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October 5, 2017

Medicare doled out $1.5B to replace defective cardiac devices over a decade

Daily Briefing

Medicare paid at least $1.5 billion from 2005 to 2014 to replace seven types of defective cardiac devices that failed on thousands of Medicare beneficiaries, according to a report released Monday by HHS' Office of the Inspector General (OIG).

According to the New York Times, the report is the first by any government agency to examine the financial losses to taxpayers and Medicare beneficiaries over faulty medical devices.

Report details

For the report, OIG identified claims for all services provided to Medicare beneficiaries who received replacements for seven types of cardiac devices from three unidentified manufacturers that had been recalled or had high failure rates over a decade. OIG selected a random sample of 526 claims from 2005 to 2014 to review the costs associated with the replacement of the devices and estimated the costs of Medicare services related to replacement of the devices. OIG in the report called the estimates "conservative."


Overall, OIG estimated Medicare from 2005 to 2014 paid at least $1.5 billion to cover services related to the replacement of seven types of detective cardiac devices, which were either recalled or prematurely failed. Meanwhile, Medicare beneficiaries spent $140 million in copayment and deductible liabilities on services related to the replacement of detective devices, according to the report.

OIG found about 73,000 Medicare beneficiaries replaced at least one of the seven types of cardiac devices—which included implanted cardio defibrillators and pacemakers—because of:

  • An infection;
  • A medically necessary upgrade;
  • A premature failure; or
  • A recall.

According to the audit, medical device recalls roughly doubled from 2003 to 2012—likely costing Medicare billions of dollars. More than 200 cardiac devices were recalled in the past five to six years, OIG found. Device makers in most cases voluntarily withdrew the products from the market after reports emerged of malfunctions and injuries. According to the New York Times, device manufacturers are required to report any problems with their devices to an FDA database.


OIG recommended that hospitals and doctors be required to submit detailed information, such as serial and batch numbers, through their Medicare claims.

OIG said, "This could help reduce Medicare costs by identifying poorly performing devices more quickly, which could also protect beneficiaries from unnecessary costs and improve their chances of receiving appropriate follow-up care more quickly."

To facilitate such data reporting, OIG advised CMS to take steps that would allow detailed medical device data to be submitted with Medicare claims. Specifically, OIG recommended CMS:

  • Continue working with the standards organization Accredited Standards Committee X12 to ensure device identifier information is included on the next version of Medicare claim forms; and
  • Require hospitals use condition codes 49 or 50 on Medicare claims to report a device replacement procedure that resulted from a defective device, regardless of whether the device was provided at no additional cost.

CMS Administrator Seema Verma in written remarks included in the audit said the recommendation for more detailed reporting is under consideration, and the agency will "carefully evaluate the potential that this policy would impose a burden on physicians unnecessarily."


David Lamir, an OIG official, said the $1.5 billion estimate represents a "drop in the bucket" in terms of the actual costs to Medicare over faulty devices. Lamir said in addition to the high financial costs, defective devices expose patients to a "high risk of illness," such as unnecessary surgeries.

Diana Zuckerman, president of the National Center for Health Research, said her organization is in favor of hospitals reporting faulty devices when they seek Medicare reimbursements to cover implant surgeries. Zuckerman said such a change would allow officials to identify defective devices ahead of a recall.

However, health care providers and medical device makers in the past have opposed increasing reporting requirements through the billing process, the Times reports.

Mark Leahey, who leads the Medical Device Manufacturers Association, said, "It is abundantly clear that  data collected in [EHRs] is a far superior and more cost-effective method for monitoring the performance of medical devices." Leahey added that an EHR "captures the full clinical history of the patient, their changing health status and detailed information on their medical treatments" (Schulte/Jewett, New York Times, 10/2; HHS' OIG release, 10/2; HHS' OIG audit, 10/2).

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