Hospitals across the United States may be pocketing millions of dollars in taxpayer money annually by charging Medicare for replacement cardiac medical devices they received for free, a new inspector general’s audit has found.
Replacement defibrillators and pacemakers, as well as the electrical connection components needed to make them function, are occasionally provided for free or at a reduced price by manufacturers to hospitals if the devices are covered under warranty or exchanged because of defects or recalls. When that happens, and the patient is covered by Medicare, hospitals are expected to notify the federal government so that Medicare reimbursement payments to hospitals can be reduced accordingly.
Instead, the Department of Health and Human Services’ Office of Inspector General discovered that hospitals routinely get the government to reimburse the full cost of pacemakers and defibrillators the health care facilities that they paid nothing to acquire.
The selective audit looked at 641 out of 1,859 total inpatient and outpatient claims related to mechanical complication of an implantable cardiac device in three states — Kentucky, Ohio and West Virginia — in 2011.
Among the cases examined, investigators discovered hospitals cheated taxpayers out of $548,000 by charging Medicare the full price for defibrillators or pacemakers they received for free or at a discount.
The problem could be much larger than that.
Among the cases examined in the audit, nearly 6 percent of the money shelled out by Medicare to reimburse hospitals for bad pacemakers and defibrillators went for inappropriate payments.
According to the audit, during 2011, “Medicare contractors nationwide paid hospitals $243.7 million for certain inpatient and outpatient cardiac medical device claims potentially eligible for a manufacturer’s credit.” If hospitals across the nation are receiving incorrect payments for recalled or defective defibrillators or pacemakers at the same rate as hospitals in the states in the audit, the overpayments could cost American taxpayers some $14 million a year.
The poor oversight of hospital reimbursement claims has earned the Centers for Medicare & Medicaid Services, the federal agency that administers Medicare, this week’s Golden Hammer, an “award” intended to highlight egregious examples of wasted tax dollars.
According to the report, Medicare contractors in charge of determining reimbursement amounts and paying claims have not been successful in preventing fraud and abuse. The Centers for Medicare & Medicaid Services has also apparently failed to provide proper oversight for contractors.
The audit could not determine whether incompetent accounting or intentional wrongdoing on the hospitals’ part was to blame for the hundreds of thousands of dollars in incorrect payments, but it is clear that some hospitals were handsomely rewarded for payments they did not deserve.
Many of the improper payments went through NGS CoreSource and CGS Administrators, the contractors responsible for paying Medicare claims in Kentucky, Ohio and West Virginia.
IG investigators reported that “one hospital received a credit for a failed defibrillator, but did not reduce charges on the claim as required. As a result, the Medicare contractors paid the hospital $28,862 when they should have paid $8,035, resulting in an overpayment of $20,827.”
In another instance, a hospital did not request a credit for a recalled electrical lead. “As a result, the Medicare contractors paid the hospital $24,378 when they should have paid $4,874, resulting in an overpayment of $19,504,” the auditors wrote.
The hospitals attributed the errors to inadequate internal policies and a lack of awareness of warranties and credit availability.
The HHS inspector general’s office has ordered the CMS to recover the $548,000 in overpayments. Additionally, the audit recommended improving education and training for hospitals to prevent improper billing and reduce wasting tax dollars.
In a response to the audit, CGS Administrators, which is now the sole contractor for Medicare claims services in the three states covered in the audit, promised to “take aggressive and extensive steps” to address the issue of overpayments for replacement cardiac medical devices.