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Note from Hugh

Medicare Weekly Update, May 6, 2008

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As discussed below, CMS issued a transmittal (Change Request 5860) last week providing billing instructions for implantable devices furnished to inpatients where the hospital received the device at no cost or received a full or partial credit for the device due to a recall or premature failure of the device. These instructions relate to a new regulation (42 CFR 412.89) that CMS implemented as part of the 2008 IPPS final rule. Under this new regulation, for certain MS-DRGs involving implantable devices, hospitals receive a payment reduction if the hospital received the implanted device at no cost or if the hospital received a full or partial credit for the device due to a recall or premature failure of the device.

Under the regulation, the mechanics of the payment reduction are quite simple. The FIs and MACs simply subtract the cost of the device (for devices received at no cost to the hospital) or the amount of the credit (where the hospital received full or partial credit for the device) from the amount that would have otherwise been payable under IPPS.  

The problem is that, until the new transmittal was issued last week, it was unclear how hospitals were supposed to communicate the cost of the replaced device or the amount of the credit to the FIs and MACs. The good news is that the transmittal answersthis question. The transmittal instructs hospitals to report the cost of the device or the amount of the credit using value code “FD.”

Operationally, this will be a challenge for most hospitals. Hospitals will have to develop a process to ensure that devices received at no cost or for credit are identified and that the cost of the device or the amount of the credit is included on the claim.

There are a couple of aspects of the transmittal that baffle me. The transmittal states that the payment reduction is effective for discharges on or after July 1, 2008. This seems inconsistent with the regulation which states that the payment reduction is effective for discharges on or after October 1, 2007. Also, the transmittal’s effective date is October 1, 2008.

Consequently, it is unclear how hospitals are supposed to bill for these cases prior to that date. I have a call into CMS to try and clarify these date issues. If I receive any useful information, I’ll report back in a future issue of Medicare Weekly Update.

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