Hospitals Did Not Comply With Medicare Requirements for Reporting Cardiac Device Credits

Manufacturer Credits and Payment Reductions for Medical DevicesFederal regulations and guidance specify how hospitals must report the replacement of a beneficiary’s implanted device if a hospital receives a full or partial credit from the manufacturer for a medical device that is covered under warranty or replaced because of a defect or recall. Medicare does not cover items or services for which neither the beneficiary, nor anyone on his or her behalf, has an obligation to pay (Social Security Act (the Act) § 1862(a)(2)). Federal regulations generally require reductions in both IPPS and OPPS payments for the replacement of certain implanted devices if: (1) the device is replaced without cost to the hospital, (2) the hospital receives full credit for the device cost, or (3) the hospital receives a credit equal to 50 percent or more of the device cost (42 CFR §§ 412.89 and 419.45). Cardiac Medical DevicesCommon cardiac medical devices used to treat beneficiaries include defibrillators, pacemakers, and their associated electrical leads. These devices are implanted during either an inpatient or outpatient procedure. Occasionally, devices may require replacement because of defects, recalls, battery depletions, or mechanical complications, which may be covered under the device manufacturer’s warranty. Generally, cardiac medical device manufacturers provide warranties for defects in materials or workmanship that happen at any time during the life of the product. Such defects may result in recalls or premature failures. When a hospital follows a manufacturer’s warranty process for its cardiac medical device, the manufacturer may issue a full or partial credit to the hospital to cover the cost of the failed or recalled device or provide a replacement without charge.