medical devices, warranty credits, and medicare regulation · ©2016 mfmer | slide-27 sc logs...

©2016 MFMER | slide-1

Medical Devices, Warranty Credits, and Medicare Regulation

What is Supply Chain’s Role?

SMI Fall 2017 ForumJesse Schafer, Explant Control Manager, Mayo Clinic

Oct 26, 2017


Objectives

1. Understanding the risk associated with Medicare’s device warranty credit and no charge device requirements

2. Learning how a large multi-site, multi-specialty academic center improved processes around cardiac and surgical device returns

3. Discovering commonplace solutions for efficient and effective device returns and credit processes and resource options, as well as auditing and monitoring techniques


Key Messages

• Supply Chain has an indispensable role in the compliance and revenue implications of medical device warranty credits

• Vendors are equally instrumental in reducing pain points in the process


Mayo Clinic Scottsdale, AZ Mayo Clinic Rochester, MN

Mayo Clinic Jacksonville, FL Mayo Clinic Health System


Interactive Questions

• Polling questions are infused in this presentation

• Goal is to increase audience engagement

• Responses are anonymous so please participate


What best describes your organization?

A. Manufacturer of implantable medical devices

B. Distributor of implantable medical devices

C. Hospital with implantable medical device services

D. None of the above


Implantable Medical Device

• Devices surgically implanted that are designed to remain in the patient after the conclusion of the procedure for one or more of the following benefits:

Limb or joint

replacementMedication

delivery

Organ

support

Monitoring and Therapy


Medicare Regulation

• All eligible explanted medical devices must be pursued for warranty credit and no-charge replacement and paid to Medicare if >50%.

Warranty

Free replacement

MedicareProblem

deviceFull or partial

benefit


How is this issue a Supply Chain problem?

Clinical Dept. Vendor

Credits

RMA

Ship & Track

Supply Chain


When is a device warranty credit plausible?

A. Recall issued

B. Problem or malfunction indicated by hospital

C. Early battery depletion indicated by hospital

D. All of the above


What is the 50% Rule?

• Credits >50% of cost of replacement devices are due Medicare (when CMS is payer)

<50%

>50%

Revenue

potential

Due

Medicare

Warranty

credit


So can the hospital keep all credits <50%?

A. Yes

B. No

C. It depends


Common Hurdle

• Difficult to know who owns medical device warranty credits – is it the clinical department, supply chain, revenue cycle, or internal compliance?

• Unless ALL departments participate, success is unlikely


So what is the risk?

Understanding the risk associated with Medicare’s device warranty credit and no charge device requirements


Why does the government care?

• US implantable medical device industry ~$35B

• 2012-2014 Medicare paid $30B for cardiac devices alone

• 2010-2017 includes OIG findings of medical device overpayments of $30-300k per hospital.

All facilities that explant medical devices are subject to audit/penalty

Device Warranty Credit


What do government audits reveal? (link)

• Hospital did not

• Pursue available credits

• Report/Pay credits it received

• Implement adequate process and controls

Supply Chain can help

with all four of these

key elements

https://oig.hhs.gov/reports-and-publications/oas/cms.asp


Which devices should you focus on to satisfy the Medicare requirement?

A. Cardiac devices

B. All battery-operated implants

C. Orthopedic joints

D. See Federal Register final rule for IPPS and OPPS annually


How are explants different than a ‘normal’ return for credit?

Product ShipVendor analysis

Credit memo

Patient accounts


Things that can go wrong

Product

• Device discarded or given to patient

• Device improperly cleaned/sterilized

• Device not recognized as requiring return

• Non-standard workflows


Things that can go wrong (cont.)

Product

• Vendor rep takes device and fails to properly initiate the claim

• Vendor rep indicates warranty expired (but it’s not)



Ship

• Vendor requests litany of clinical details prior to authorizing return

• Item rejected as past 30-45 return window

• Vendor box used but tracking # not captured



Vendor analysis

• Vendor unable to obtain sufficient info

• Device evaluation not requested

• Product analysis report not requested

• Vendor never processes warranty claim



Credit memo

• Patient name and device serial not documented

• Credit memo is not detected as explant

• Explant returns and credits not reconciled

• 50% rule not calculated accurately



Patient accounts

• Patient Accounts never notified of credit received

• Annual cost report not updated

• Patient claim not adjusted


What happens if Supply Chain is not engaged?

