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Examples: Generating Outlier Payments When Reporting Charges and Credits for Medical Devices

Here are examples of the correct and incorrect ways of reporting charges and credits for replaced medical devices that will generate outlier payments, which is the target of a new audit by the HHS Office of Inspector General (“With Request for Vendor Memos, OIG Begins Audit of Outlier Payments and Device Credits,” RMC 28, no. 10). These examples were developed by Stephen Gillis, director of compliance coding, billing and audit at Partners HealthCare in Boston. Contact him at sjgillis@partners.org.

Assumptions:
device cost = $10,000
charge amount for device based on a markup of 2x = $20,000
Original Claim
Original Claim total charges (includes device)$50,000
Original claim total payment$15,000
Difference between charges and payments$35,000
Outlier triggered?No
Hypothetical Scenario 1
Device credit received, greater than 50% of cost$6,000 New cost for the device is $4,000 with 2x markup equals new charge of $8,000.
Claim adjusted to reflect FD value code with $6,000 value code will decrease APC payment by $6,000.
Forgot to reduce the $20,000 charge to reflect a reduction in the cost of the device so total charges remain at $50,000
Revised claim #1 - with incorrect chargesRevised claim #1 - with correct charges
Revised Claim total charges (includes device)$50,000 Revised Claim total charges (includes device)$38,000
Revised claim total payment (from FD = 6,000)$9,000 Revised claim total payment (from FD = 6,000)$9,000
Difference between charges and payments$41,000 Difference between charges and payments$29,000
Outlier triggered?YesOutlier triggered?No
Hypothetical Scenario 2
Device credit received (full replacement cost)$10,000 New cost for the device 0 and a token charge of .00 or .01 should be reported.
Claim adjusted to reflect FD value code with $6,000 value code will decrease APC payment by $6,000.
Forgot to reduce the $20,000 charge to reflect a reduction in the cost of the device so total charges remain at 50,000
Revised claim scenario 2 - with incorrect chargesRevised claim scenario 2 - with correct charges
Revised Claim total charges (includes device)$50,000 Revised Claim total charges (includes device)$30,001
Revised claim total payment (from FD = 10,000)$5,000 Revised claim total payment (from FD = 10,000)$5,000
Difference between charges and payments$45,000 Difference between charges and payments$25,001
Outlier triggered?YesOutlier triggered?No
Reporting the device credit with FD value code reduces the APC payment amount by the amount of the credit.
If you forget to reduce the charges to reflect the lower cost for the device, the gap between charges and payment increases and can sometimes cause an outlier situation.
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