CMS Guidance for Implants

Charging policies for implanted devices have long posed a challenge for hospital CDM management. For years, CMS has discussed high cost devices and device pass-through payment policies but stopped short of manualizing specific language or providing specific policy guidance. Despite industry discussion over the decades, hospitals have been forced to contend with subjective and variable policies.

In March of 2022, industry experts were relieved to finally see CMS stepping up with manualized implant billing rules and definitions in an update to the Medicare Claims Processing Manual guidance on device code reporting. Although welcomed and necessary, the CMS language will likely take a slow pace making its way into payer policies, audit protocols, and CDM industry-standard practice.

CMS Guidance

CMS published device billing rules effective April 1, 2022 in its April 2022 Update of the Hospital Outpatient Prospective Payment System (OPPS). ChargeAssist® customers can find this guidance in the ChargeAssist Document Center and Document Search.

The “Billing for Devices Under OPPS” section refers to a CMS manual update clarifying long-standing device definitions and billing rules. We summarize the key takeaways below, but to view the full referenced text, click the box below to expand.

*Newly-added language in bold text

Section 61.1 – Requirement that Hospitals Report Device Codes on Claims on Which They Report Specified Procedures

(Rev. 11305; Issued: 03-24-22; Effective: 04-01-22; Implementation: 04-04-22)

Effective January 1, 2005, hospitals paid under the OPPS (bill types 12X and 13X) that report procedure codes that require the use of devices must also report the applicable HCPCS codes and charges for all devices that are used to perform the procedures where such codes exist and are designated with a status indicator of “N” (for packaged payment) or “H” (for pass-through device payment) in the OPPS Addendum B that applies to the date of service. If there are device HCPCS codes with status indicators other than “N” or “H” that describe devices that are used to perform the procedure or that are furnished because they are necessary for the function of an implanted device, hospitals should report the charges for those other devices on an uncoded revenue code line, but should not report the HCPCS codes for those items. Typically, payment for the costs of all internal and external components required for the function of a nonpass-through device is packaged into the APC payment for the associated procedure in which the device is used. Accurate reporting of HCPCS codes and charges for these internal and external device components is necessary so that the OPPS payment for the associated procedures will be correct in future years in which the claims are used to set the APC payment rates.

For procedure codes that require the use of devices that are not described by a specific HCPCS code, hospitals should report HCPCS code C1889 (Implantable/insertable device, not otherwise classified) and charges for all devices that are used to perform the procedures.

Such devices must:

  • Have received FDA marketing authorization, have received an FDA investigational device exemption (IDE) and have been classified as a Category B device by FDA in accordance with 405.203 through 405.207 and 405.211 through 405.215, or meets another appropriate FDA exemption from premarket review;
  • Be an integral part of the service furnished;
  • Be used for one patient only;
  • Come in contact with human tissue;
  • Be surgically implanted or inserted (either permanently or temporarily); and
  • Not be either of the following:

(a) Equipment, an instrument, apparatus, implement, or item of the type for which depreciation and financing expenses are recovered as depreciable assets as defined in Chapter 1 of the Medicare Provider Reimbursement Manual (CMS Pub. 15-1); or

(b) A material or supply furnished to a service (for example, a suture, customized surgical kit, scalpel, or clip, other than a radiological site marker).

Manufacturers frequently package a number of individual items used with a device in a particular procedure. In cases of devices that are described by device category HCPCS codes whose pass-through status has expired, or HCPCS codes that describe devices without pass-through status, and that are packaged in kits with other items used in a particular procedure, hospitals may consider all kit costs in their line-item charge for the associated device/device category HCPCS code that is assigned status indicator “N” for packaged payment. That is, hospitals may report the total charge for the whole kit with the associated device/device category HCPCS code. Payment for device/device category HCPCS codes without pass-through status is packaged into payment for the procedures in which they are used, and these codes are assigned status indicator “N.” In the case of a device kit, should a hospital choose to report the device charge alone under a device/device category HCPCS code with SI=”N,” the hospital should report charges for other items that may be included in the kit on a separate line on the claim. Hospitals may use the same revenue code to report all components of the kit.

