Shortcomings of Device Claims Data Complicate and Potentially Increase Medicare Costs for Recalled and Prematurely-Failed Devices

We determined that Medicare costs related to the replacement of all recalled or prematurely failed medical devices could not be identified and tracked using only Medicare claim data. Such costs cannot be determined using only claim data because, although Medicare claim forms identify the medical procedures performed, they do not contain a field for reporting medical device-specific information. The lack of information on the claim forms prevents the Centers for Medicare & Medicaid Services (CMS) from being able to fully understand and address the Medicare costs related to recalled or prematurely failed medical devices. In addition, the lack of information impedes the Food and Drug Administration and CMS's ability to identify poorly performing devices as early as possible. This diminishes device recipients' chances of receiving timely followup care.

To examine the costs Medicare incurred because of recalled or prematurely failed medical devices, we reviewed the Medicare costs associated with seven cardiac devices from three manufacturers that had been recalled or had high failure rates over a 10-year period.

We estimated the cost of Medicare services related to the replacement of seven recalled and prematurely failed cardiac devices totaled $1.5 billion over the 10-year period ending on December 31, 2014. In addition, we estimated that beneficiaries had $140 million in copayment and deductible liabilities related to these replacements and their related services and procedures.

To facilitate the use of claim data to identify and track the additional health care costs incurred by Medicare resulting from recalled or prematurely failed medical devices, we specifically recommend that CMS: (1) continue to work with the Accredited Standards Committee X12 to ensure that the Device Identifier is included on the next version of claim forms and (2) require hospitals to use condition codes 49 or 50 on claims for reporting a device replacement procedure if the procedure resulted from a recall or premature failure independent of whether there was a device provided at no cost or with a credit.

In written comments on our draft report, CMS stated that our first recommendation is a policy that is under consideration. CMS stated that it would carefully evaluate the potential that this policy would impose an unnecessary burden on physicians. CMS stated that it concurred with our second recommendation "in cases where payment is impacted." We continue to recommend that CMS require hospitals to use condition codes 49 or 50 on claims for reporting a device replacement procedure if the procedure resulted from a recall or premature failure regardless of whether there was a payment impact.