• Clinical area may rely upon local vendor rep

• Shipments may occur without any tracking

• Supply Chain may have no heads-up that credit memos may be pending

• No one may be following up on unresolved credit claims

• No one may alert Patient Accounting when credits are received and due Medicare

Hospital is at RISK


What processes can help?

Learning how a large multi-site, multi-specialty academic center improved processes around cardiac and surgical device returns


SC logs return in

ERP

Device

removed/replaced

and documented in

EHR

Phase 1 – initiate warranty claimPatient requires

new therapy or

device failure

incurred

EHR flags device

for return to vendor

Device routed to

pathology or

holding area

Return to vendor

form submitted to

SC

SC contacts

vendor to request

RMA and return kit

as needed

SC notifies clinical

area item can be

shipped

Item routed

through dock and

tracking performed


SC monitors credit

memos for explant

identifiers

SC reconciles

vendor warranty

claim reports

against open

returns

SC follows up with

open claims >90

days

SC notifies clinical

area of vendor

requests for

additional info

ERP and EHR

updated with claim

outcomes

Notification routed

to Patient

Accounting for

credits >50%

Phase 2 – close warranty claim


Role of Clinical Dept.

Identify eligible

explants

Clean and bag devices

Document explant reason

Obtain return kit

Complete vendor

paperwork

Route device for return

within 30 days

Clinical or Supply Chain


Role of Supply Chain

Track all explant returns (patient

and device)

Request RMA and/or return kit

Detect explant credit memos

Reconcile open explant credits

Notify patient billing of

credits >50%


Role of Vendor

Provide return kits

Assist with out-of-service

and claim paperwork

Assess warranty claim within

90 days

Provide monthly report claim status

Issue credit memo as needed


Cardiac Device Returns

• Workflow example

• Return all cardiac explants

• Clinical area submits claims for vendors that don’t automatically initiate a claim

• Allow end user to box/ship using vendor provided pre-paid return kits

• Ensure return record created in ERP

• Watch for credit memos and reconcile monthly vendor report against returns


Surgical Device Returns

• Workflow example

• Require clinical area to determine if item is eligible for return

• Request minimum data to initiate RMA request with vendor

• Forward the data to vendor as pdf

• Request return kit and direct ship to end user

• Watch for credit memos and reconcile monthly vendor report against returns


Suggested Minimum Data

• Facility

• Reporter/Contact

• Patient name, DOB, gender

• Device model, serial

• Implant/explant dates

• Explant reason

• Explanting/Implanting MD

• Replacementmodel, serial

• Storage solution?

• Disinfection?

• Destructive analysis ok?

• Vendor rep involvement with case

Reference MedWatch Form FDA 3500A (link) for common vendor questions

https://www.fda.gov/downloads/aboutfda/reportsmanualsforms/forms/ucm048334.pdf


Solutions

Discovering commonplace solutions for efficient and effective device returns and credit processes and resource options, as well as auditing and monitoring techniques


Strategies

• Capture explant type and reason in EHR

• Build alert to prompt clinical area to route item for shipment

• Add report to EHR that provides key patient and device information

• Develop standard data sheet to allow direct send of patient/device info to vendor to initiate complaint/return


Strategies (cont.)

• Ensure appropriate documentation in ERP returns record

• Consider automated credit memo scanning to detect key explant identifiers (RMA, serial #)

• Develop reconciliation process to close all explant returns as approved or denied by vendor

• Develop process to notify billing of all credits >50% of replacement device cost


Strategies (cont.)

• Run ERP reporting to monitor explant return status

• Reconcile with monthly vendor claim reports

• Require explant credit memos in contracting language to assist hospital compliance

• Provide constructive feedback to vendors regarding claim response time

• Consider warranty outcomes as part of vendor performance and product value


Potential RevenueExamples

Example: 2,500 * 5% * $7,500 * % Retained by Hospital = Potential Revenue

Note: the portion retained by hospital is dependent upon regulation,

payer contracts and hospital policy

Explant volume

% eligible for warranty credit

Average device cost

Average credit value

Portion of credits Medicare and <50%

Portion of credits Medicare and >50%

Portion of credits non-Medicare

2,500

5%

$10,000

$8,000

10%

40% (due Medicare)

50%


How is this issue a Supply Chain problem?

Clinical Dept. Vendor

Credits

RMA

Ship & Track


Q&A

medical devices, warranty credits, and medicare regulation · ©2016 mfmer | slide-27 sc logs...

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