Life Science Compliance Update

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December 22, 2017

OIG Asks CMS to Track Medicare Costs from Device Failures

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A recent Office of Inspector General (OIG) report suggests that the lack of medical device-specific information on Medicare claim forms complicates CMS efforts to identify and track Medicare costs related to the replacement of recalled or prematurely failed medical devices.

The OIG determined that Medicare costs related to the replacement of recalled or prematurely failed medical devices could not be identified and tracked using only claim data. However, using claim and other data in combination with complex and labor-intensive auditing procedures, OIG estimated that services related to the replacement of seven recalled and prematurely failed medical devices cost Medicare $1.5 billion during calendar years 2005 through 2014. It was also estimated that $140 million in beneficiary copayment and deductible liabilities were related to these recalled and prematurely failed medical devices and their related services and procedures.

Medicare claim forms include the medical procedures performed but do not contain a field for reporting medical device-specific information. By including medical device-specific information on the claim forms, CMS could more effectively identify and track Medicare’s aggregate costs related to recalled or prematurely failed devices. This could help reduce Medicare costs by identifying poorly performing devices more quickly, which could also protect beneficiaries from unnecessary costs and improve their chances of receiving appropriate follow-up care more quickly.

To do the review, OIG identified Medicare claims for calendar years 2005 through 2014 for all services provided to Medicare beneficiaries who had replacements of seven selected recalled cardiac medical devices. Then, a random sample of 526 claims and requested medical records for each sample item to determine whether the claim was associated with a replacement of a recalled or prematurely failed medical device were requested.

The OIG recommends: (1) that CMS continue to work with the Accredited Standards Committee and (2) that CMS require hospitals to use condition codes 49 or 50 on claims for reporting a device replacement procedure.

The OIG recommends CMS continue to work with the Accredited Standards Committee to ensure that the Device Identifier (DI) is included on the next version of claim forms. From there, CMS would use this data to identify and track the additional health care costs incurred by Medicare for recalled or prematurely failed medical device. CMS did note that it was considering adding the DI to the claim form, but that it will “carefully evaluate the potential that this policy would impose burden on physicians unnecessarily.”

OIG also recommended that CMS require hospitals to use condition codes 49 or 50 (indicating specific product replacements) on claims for reporting a device replacement procedure for all procedures that resulted from a recall or premature failure, regardless of whether the device was provided at no cost or with a credit. CMS concurs with this recommendation in cases where payment is impacted.

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