CMS proposes changes to IPPS reducing payment for replacement devices

CMS believes 20% is a substantial credit and significant savings to hospitals. This reduced payment policy will only apply to DRGs under IPPS for which the implantation of the device determines DRG assignment. CMS limited the DRGs to which this policy applies because it recognized that in some cases the cost of the device is a small portion of the IPPS payment and in others the device may be a significant portion of the hospital's cost for the case.

CMS also will require hospitals to report replacement devices for which they get a credit using Condition Code 49 (product replacement due to non-function during lifecycle) or Condition Code 50 (product replacement due to recall). Claims with these codes will be handled manually by the fiscal intermediary. The amount of the credit or the full cost of the device (when the hospital receives no charge or a full credit) will be subtracted from the payment. CMS proposes requiring hospitals to provide invoices that demonstrate the normal cost and the amount of any credit and seeks comment on the type of documentation that should be required and how payment should be adjusted.

Other changes that CMS proposes in the IPPS rule include use of a Medicare Severity DRG (MS-DRG) classification system to accommodate severity of an illness and changes to DRG classifications affecting procedures involving certain devices, such as intracranial stents, implantable neurostimulators, cochlear implants, and spinal disc devices.

The IPPS proposed rule was released on May 3 in the Federal Register. Public comments are due by June 12.