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.

Why I Left My Career as a Pharmacist to Become a Consultant and Help Other Hospitals

Written By: Jake Thompson, PharmD, MS,

Over the past 18+ years in pharmacy, I have constantly been changing roles within the sector. I have held pharmacy technician and intern roles in both retail and hospital settings. I have been a PGY1 clinical resident and PGY2 administrative resident. These experiences positioned me to quickly take on various pharmacy leadership roles in a variety of settings in both the government and private health care arena.  The common trend during these experiences has been the constant rise of drug costs, drug shortages, and new therapies.

These three trends forced me to create teams to focus on medication procurement in each of my leadership positions. The more we dove into medication procurement, the more that opportunities and questions surfaced. As the complexities of drug costs, drug shortages, and new therapies arose, it became evident that we needed external consultants to help us. After many frustrating engagements along the way, I was fortunate to eventually find a true partner in Turnkey Pharmacy Solutions. Turnkey brought the 340B expertise our team needed when managing the complexities of pharmacy procurement.

At the same time, Turnkey was finding that other health systems were not able to focus on the financial opportunities surrounding day to day operations and long-term strategy regarding pharmacy procurement.  They recognized the success our team was having around 340B and they convinced me to change roles yet again, but this time as a consultant.

It was clear to me that if we applied the same principles to medication procurement to other hospitals and clinics, we could make a difference. If we could triple my region’s 340B savings in three years in my previous role, why couldn’t we help other hospitals do this too?  In talking with other colleagues in pharmacy leadership positions, they agreed that they were leaving millions of dollars on the table. These conversations highlighted the opportunity for us to create a team that could help  hospitals return  dollars to their bottom line and allow them to reinvest those funds into quality patient care.

It was my experience of working with Turnkey that led me to leave my career as a pharmacist and dedicate myself to helping other hospitals to optimize their own drug spend.  I thought at that time, and I still believe, that I could do more good by working with covered entities across the country to lift many boats rather than to simply stay in one network and focus my attention on only one patient population.

The decision to join Turnkey (SpendMend Pharmacy) as the head of their optimization and growth services is one I have not regretted for even a single moment over the last two years. I am proud of the work my team has done and now since our recent merger with SpendMend, am looking forward to serving many more networks in the years to come.

My training in pharmacy leadership always taught me to measure, track, and document your success (and failures). This philosophy is vital to ensure that the right solutions are in place for the problems being worked on. It also helps gain trust and confidence from various stakeholders impacted by the change. We are excited to share in our next blog post the analysis on our team’s impact across two years of engagements. For a better look at the savings opportunity in your drug spend, visit the SpendMend website and schedule a free consultation with me or with one of our other expert consultants.

With OIG Waivers Lifted, Hospitals Face Steep Penalties at the Worst Time

On March 30, 2020, in reaction to the President’s declaration of a national health emergency due to the COVID-19 pandemic, the Department of Health and Human Services (HHS) waived several CMS and OIG program requirements and their related audits.

Several months later CMS signaled the reversal of their order announcing their intention to “discontinue exercising enforcement discretion beginning on August 3, 2020, regardless of the status of the public health emergency.”

Translation:  At the direction of CMS, OIG is back doing audits to ensure hospitals are following procedures and one of their key focal points is Medical Device Explant Warranties, an initiative that, alone, is projected to recover billions of dollars from U.S. hospitals.

While there isn’t clear guidance on exactly how the rollout of the audit programs will take place, it’s clear that CMS and the OIG are intent on trying to eliminate fraud, waste, and abuse in pursuit of recovering monies they feel are owed back to Medicare.

All U.S. hospitals are in scope and there have been cases where some systems have been blindsided by claims in excess of $40M.  Your hospital has likely been in violation of the credit handling process and will owe significant dollars based on the OIG audit.  In a recent sample of 296 hospitals, the OIG found that 100% of hospitals were in violation.

Unseen errors can come in many different forms and are based on several factors.  For example, in 2017 Abbott Laboratories recalled a Coronary Dilation Catheter which was experiencing a protective balloon inflation malfunction.   The recall resulted in thousands of replacements and subsequently resulted in thousands of potentially mismanaged warranty credits.  The OIG will be checking to see if your hospital handled these (and many other recall-based credits) correctly.

Are you prepared?

SpendMend recommends calling in one of our tenured specialists to perform a Mock OIG Audit to assess your compliance and any risk you might have. Program oversites are as common as they are costly – and they happen every day.

The Impact of COVID-19 on Hospital and Healthcare Construction

Written by: Curt Plyler, Principle at Fort Hill Associates

The Problem

Hospitals and healthcare networks invest large amounts of capital into construction projects every year.  Managing these projects requires key personnel at the hospital to set a clear plan, administer strong contracts, and establish positive working relationships with the right partners.

Even in the best of times, construction projects are complex and difficult to manage which can result in delays, scope creep, and unexcepted costs.  U.S. hospitals can expect to find contract leakage of 1% to 2% on even the most well written and well monitored contracts. For ambiguous contracts, the leakage could be much greater.

Many hospitals, with limited resources, may not have the experienced personnel necessary to review project construction costs.  Without proper review, hospitals can be at risk from contractors billing for non-reimbursable items up to the contract’s Guaranteed Maximum Price (GMP) value, reducing project savings.