We find it interesting that the “incident to” verbiage was omitted in the new language under item (b) (“A material or supply furnished (incident) to a service”). We will watch for potential verbiage correction by CMS. This is based on the Code of Federal Regulations language found at 42 CFR § 419.66 – “Transitional pass-through payments: Medical devices.” The current verbiage may continue to cause some variability in payer interpretation of “billable items,” and it still stops short of the generic term “routine supply” that we see used by some payers and auditors.

This new clarity of “chargeable devices” definitions above may cause industry ripples for years as hospital teams, payers, auditors, consultants, and vendors may now need to revisit obscure or subjective interpretations for how implanted devices should be interpreted.

Hospital CDM and revenue cycle teams will want to review the revised guidance and meet with clinical, ancillary, support, and contracting staff to ensure that all are clear on these refined definitions. To fully comply with CMS guidance, teams may need to consider line item auditing of device CDM sections. For the long term, file maintenance and data monitoring efforts should be assigned, scheduled, documented, and executed consistently to keep CDM device charges at the highest level of charge data accuracy possible.

ChargeAssist® users can utilize the product’s audit modules as well as the resource modules for ensuring a compliant device charge maintenance program. Check for invalid codes, quarterly changes, and pricing (if not calculated dynamically based on cost).

Past Guidance on Implants

In this section, we provide an overview of how guidance on, and scrutiny of, implant charge policies have evolved over the decades.

Overview of Implant Charge Data Concerns

CMS and many commercial payers differentiate their definitions and categorization of implanted devices and treat them differently than lower-cost supply items. Correct charge data management of implant charge items includes:

  • Development of accurate definitions of implants to comply with Medicare and other payer contract terms
  • Assurance of correct and synchronized patient accounting and other applicable files that link charge capture with claims processing (varies by hospital information system (HIS))
  • At least quarterly verification of data in masterfiles (HCPCS coding, revenue codes, price, etc.) to ensure accurate claims
  • Consistent and clear descriptions for all applicable masterfiles and applications (including public view price transparency files, billing, materials, surgery, order entry, and other workflow tools)
  • Internal consistency in HCPCS device definitions within hospital charge policies (including use, the permanence of the product in the body, use of CMS definitions, use of other payer definitions, etc.)
  • Accurate and timely pricing and charge capture
  • Synchronization of CDM with other applicable masterfiles
    • Ongoing accuracy with implant/supply source files to represent the organization’s current product inventory of items
  • Plans for charging, pricing, and coding of special-order or on-demand implants provided for case-specific needs
  • Knowledge of hospital-adopted device definitions, charge policies, pricing policies, CDM maintenance requirements, payment rules under current CMS policy, and other critical information
  • Quick and knowledgeable action when implant charge items trigger claims edits

CMS and other payers’ differing interpretations of implants have left hospitals struggling with revenue code assignment. At the root of the confusion is how each hospital and health care system defines “implants.” We believe the 2022 manual updates will lessen this challenge.

In addition to Medicare’s separate cost report category for high cost supply items, commercial insurers often pay additionally for implants through various contract terms. Utilizing more specific implant definitions will ensure more defensible, compliant, and accurate claims. It will also make CDM management, auditing, and monitoring easier.

Background

In 2009, CMS modified its rules for hospital reporting of low-cost supplies and high cost devices on the Medicare Cost Report. CMS determined that revenue code assignment would be the most logical vehicle for mapping charges to the associated cost centers. The new cost center represents “Implanted Devices Charged to Patients” intended for high cost devices. The alternative original cost center of “Medical Supplies Charged to Patients” was retained for reporting supply items not meeting the criteria for the new cost center.

Based on public comment on language within the CMS 2009 IPPS Proposed Rule, it became clear that there remained confusion about revenue codes for “Other Implants.” The 2009 Final Rule language clarifies Medicare’s modified policy and definitions.

Within the guidance, CMS provided a definition of “implant” which varied from that provided by NUBC and the Code of Federal Regulations (displayed later in this article). At the time, CMS stated that hospitals should use revenue codes to differentiate charges for the two cost centers. CMS felt that this would make conversion to the new cost center simple, as revenue code definitions did not change. However because of ambiguity and public comment about the definition of implanted devices, CMS stated that it would not require that the implantable device remain in the patient when the patient was discharged.

