Cardiac Device Failures Costly to Medicare

October 06, 2017

WASHINGTON, DC — Medicare incurred $1.5 billion in costs over 10 years to replace seven recalled and prematurely failed cardiac devices, according to a report from the US Department of Health & Human Services (HHS) Office of Inspector General (OIG)[1].

Roughly $1 billion of the $1.5 billion were Medicare payments for device-replacement procedures, such as cardiac surgery to replace prematurely failed pacemakers or internal defibrillators. The remaining $500 million were Medicare payments for post–device-replacement services, including imaging, postacute care, and physician visits to monitor patients after the new devices were implanted, the report notes.

Altogether, between 2005 and 2014, the OIG identified 72,710 Medicare recipients who had one of the seven devices replaced due to recalls, premature failures, medically necessary upgrades, or infections. The report does not list the specific devices or manufacturers or patient injuries.

A "Significant Concern"'

The OIG report also estimates that Medicare beneficiaries had $140 million in copayment and deductible liabilities related to these replacements and their related services and procedures.

For a variety of reasons, the OIG says the $1.5 billion in Medicare payments and $140 million in beneficiary copayment and deductible liabilities for services and procedures that resulted from the recalled or prematurely failed devices is a "conservative estimate."

"Although not improper payments, the substantial costs incurred by Medicare and the liabilities incurred by its beneficiaries to replace recalled or prematurely failed medical devices are a significant concern," the report states.

The report also cites several shortcomings in device claims data. In particular, the OIG says it's not possible to identify and track Medicare costs related to the replacement of recalled or prematurely failed medical devices using only Medicare claims data. While Medicare claim forms identify the medical procedures performed, they do not have a field for reporting medical device–specific information.

This lack of device-specific information on claim forms, coupled with limited use of relevant condition codes, impedes the ability of the Centers for Medicare & Medicaid Services (CMS) and the Food and Drug Administration (FDA) to identify poorly performing devices as soon as possible, which "diminishes device recipients' chances of receiving timely follow-up care," the report notes.

To facilitate the use of claims data to identify and track the additional healthcare costs incurred by Medicare resulting from recalled or prematurely failed medical devices, the OIG recommends that the CMS "continue to work with the Accredited Standards Committee X12 to ensure that the device identifier is included on the next version of claim forms."

On this recommendation, in written comments on the OIG report, CMS administrator Seema Verma said this policy is currently under consideration and noted that  the CMS will "carefully evaluate the potential that this policy would impose burden on physicians unnecessarily."

The OIG report also recommends requiring hospitals to use condition codes 49 or 50 on claims for reporting a device-replacement procedure if the procedure resulted from a recall or premature failure independent of whether there was a device provided at no cost or with a credit. Verma said the CMS "concurs with OIG's recommendation in cases where payment is impacted."

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