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OIG Billing Reviews of Medical Device Replacements

The Office of the Inspector General ("OIG") recently published several reports finding that prestigious east coast hospitals incorrectly billed the Medicare program for replacement medical devices. These are not new problems.   In fact, it has been reported that providers often bill the Medicare program for replacement devices without accounting for the related credit which is refunded by the manufacturer to the provider.

Usually the government only takes issue with the failure to account for and refund Medicare the manufacturer credit. In the recent reviews, the OIG also scrutinized the hospitals for not seeking the credits under the device warranties. This twist is problematic because the government could next argue that the providers should have known about the credits and seek civil monetary penalties. It's also not outside the realm of possibility that the government wouldn't pursue the device company even if the provider failed to make a warranty claim or didn't meet warranty conditions.

Here's a few suggestions for mitigating the civil monetary penalty risk as well as taking advantage of warranty replacement in high dollar/volume device intensive areas like orthopedics and interventional cardiology:

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  • Educating clinicians about the issue and impact on department resources. For example, with just fifty $10,000 devices, 2 million dollars could be lost if the devices are replaced and the warranty is not used with $500,000 in lost revenue, the threat of another $500,000 to 1 million in damages and $500,000 in legal fees not to mention reputation damage. 
     
  • Changing department forms for clinicians to indicate when a device has failed and may be eligible for warranty. 
     
  • Keeping commonly used device warranty information, restrictions and contact information in a designated binder.
Copyright © 2020, Sheppard Mullin Richter & Hampton LLP.National Law Review, Volume I, Number 93
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