In the Time of COVID-19

In the current environment, the issue has grown even more challenging.  Unanticipated delays in construction projects caused by COVID-19 (and beyond the Contractor’s control) have been impossible to avoid.  Although contingencies such as time extensions and price adjustments should already be in place, the current conditions are so unique that they are not always addressed in existing written agreements.

Some of the unique conditions in the current environment include:

  • Claims of increased insurance costs from COVID-19 impacts
  • Project time extensions that adversely impact critical path milestones
  • Additional cleaning requirements to ensure COVID-free work environments
  • Additional labor inclusive of personal protective equipment
  • Supply chain disruptions driven by manufacturing and delivery delays

In some cases, newly created guidelines to help contractors and owners navigate these new conditions and continue work with limited confusion are often difficult to interpret and subject to change.

With dwindling resources and little to no expertise on staff, hospitals are relying on their contractors to interpret, explain, and implement new terms and conditions.  Leaving the review of this critical costing information to a contractor creates an unacceptable level of exposure for the hospital.  In fact, contract changes related to COVID-19 increase the possibility for leakage with the addition of millions of dollars and delays to construction projects.


What Can Hospitals do?

To protect their interests, hospitals must present clear expectations to contractors while remaining vigilant on timelines and maintaining good documentation to avoid additional costs and delays.  As difficult as it may seem, it is highly recommended to validate all COVID-19 related costs as they arise as opposed to settling at project conclusion.

Hospitals and healthcare networks that feel as though they have no other option but to defer to contractors for the final decisions on cost and timeline overages need to quickly find a third-party advocate to help represent them regarding the rapidly changing demands of COVID-19.

In the current environment, a failure to protect the hospital’s position on construction project changes will prove extremely costly.

When The Hospitals Started Asking Me For Help… We’re Stronger Together.

Written By: David Hewitt, RVP of Sales – East,

I’ve served healthcare networks and hospitals for nearly a decade and if you would have asked me in January… I would have told you that I had seen it all.

But I hadn’t…none of us had.

The last few months have been one new experience after another and I’ve observed firsthand, how strong we are, and more than that – how strong we are together.

I’m fortunate, I’ve worked with many of the top hospitals across the country, and from those engagements I was able to meet some of the most influential leaders at world-class facilities.

If I’m being honest, conversations with these individuals have sometimes been a little one-sided – in terms of deference.  It’s true, my clients appreciate what I do, but I know I’m viewed as a supplier only, and by definition that makes me an outsider.

But things were a little different last week.  I was meeting with the CFO of a top U.S. hospital who I have met on a couple other occasions and he is always professional and cordial, but it’s always clear that I’m a contractor.  Although my work is openly and highly appreciated – the boundaries are still there.

During the conversation last week, my client took on a different demeanor – he was more candid and more vulnerable.  Clearly, the past few months have had a major impact on him.  His first words were, “David, I need you guys right now.  I need you to watch our back.”

You see, a couple months ago his whole healthcare network (like every other network in the country) shut down their elective procedures.  As a result, they bled cash.  And now, his group is planning to turn procedures back on to drive cash flow back to his bottom line.

The hospital is down in terms of staff, supplies and morale (if we’re being honest) and they are now expected to ramp up to pre-pandemic levels of output and efficiency.  Come on, man…

“We haven’t been focusing on our top or bottom line in the last few months and we know we’ve been taken advantage of by a few of our suppliers, and we know we’ve lost millions,” he admitted starkly. “You have to look into this for us.”

He asked me to double down on our audit scope and to investigate his AP transactions and his vendor relationships in detail.  He said he knew they had been moving too fast and too clumsily for the last several months in their attempts to keep up with the surge of COVID-19 patients.

As a result of his focus being pulled away from day-to-day operations, he was certain they had not been able to maintain compliance with their internal controls across their Procure-to-Pay cycle and he was grim about the losses he was suffering as a result.  He suspected they had been making purchases off-contract; onboarding duplicate and fraudulent suppliers; falling prey to price gouging; missing discounts and rebates; issuing duplicate and over-payments; and much more.  He actually said “… and that’s probably just the tip of the iceberg.”

Clearly the topic was very raw for him.  Hospitals like his have been reporting losses in the hundreds of millions of dollars due to COVID-19.

I felt bad for him.  I did.  But I felt excited too, because I realized how much we could help.  And he knew it too.  He said, “David, of all my partners you guys are the only one that can make this kind of impact this quickly.  I need you to backfill.”  I don’t know if I am doing the story justice, but in that moment everything changed.  He was pulling me in as part of his team.  I was more than a supplier.

I want to be clear about something, I know this is a self-serving story, but it’s a true story.

I’m not sharing this to advertise my company or to exploit the hardships of the market.  Quite the contrary.  I’m writing this because my firm wants to help.  We consider ourselves part of the healthcare industry.  The core of our mission statement is “to help hospitals better fund patient care.”  We take this very seriously.

We have an ideal solution to help hospitals restore cash flow right now – in a time when they really need it – and we want to use our solution to help recover funds and drive dollars back to hospitals.  Period.

If you work in finance at a hospital and you have any questions about what tools or strategies you should be using to drive hard dollars back to your bottom line, please reach out.  As I mentioned in the intro, I have been in this industry for nearly 20 years and if SpendMend is not a fit for you then I am sure I can connect you with another provider or consultant that can help you.

Please don’t hesitate to be vulnerable and reach out.  We truly are stronger together.