Knowledge Base Article

Wives, do you ever tell your husband how much money you saved him because you bought something on sale? In the medical realm, hospitals sometimes get medical devices “on sale” – well, actually at reduced or no cost for various reasons, such as premature replacements, product recalls, or as part of a clinical trial. Since the device is free or at a reduced cost, Medicare doesn’t want to reimburse the hospital for a full cost device. Therefore, hospitals must communicate the “special price” to Medicare on the claim with specific codes in order not to receive an overpayment.

Last year CMS changed the way hospitals report devices on outpatient claims when the device is provided at no cost, with full credit, or with partial credit that is 50% or greater than the cost of the device. Prior to this change, hospitals used modifiers –FB and –FC to communicate this information on the claim. Effective January 1, 2014, the use of modifiers FB and FC were discontinued, and hospitals were instructed to use Value Code FD and condition codes 49 or 50 to report device credits. However, condition codes 49 and 50 only describe devices that are replaced –

• Condition Code 49 – Product Replacement within Product Lifecycle
• Condition Code 50 – Product Replacement for Known Recall of a Product

Sometimes the original device for initial implantation is provided to the hospital at no cost, such as a free sample or due to a medical device clinical trial. Therefore for claims received on and after July 1, 2015, CMS is adding a new condition code for hospital reporting to identify medical devices for initial device placement provided at no or reduced cost due to a clinical trial or free sample (MLN Matters MM8961). The new condition code is:

• Condition Code 53 – Initial Placement of a Medical Device Provided as Part of a Clinical Trial or Free Sample

To report medical devices for initial device placement provided at no or reduced cost, hospitals will report the:

• Value Code “FD” (Credit Received from the Manufacturer for a Medical Device)
• The amount of the device credit in the amount portion for value code “FD”
• Condition Code 53
• A charge of $0.00 for the device (or a token charge of $1.00 if required by the billing system)

The OPPS payment deduction for device credits for device-dependent APCs is limited to the lesser of the device credit amount reported in the FD value field or the device offset amount for that APC.

If the device is furnished as part of a clinical trial, the claims requirements for institutional billing of clinical trials must also be followed.

Hospital Compliance Audits performed by the Office of Inspector General (OIG) have consistently identified errors with the lack of reporting device credits. From my years working in a hospital, I realize tracking and reporting such credits would be a very detailed process, involving numerous departments. But to prevent overpayments, hospitals must come up with appropriate processes to know when a credit is received or should be received, the credit amount, the reason for the credit, and get the correct data on the claim to report that credit to Medicare. So as with the wife’s “on sale” purchase, “on sale” devices still come with a price!