OIG: Medicare took a haircut on cardiac device replacements

Hospitals that received manufacturer credits for replacing cardiac medical devices didn't pass the savings along to Medicare through required claims adjustments, an Office of Inspector General audit found.

A study of 641 claims filed in Kentucky, Ohio and West Virginia in 2011 revealed a $547,553 overpayment on 86 claims as a result of this problem. Consequently, "hospitals across the United States may be pocketing millions of dollars in taxpayer money annually by charging Medicare for replacement cardiac medical devices they received for free," The Washington Times reported.

Cardiac medical devices include defibrillators, pacemakers and electrical leads, the report noted. Surgeons implant these in beneficiaries during inpatient and outpatient procedures. But--like other mechanical objects--the devices may need to be replaced occasionally due to defects, recalls or other snafus. Replacements may be covered by manufacturer warranties, and the terms of these vary.

Medicare payments must be reduced for replacement of an implanted device if it's replaced without cost to the provider, or if the provider receives a credit of 50 percent or more of the device's cost. Providers must adjust their claims with the proper condition and value codes in these cases.

But hospitals audited by the OIG didn't always do that. Nearly 6 percent of the dollars paid by Medicare to hospitals in the OIG study were paid inappropriately. Projecting these results to hospitals nationwide, overpayments could cost taxpayers about $14 million a year, The Washington Times noted.

Here's a representative example: When one hospital failed to reduce its charges after receiving credit for a faulty defibrillator, Medicare overpaid $20,827.

Audited hospitals blamed the billing errors on inadequate procedures for reporting credits, lack of awareness of warranties and credit availability, and misapplication of credit amounts, the report noted.

The Centers for Medicare & Medicaid Services will recoup the overpayment identified by the audit and educate hospitals on claims adjustment procedures.

For more:
- read The Washington Times article
- here's the OIG report (.pdf)