OIG

The “What, What, What” of Medical Device Explants

SpendMend Team

By Joe Heminger, Business Development Representative

The OIG listed on the 2022 workplan that they will be auditing the hospital’s explanted medical device credit process and approved $50 million in funding for these audits.

To give you a quick breakdown, we have listed what you need to know.

The What

Explanted medical devices sometimes fail and must be replaced. Hospitals owe Medicare warranty monies for explanted items even if they do not send the explant in for review or if they do not recover the funds.

The So What

Centers for Medicare & Medicaid Services (CMS) reported that the Office of Inspector General (OIG) is currently auditing hospitals across the United States. Medical Device Explant credits are a huge focus for them. The new fine and penalty structure for non-compliance can result in a huge financial burden when hospitals are already suffering due to COVID-19.

The Price of Non-Compliance

Penalty = 3x the credit + additional fines

Designated as an Excluded Provider

The Now What

SpendMend can perform a low-cost OIG Mock Audit of the last 4 years of this high-risk low-frequency occurrence. Let us determine if your program is compliant or at risk!

For any questions about how a SpendMend Medical Device Explant Warranty Credit Review can impact your bottom line and improve your process, please do not hesitate to contact me at jheminger@spendmend.com.

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

SpendMend Team

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.

OfficeofInspectorGeneral

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The Typical Points of Failure for Reporting Medical Device Credits

SpendMend Team

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 Is Your Process For Reporting Medical Device Credits Falling Short?

SpendMend Team

Written by: Joe Heminger, Business Development Manager

So, why is your process for reporting medical device credits falling short?
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.
In November 2020 OIG issued a report detailing that 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 for recalled or prematurely failed cardiac medical devices.
OIG concluded that hospitals would continue to struggle with compliance because of the following consistent areas of difficulty:

  • Billing Systems – Health billing systems are not consistently updated to reflect the changes from 2014 regarding new condition and value codes. Hospitals that have made updates to their systems are not using the code when updating the UB-O4 on original or resubmitted claims.
  • Lack of Written Policies and Procedures – Health systems either have inadequate or non-existent written policies and procedures or do not enforce the current policies that are in place.
  • Insufficient Communication – Health systems suffer from a lack of interdepartmental communication when receiving reportable claims. The audits show that hospitals are submitting25% of the credits on time from the original claim and 81% on the 90-day resubmission.
  • Inadequate Compliance Testing – Health systems lack internal resources and/or expertise.  In addition, they are far too inconsistent at collecting the data both from the facility and the vendors.
  • Vendor Involvement – Health systems relied upon the vendor to manage the device return and credit process which resulted in gaps.

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

Don’t Be Fooled… By Medical Device Non-Compliance!

SpendMend Team

Written By: Joe Heminger, Business Development Manager

It’s April first and it’s hard enough to get through the day without some prankster trying to pull a fast on you. The last thing you want to do is fool yourself, but in our latest review of U.S. Health Systems, we have learned that that’s exactly what so many healthcare professionals are doing when it comes to managing their medical device healthcare credits.

The following list represents the TOP 3 ways in which professionals in and around the medical device warranty credit process are choosing to FOOL themselves time and time again:

  1.  You don’t closely monitor the warranty credit process because you believe your vendor has it all covered. Too often, hospital O.R. staff has relied upon the vendor to manage the device return and credit process, resulting in gaps and non-compliance. The vendor means well, but they are not the ones with real dollars at stake and they simply don’t have the same incentive to manage the process correctly. Hospitals must have an internal process to return and track the explant back to the vendor, and ensure the resulting credit is tracked, allocated and coded correctly.
  2.  You chose NOT to bring in a third-party independent auditor to check your procedure because you believe you’re doing OK on your own. The truth is, you don’t know what you don’t know. These gaps in compliance can be critical to your hospital and will determine what action the OIG takes. One small gap in compliance can cost your hospital tremendously. The most important measure you can take is to have an external, independent compliance audit of the last 4 years as the OIG found that hospitals do not conduct internal audits have gaps in compliance.
  3. You think the stakes are low and it is just a simple matter if paying back unreturned Medicare credits. There is so much more at stake than you might imagine. The OIG is targeting all U.S. Hospitals in their latest audit. If/when they find proof of an improper payment, they will claw back the amount of the payment, plus a penalty equal to three times the amount of the payment, plus an additional fine of $11,463 up to $22,927 per each infraction. And what’s worse is that hospitals that are shown to have made several egregious errors may be placed on an excluded list and prevented from taking future Medicare reimbursements. And even worse, in cases where deliberate fraud is detected, a Health System executive may be forced to serve jail time.

So please don’t fool yourself! It really isn’t so easy to track every single medical device credit on your own. Too much can go wrong from removal to coding compliance, and far too much is at stake.
Talk to SpendMend about simple strategies you can use to ensure historical and future compliance, no foolin’!

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