insights.  Add to that, your report balance will be inaccurate.

You could choose to bring in an accounting firm but given the typical rates, you will likely see the costs of the project scaling out of control because you are asking these groups to pour over large volumes of data across many different systems.

In our experience, we find that the best solution is to hire a Recovery Audit firm to review the RNI report.  Recovery Audit firms have experience, tools, and aptitude for reviewing enormous sets of data and they have comfort and familiarity with your vendors.  If you do choose to allow a Recovery Audit firm to review your RNI, insist that they are delivering deep root cause analysis as well and best practice suggestions for reducing the problem on an ongoing basis.

The Typical Points of Failure for Reporting Medical Device Credits

Written By: Joe Heminger, Business Development Manager

The Office of Inspector General (OIG) performed a review of cardiac device credits to determine whether hospitals complied with Medicare requirements for reporting manufacturer credits associated with recalled or prematurely failed cardiac devices.

For every 3,233 of the 6,558 Medicare claims that were reviewed, hospitals likely did not comply with Medicare requirements associated with reporting manufacturer credits. That equates to a 49.3% rate of non-compliance.

The following list outlines the typical points of failure:

  1. Clinical Areas Product Collection

    • – Device discarded or given to the patient​
    • – Device improperly cleaned/sterilized​
    • – Device not recognized as requiring return​ under the warranty program
    • – Vendor rep wrongly indicates that the item is not under warranty
    • – Vendor rep takes the device and fails to properly initiate a claim​
    • – Non-standard workflows​
  2. Shipment Process

    • – Vendor box or kit used, but tracking number not captured​
    • – Vendor rejects item because it is past the 30-45-day return window for warranty
    • – Return Merchandise Form not completed
  3. Vendor Process

    • – Vendor unable to obtain sufficient information
    • – Device evaluation not requested​
    • – Product analysis report not requested​
    • – Vendor never processes warranty claim​
  4. Credit and Finance Process

    • – Patient name and device serial number not documented
    • – Credit memo is not detected as explant​ and applied to the outstanding invoice
    • – 50% rule not calculated correctly​
    • – Explant returns and credits not reconciled​
    • – Patient Accounts never notified of credit received​
    • – Patients claim not adjusted via the UB-04

For insights and advice on how to address these typical points of failure and construct a fully compliant process for reporting manufacturer device credits – contact SpendMend today.

SpendMend Qualifies for Grand Rapids Business Hall of Fame

Written by: Kylee Savage

I am so proud to report that SpendMend has been selected for the 2021 Grand Rapids Awards for Enhanced Audit Recovery by the Grand Rapids Award Program. SpendMend has received this award for three consecutive years and it now qualifies us for the 2021 Grand Rapids Business Hall of Fame.

The Grand Rapids Award Program annually awards companies for achieved exceptional marketing success in their local community and business category. Companies are given recognition for their best practices and programs that have helped expand their business. In addition, it honors small businesses who lead in customer service and community involvement.H

Our mission is to positively impact patient care by delivering unparalleled value to our healthcare industry clients through our innovative solutions. We dedicate ourselves to help hospitals and healthcare systems while always maintaining the highest levels of integrity, morality, and ethics. Currently, we serve hundreds of healthcare clients all over the country. We’ve been fortunate to work with the largest brands in the industry while also receiving high praise and recognition from national industry associations, major GPOs, award outlets, and more.

No matter how we grow or where we serve, we will never forget our local community, and we are so incredibly proud to receive this type of recognition from the city of Grand Rapids.  We plan to work tirelessly for the next year to ensure that we can earn the award for a fourth straight year.

Is 340B Referral Capture Right For Your Organization?

Written By: Jake Thompson, jthompson@spendmend.com

Earlier this month we announced that the 340B Referral Capture program has been made available to all current and new clients moving forward.  Since this announcement, we have been receiving calls daily about this service, so we wanted to highlight a few points of interest which arise frequently in these conversations.

How can I learn more?   

Check out our website (https://www.spendmend.com/solutions/pharmacy-solutions/) for more details about the offering.

How do I know if my organization can benefit? 

We can help you assess that. To start, there are a few key items that may help you quickly understand if the service can assist your needs.

1. Clinic Setup: Do you have primary care clinics as part of your 340B Covered Entity (CE)?

  • Having primary care clinics helps you, as the CE, establish patient responsibility of care for any potential referral to a specialist. If you are unsure, we can quickly help you assess this by evaluating your most-recently filed Medicare Cost Report or the services consistent with your scope of grant.

2. Specialists: Are your patients routinely being referred to non-CE specialty clinics?

  • These documented referrals are what we can help track down in order to evaluate potential 340B eligible prescriptions. If you are unsure how to assess, we can help you get the right data out of your EMR to evaluate.

3.  Contract Pharmacy Network: Does your CE have relationships with the pharmacies that fill specialty prescriptions for your patients?

  • Having a contract pharmacy network in place can facilitate 340B Referral Capture savings.  If you do not, we can help evaluate which pharmacies would benefit you to be in contract with and help you with implementation.

4. Documentation: Does your CE receive clinical information back from the prescribing specialist after a patient has been seen?

  • This documentation helps close the loop for a 340B referral prescription.  If you are unsure or lacking in this area, we can help your CE get the necessary clinical information to qualify the prescriptions.

Our team is already overworked, won’t this require a lot of time? 

Our team will do all the work to set up the program and administer it and each month you will get a report of all the prescriptions found!

It may be difficult for us to budget this type of service. How can you help? 

Our model is based on the shared savings of the realized 340B value of each 340B referral prescription qualified.  Therefore, there is no up-front cost, and you only pay us a small portion of the savings when we find 340B savings for your CE.


As always, do not hesitate to reach out to us if you are interested and we can discuss all the details and answer any questions.  We would love to help your CE regain any 340B savings that have been eroded during these uncertain times.