By Al Brander, VP of Clinical Services
As a former Chief Nursing Officer at Spectrum Health, I’ve seen firsthand how crucial it is for Integrated Delivery Networks (IDNs) to manage their finances effectively. One major issue that often gets overlooked is handling warranty credits for medical devices removed from patients. If not managed properly, these credits can lead to significant financial losses and fines.
One project that I have personally overseen for several clients is a mapping project, wherein I work with the client to map out the end-to-end policies and procedures that govern their process for managing these warranty credits.
Performing this project and delivering the results to clients has shed light on process inefficiencies, financial risks, and lost money, providing a clear path for improvement and better financial management.
Why is This Important?
Managing warranty credits can be complex, and hospitals must claim them and return amounts over 50% of the device’s cost to the Centers for Medicare & Medicaid Services (CMS). Non-compliance can lead to heavy fines, with the Office of Inspector General (OIG) finding that all U.S. hospitals have some level of non-compliance.
CMS estimates these mistakes cost $1.5 billion annually, and the government plans to recover these funds through audits. Fines range from $13,508 to $27,018 per instance, and hospitals must repay three times the credit amount if the explant is not returned or the overpayment is not reported.
The Mapping Project
During the project, SpendMend will map out your current process. This involves speaking with key departments to understand their procedures and identifying areas for improvement. We will investigate the following topics:
Clinical (Cath/EP Lab and Surgery):
- Booking and confirming explant cases
- Contacting manufacturer’s rep
- Documenting explants
- Determining warranties or recalls
- Recording and shipping explants
Accounts Payable (A/P):
- Identifying and processing warranty credits
- Determining the 50% threshold
- Updating UB-04 forms
- Handling credit reports
Patient Revenue:
- Updating UB-04 forms
- Using condition and value codes
- Modifying original UB-04 forms
Our detailed project output provides a comprehensive analysis and actionable insights into your current processes – including the following key elements:
- Policy and Procedure Review: We will review any current policies and procedures related to managing explanted devices and warranty credits.
- Mapping and Analysis: After gathering information, we create a visual map of your process to identify gaps, inefficiencies, and risks.
- Assessment of Potential Mismanaged Credits: Identifies overlooked or inadequately pursued credits, revealing financial exposure.
- Potential Costs to Your Organization: Highlights costs from mismanaged credits, including fines and penalties, to prioritize corrective actions.
- Opportunity for Recouping Overpaid Medicare Amounts: Identifies discrepancies to recover funds previously overlooked.
Future State and Change Management: If you choose to move forward and work with SpendMend to create a solution for managing warranty credits, we will create a ‘future state’ process map, including a change management plan to help migrate your process toward an ideal state while continually enhancing compliance and efficiency.
The Final Word
Mismanaging explanted medical device warranty credits is costly. By mapping out and improving your processes with SpendMend, IDNs can ensure compliance, recover lost funds, and avoid penalties. Even if a medical device warranty credit audit isn’t your next step, the insights gained from the mapping project will undoubtedly shed light on this process and adjacent processes. New ideas for efficiency will emerge, providing lasting value and enhanced visibility into your operations. Take action today to protect and improve your organization’s financial health.
