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IPPS Proposed Rule Clarifies Device Payments

James Carroll, for HealthLeaders Media, June 2, 2011

Editor's note: This article is the second in a series of three IPPS-related updates. The first can be found here.

The April 19 inpatient prospective payment system (IPPS) proposed rule contains an abundance of notable clarifications and updates that will affect multiple departments. Of these proposals, the Centers for Medicare & Medicaid Services' clarification on payment for recalled and replaced devices stand out as one of the most significant for providers.

The 2008 IPPS rule implemented a policy that reduced a hospital's IPPS payment for certain MS-DRGs where the implantation of a device that had been recalled determined the base MS-DRG assignment for that procedure. At that time, CMS stated it would "reduce a hospital's IPPS payment for those MS-DRGs where the hospital received a credit equal to 50% or more of the cost of the device when a manufacturer provided a credit for a recalled device".

As a result, CMS implemented condition codes to trigger the payment reduction, according to Debbie Mackaman, RHIA, CHCO, regulatory specialist for HCPro, Inc. When the device is replaced at no cost due to a malfunction of the device prior to the end of its normal lifecycle, condition code 49 is reported. If the device is replaced due to an FDA or manufacturer recall, condition code 50 is reported. Mackaman adds that in this case, the amount of the credit is reported on the UB04 claim form with a value code FD, and that amount is subtracted from the hospital's DRG payment.

Similarly, CMS implemented a "partial credit" policy in the 2008 outpatient prospective payment system (OPPS) reduced the amount of payment for an implanted device made under the OPPS. It was determined that a significant portion of the payment can be attributed to the cost of an implanted device when the provider receives partial credit for the cost of a replaced device, but only where the amount of the device credit is greater than or equal to 50% of the cost of the implanted replacement device, according to CMS.

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