Expand the box below to view the entire excerpt from the CMS 2009 IPPS Final Rule.

“…we are instead adopting the commenters’ recommendation that hospitals should use revenue codes established by the NUBC to determine what should be reported in the ‘Medical Supplies Charged to Patients’ and the ‘Implantable Devices Charged to Patients’ cost centers. We note that use of the existing revenue codes will still generally result in implantable devices being reported in the ‘Implantable Devices Charged to Patients’ cost center because revenue codes 0275 (Pacemaker), 0276 (Intraocular lens), 0278 (other implants), and 0624 (FDA investigational devices) for the most part, generally would be used for reporting higher cost implants. However, use of the existing NUBC definitions would not require that the implantable device remain in the patient when the patient is discharged; therefore, in this respect, the policy we are finalizing differs from the one we proposed.” (bold emphasis added)

Key Definitions

The new “high cost” cost report cost center highlighted the ambiguity of the “implant” definition and how some devices should be categorized.

An incorrect device revenue code in the charging masterfile can mean payment differences leading to concerns of either lessened reimbursement or compliance risk. A publicly available NUBC proposed meeting agenda document identifies concerns with the definition of implantable devices. In the document, NUBC recognizes the ambiguity of some items’ revenue code assignments. At the time of this dialogue, the historic NUBC definition appeared to be as follows:

“Implantables: That which is implanted, such as a piece of tissue, a tooth, a pellet of medicine, or a tube or needle containing a radioactive substance, a graft, or an insert. Also included are liquid and solid plastic materials used to augment tissues or to fill in areas traumatically or surgically removed. An object or material partially or totally inserted or grafted into the body for prosthetic, therapeutic, diagnostic purposes…Examples of Other Implants (not all-inclusive): Stents, artificial joints, shunts, grafts, pins, plates, screws, anchors, radioactive seeds.”

The NUBC definition (above) and the more general CMS definitions of the past continued to leave hospitals unclear about some charge items’ proper revenue code assignments. To compound the confusion, historic regulatory language in the Code of Federal Regulations 21 CFR Part 860 stated:

“… Implant means a device that is placed into a surgically or naturally formed cavity of the human body. A device is regarded as an implant for the purpose of this part only if it is intended to remain implanted continuously for a period of 30 days or more, unless the Commissioner determines otherwise in order to protect human health.”

Commercial insurances and auditors alike have continued to apply inconsistent implant definitions. Many hospitals have struggled with identifying the appropriate revenue code for certain charge items. In the absence of hospital-specific policies, teams are frequently unclear about the use (temporary vs. long-term) of these devices as well as the fundamental question of whether the item is truly “implanted.”

All of these ambiguities lead to the question of whether the item is separately charged as a supply or an implant, driving CDM revenue code and cost report data decisions. The lack of clarity even creates the question of whether items can be separately charged under payer policies when payers introduce vague terms such as “routine supplies.” The new guidance from CMS in March 2022 should remove much of the confusion with specific language manualized in the CMS hospital billing guidance.

Developing an Action Plan

To ensure a consistent masterfile population strategy, hospital teams may wish to document organization-specific definitions (using the new CMS manualized language) and include the policies supporting implant charge data population and billing protocol. In addition to confirming whether a class of supply/device items meet the definition of implant, it will also be important to confirm policies for HCPCS Level II codes, pricing, charge capture, and description standards.

In formalizing your hospital’s internal implant definitions, the CDM manager should ensure consistency in definitions and policies house-wide. Internal research of various payer requirements, contracted payment terms, and claims edits for different insurance companies is essential. As we have found, even when using the available revenue code, HCPCS, and implant definitions, there will be some ambiguities among payers and auditors.

CDM maintenance is a never-ending process. Changes such as the revised 2009 high cost device cost report category or the clarified 2022 language can have significant implications if data is inappropriately populated in master files. To avoid charge policy confusion, hospitals must refine and possibly expand policies with clear and contemporary definitions.

We believe tackling supply and device charge data policies today will result in fewer downstream challenges with claims and cost report data. Contact Panacea if your organization needs CDM tools to support audit, synchronization, and research on medical devices. Consulting, coaching, and educational support is also available if policies need to be fine-tuned.