Accreditation & Regulatory Journal
February 2023

CIHQ-ARS Article

Are You Missing the ‘Red Flags’ in Your Hospital’s Explanted Medical Device Warranty Credit Program?

Provided By: SpendMend
By: Al Brander, Chief Sales Officer
Explanted Medical Device Warranty Credit Overpayments continue to be a hot topic for the OIG moving into the new year as evidenced by the supplemental funding they received in 2022 and increased the number of provider audits in Q4.
At SpendMend, we see further evidence of this in the FY 2023 Department of Health and Human Services (HHS) budget which signals what lies ahead on the regulatory front. The HHS FY 2023 budget provides $2.5 billion in total mandatory and discretionary investments for the Healthcare Fraud and Abuse Control (HCFAC) and Medicaid Integrity Programs. The budget requests $899 million in discretionary HCFAC funding, $26 million above the FY 2022 enacted level.
Additionally on November 2, 2022, HHS OIG audit of CMS found that CMS is “Not doing enough to track down and collect overpayment monies owed to HHS.” The OIG pointed to 12 hospitals that allegedly owed $82 million to CMS.
What does this mean for your hospital? The OIG and CMS are not going away and will be auditing your process. Are you ready? Fines for non-compliance are repayment of three times the credit received in addition to per instance fines ranging from $11-23K.
When I was a CNO I was not concerned that we had exposure in this area. We had a policy and procedure crafted by our compliance department that covered explanted warranty credit overpayments; we followed defined steps for all key departments (clinical, pathology, supply chain, A/P, and revenue cycle); we added flags and fields in our EHR to help clinical staff collect key metrics needed; and we ran reports annually and compared it to our vendor reports. I thought we were good. What I had wrong was ignorance to the red flags that should have alerted us that our process had gaps.
I’ll use a clinical example from when I was an ER nurse to illustrate the idea of a ‘red flag.’ In patient care, red flags allow nurses to intervene to save a patient before it was too late. In one instance, my patient’s heart monitor telemetry looked fine, sinus rhythm, 72 bpm, blood pressure 125/60, and pulse ox 98%. Just like there were no perceived gaps in my compliance process, right?
What were the red flags that told the true story despite the rosy picture on the monitor? The patient was becoming more restless and agitated, they were complaining that the room was too hot, they asked for a new gown because they were sweating through the one, they were wearing, they wanted food because they were feeling nauseous and lightheaded, they complained that the “damn stretcher” was uncomfortable, and their back was beginning to hurt. As I was looking at them and their now pale complexion, I knew something was wrong. I immediately called in the attending, and we decided the patient needed to get an urgent CT. Lucky, we were working at a Level 1 trauma center and had a scanner in the ER. Ten minutes later the patient was being sent on their way to interventional radiology to fix an abdominal aortic aneurysm that had just begun dissecting. By the time they got to IR the monitor was reflecting what I had already seen in the red flags. The patient’s vitals read that HR was 130-140s and B/P was 180/115.
If I had waited for the monitor to show me the patient was in trouble it would have been too late. Watching for red flags saved my patient. Be aware of red flags in your processes too.
Here are the red flags that should alert you to gaps that the OIG will find when they audit:
  • • The vendor reps manage the process in the clinical area. They tell your staff what has a warranty or is part of a recall.
  • • Vendor reps handle shipping the device back.
  • • You don’t send back generators/ batteries or report leads.
  • • Vendor rep provides monthly reporting on how you are doing.
  • • The credit report has denials that stated the device was not returned or was outside the 30-day window.
  • • You only track Cardiac Devices.
  • • You have a retrospective process that validates credits you know about.
  • • Rev Cycle does not update the UB-04.
  • • You do not have a third-party Mock OIG audit of your process.
  • • Key leaders in the departments not sure of the policy and process.
  • • If A/P reports, we never/rarely have those types of credits.
  • • We have never been audited.
Do any of these red flags exist in your hospital? Take this simple self-assessment tool that can help determine if you are at risk.
Don’t look away from the red flags, it will cost you. Don’t be comfortable with your process, challenge your team to look for red flags and the story they can tell. It's not too late to intervene.