Self-Assessment of Cardiac Medical Device Health Insurance Overpayments – Methodology | Foley & Lardner srl


More than 900 hospitals across the United States are approaching a deadline imposed by the Centers for Medicare & Medicaid Services (CMS) to report overpayments due to the withdrawal (explant) of defective cardiac medical devices if the remissions of 50 % or more provided by manufacturers were not deducted from health insurance claims. When calculating overpayments over the past six (6) years, hospitals should take care to employ and carefully document the methodology used to calculate the overpayment, especially if a statistical methodology is used. Hospitals may be required to reimburse large amounts and should seek advice regarding the methodology and description provided to CMS.


Cardiac medical device implants, including defibrillators, pacemakers, and their associated electrical components, sometimes need to be replaced due to defects, recalls, or mechanical complications. Typically, during the five-year warranty period, cardiac medical device manufacturers will issue full or partial credit to the hospital to cover the cost of the defective device, or provide a replacement at no charge. When a Medicare beneficiary receives one of these discounted replacement devices for at least 50% of the cost of the explanted device, the hospital is required to report the credit to Medicare and accept a reduction in payment. . This requirement stems from Medicare regulations for inpatient services (42 CFR § 412.89) and inpatient outpatient services (42 CFR § 419.45). When a discount of more than 50% is received, the hospital is expected to include a modifier on its request for payment and indicate the amount of the discount. Failure to do so, usually due to inadequate internal controls within the hospital billing department, could be cited as the cause / result in overpayment to the hospital if it was paid for the full cost of the hospital. ‘apparatus

There is a long history of interest from the Office of the Inspector General of the Department of Health and Human Services (OIG) in the subject of device credits, including a number of comprehensive hospital compliance audits, and some hospitals have challenged the OIG’s interpretation of rules in this area. This is the latest effort by the OIG and CMS to address non-compliance in this area. Currently, CMS is pursuing overpayments identified in an OIG audit, and hospitals that have received letters must take the issue seriously.

Problem and analysis

In November 2020, the BIG reported on the findings of its audit out of 6,558 Medicare claims for cardiac medical device replacement procedures conducted between January 1, 2015 and June 30, 2017. The OIG concluded that for almost half of the claims audited, hospitals failed likely did not comply with Medicare requirements to report manufacturer credits on devices, resulting in potential overpayments of more than $ 33 million to 911 hospitals. In order to identify specific hospitals, the OIG obtained information from several manufacturers regarding the discounts granted and cross-checked a sample of complaints to see if the discounts were correctly reported.

As a result, in late 2020 and early 2021, CMS issued letters advising hospitals of any overpayments identified in the OIG audit. CMS has given hospitals 240 days (6 months plus 60 days under the overpayment rule) from the date of the letter to investigate, identify, report and return any overpayment related to a cardiac medical device. over the past six years. Hospitals should report the results of their self-assessments to their Medicare Administrative Providers (MACs). The deadlines are fast approaching for hospitals that have received letters from CMS, some as early as August 28, 2021, and hospitals must be prepared to meet them. The six-month deadline is stated in letters to hospitals as CMS’s view of a reasonable time to investigate, after which the 60-day reimbursement requirement of the Overpayment Reimbursement Regulation (42 CFR § 401.305) would apply. Given the complexity of the investigation required, there may be some flexibility for a hospital to take more time for particularly complex assessments and quantifications. As a result, hospitals may seek additional time and should contact CMS and their other MACs regarding their efforts in this regard. Advice should be sought on how to proceed in particular situations.

CMS has indicated that it expects to receive a detailed description of the exact methodology each hospital uses to calculate overpayments, including a detailed written description of the methodology used to identify the universe and size of the hospital. sample of complaints examined in the self-assessment. If statistical sampling is used, hospitals should be guided by Chapter 8.4 of the Medicare Program Integrity Manual, which covers valid statistical sampling methodologies. As we have already noted, the description of the methodology should be clear and address technical issues adequately, so that hospitals put this issue behind them. Likewise, hospitals that wish to challenge the CMS and OIG’s interpretation of the remission reporting requirement, or believe they have handled credits appropriately, are encouraged to document the position that the hospital has not. “Identified” an overpayment and why.

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