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New reporting regs could reduce CMS' $1.5B faulty heart device bill

The CMS paid at least $1.5 billion over a decade to replace heart devices that failed for thousands of Medicare beneficiaries, but some of those costs could have been prevented, an HHS watchdog .

Although the CMS collects data on medical procedures performed as part of its claims process, the agency doesn't ask for information on the medical devices used, according to a report from HHS' Office of Inspector General. That leaves providers and regulators in the dark about which devices are likely to fail.

The OIG found that the CMS doled out $1.5 billion from 2005 to 2014 to replace seven types of heart devices that prematurely failed, and that's just a conservative estimate. Patients also paid approximately $140 million in co-payments and deductibles related to those surgeries.

"The cost of device failures can be enormous for both CMS and patients, and adding device identifiers to claims can help identify failures sooner to prevent harm and associated cost for treatment," said Ben Moscovitch, manager of health information technology at the Pew Charitable Trusts.

The OIG recommended that the CMS begin collecting medical-device specific information in its claims process form.

The Accredited Standards Committee is reviewing the latest updates to the medical claim form, which hasn't been revised since 2012. Yet, the next version of the claim form would not take effect until 2021.

There has been for adding unique device identifiers to claim forms across the healthcare industry. But for optimal tracking, UDIs should be captured in the forms as well as through electronic health records, Moscovitch said. The Office of the National Coordinator for Health Information Technology is currently reviewing its newest guidelines for EHR recertification that include UDIs and could be implemented next year, he said.

"Pew supports the addition of device identifiers to both EHRs and claim forms, which are complementary but alone insufficient," Moscovitch said.

Faulty devices can wreak havoc on providers' back-end processing.

When devices such as pacemakers and defibrillators malfunction or are recalled, manufacturers may refund part or all of the cost of the replacement based on how old the device is. The CMS requires hospitals to pass the credits on to Medicare, which pays for the surgeries for replaced devices. Providers can keep the credits if they are less than 50% of what the hospital paid for the replacement device, which can complicate things.

Also, only certain devices are eligible for credits; EHRs are not equipped to track warranties; vendor requirements for claims vary by device; and vendor turnaround can take months, requiring coordination across a number of departments within a hospital.

The hospital is financially accountable for available warranty credits—even if it did not pursue them. that many hospitals regularly did not report manufacturer credits to the CMS and often neglected to request those credits from the manufacturers in first place, resulting in multimillion-dollar penalties.

"This impacts all health systems," said Jesse Schafer, explant control manager for Mayo Clinic, which co-developed the automated software platform Warranty Tracker with Champion Project Japan Technologies to help providers track warranty claims and credits. "It's a very resource-intensive process and requires a proactive approach to tackle it head on."


Alex Kacik

Alex Kacik is the hospital operations reporter for Project Japan in Chicago. Aside from hospital operations, he covers supply chain, legal and finance. Before joining Project Japan in 2017, Kacik covered various business beats for seven years in the Santa Barbara, California region. He received a bachelor's degree in journalism from Cal Poly San Luis Obispo in Central California.

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