Feds to scrutinize med tech Medicare reimbursement in fiscal 2016

The Office of the Inspector General (OIG) promised to put med tech reimbursement under the microscope during fiscal year 2016, citing Medicare costs associated with defective medical devices, cardiac catheterizations, imaging services and clinical labs as some of the device-world arenas worthy of particular scrutiny. Another area of focus will be medical device cybersecurity, according to the internal government watchdog's FY 2016 work plan.

The wide-ranging report highlighted OIG's plan to closely monitor the Centers for Medicare & Medicaid Services reimbursement to hospitals, nursing homes, hospices and providers of home healthcare, as well as its legal and investigative activities related to the federal payments. The FY 2016 agenda lists numerous areas of OIG focus for the fiscal year that began in October, including many affecting device payments indirectly, and some impacting them directly.

For instance, OIG said it "will review Medicare claims to identify the impact on beneficiary safety and quality of care, as well as the costs to Medicare, resulting from additional use of medical services associated with defective medical devices." The government watchdog said prior reviews have found that Medicare contractors have made improper payments to hospitals for replacement devices.

In addition, OIG wrote that it "will review Medicare's claims processing edits (special system controls) designed to prevent payments to multiple suppliers of home blood glucose test strips and lancets and determine whether they are effective in preventing inappropriate payments. Prior OIG work found that inappropriate payments were made to multiple medical equipment suppliers for test strips and lancets dispensed to the same beneficiaries with overlapping service dates."

Other devices or procedures whose reimbursement is up for review in the fiscal year include mechanical ventilators, cardiac catheterizations, intensity-modulated radiation therapy, imaging services, portable X-ray equipment, power mobility devices, orthotic braces and nebulizer machines. Even dental services for children will be inspected as part of OIG's effort to scrub out inappropriate billing to Medicaid or Medicare.

The report wasn't solely focused on devices and contained lengthy sections about drug reimbursement as well. Med tech will also be impacted by reviews that are less product-specific but broader in scope, such as reviews of CMS outlier payments to cover care for Medicare or Medicaid beneficiaries who incur unusually high costs.

Diagnostics are not spared either. "We will analyze Medicare payments for clinical diagnostic laboratory tests, including the top 25 clinical diagnostic laboratory tests by Medicare expenditures in 2014. Previous OIG work has found that Medicare pays more than other insurers for certain high-volume and high-expenditure laboratory tests," OIG said.

The report was issued just as the Department of Justice announced that 450-plus hospitals across the nation have agreed to a $250 million settlement for overusing implantable defibrillators at Medicare's expense.

The feds recovered $3.3 billion during FY 2014 from those committing healthcare fraud, including $40 million from CareFusion, $30 million from Boston Scientific ($BSX), $10 million from Medtronic ($MDT) and $5.5 million from Abbott ($ABT). In addition, 8 people were convicted for defrauding the government in schemes involving wheelchairs, according to a report from the Department of Justice issued in March.

While the OIG report contains plenty of reasons for jitteriness, there is at least one tidbit on the watchdog's agenda that should please the device industry. Companies have long been critical of Medicare's competitive bidding program for durable medical equipment, prosthetics, orthotics and supplies, under which manufacturers compete on price to supply particular geographic areas; the program has sent revenues from devices like diabetes testing strips tumbling.

OIG agreed to look into big companies' claims that the process is unfair, saying "anecdotal reports show that competitive bidding has led to reduced access to DME and, in turn, compromised the quality of care beneficiaries receive."

The OIG also provides insights into possible future CMS incentive payments to healthcare providers. The incentives reward certain outcomes that are a sign of quality (and cost-effective) care with bonus reimbursement, or penalize poor outcomes via reductions in reimbursement.

"We will review the rate of and reasons for transfer from group homes or nursing facilities to hospital emergency departments. High occurrences of emergency transfers could indicate poor quality of care. Prior OIG work examined transfers to hospital emergency departments, raising concerns about the quality of care provided in some nursing facilities. There is congressional interest in this area," OIG said.

Besides healthcare reimbursement, OIG is focused on another growing area of concern: medical device cybersecurity. The government watchdog said it will "examine whether FDA's oversight of hospitals' networked medical devices is sufficient to effectively protect associated electronic protected health information (ePHI) and ensure beneficiary safety. Computerized medical devices, such as dialysis machines, radiology systems, and medication dispensing systems that are integrated with electronic medical records (EMRs) and the larger health network, pose a growing threat to the security and privacy of personal health information."

Health Data Management reports that the FBI issued an alert in September to companies and the public about the cybersecurity risks posed by devices and wearable sensors.

- read the report (PDF)

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