The OIG Work plan: Potential Implications for Medical Device Manufacturers and Suppliers

By Rosemary Weghorst
June 8, 2015


• Categories: 05-Quality/Regulatory, Market Access, RC - Medical Device Audits, Certification & Verification

The OIG plan for 2015, re-released in May, with updates from the plan that was released in October 2014, demonstrates a pattern of what we have seen in the past, as well as the addition of a few new items. Of note, the OIG will continue its investigative actions focused around their strike force teams (formed in 2007) and the Health Care Fraud Prevention and Enforcement Action Team (HEAT) (started in 2009). The OIG highlighted that their strike force activities from October 1, 2014 to March 21, 2015 have resulted in more than $163 million in fines and charges against 69 individuals or entities. The OIG will also continue to investigate companies that manipulate payment codes and submit false claims, as well as review business arrangements that could violate the Anti-Kickback Statute.

This year’s work plan, with updates, includes several items that will impact medical device manufacturer and suppliers. The following areas are a few items that are worthy of note.

Oversight of Postmarketing Studies of Approved Drugs

In order to assess serious risk associated with approved drugs, Section 505(o)(3) of the Food and Drug Administration Act of 2007 (more commonly known as FDAAA) provides the FDA authority for additional testing of approved drugs and biological products. In 2015, the OIG will be assessing to what degree the FDA actually requires such additional testing and the FDA’s enforcement actions against organization that do not comply with the FDA’s requests and requirements. While this review from the OIG does not come out until 2016, manufacturers will want to assess the (1) implications to medical device post-market studies and (2) the potential implications to their overall clinical study process.

Review of Financial Interests Reported Under the Open Payments Program

In May 2015, the OIG added a new provision to the OIG work plan related to a review of the financial interests provided through the Open Payments Program. With the goal being accuracy and public transparency, the results may lead to new or additional clarification on the reporting payment process, especially given the fact that CMS is expected to publish the 2014 data at the end of June 2015. While the report is not due out until FY 2016, it will be interesting to see if and how the OIG review impacts payment reporting going forward.

Equipment and Supplies – Billing and Payments

A continued area of focus for the OIG this year is supplier documentation around medical necessity. Several areas are under review this year: 

1. Nebulizer machines and related drugs
2. Power mobility devices (PMDs)
3. Frequently replaced supplies
4. Diabetes testing supplies.

The OIG report highlights the fact that previous reviews determined that suppliers received $46 million for inhalation drugs related to nebulizers that the OIG later classified as overpayments. Suppliers need to ensure that their process and documentation (including critical coding modifiers, physician orders, and refill requests) are appropriately collected and sufficiently organized, specifically when it comes to the requirements of documenting medical necessity and demonstrating that items are “reasonable and necessary” as defined by the Social Security Act § 1862 (a)(1)(A). The industry should expect reviews from the OIG on both these areas in FY 2015.

Equipment and Supplies – Quality of Care and Safety

Another area of interest for suppliers this year will be the OIG’s review of how the competitive bidding process impacts access to durable medical equipment. Concerns have been raised that competitive bidding in certain areas could limit access to certain parts of the population. It should be noted that this review was not in the OIG’s original 2015 plan, but that it was recently added to their scope of review in their updated work plan released in May. The industry should expect a review from the OIG on this issue in 2016.

Equipment and Supplies – Policies and Practices

The OIG will be reviewing opportunities to reduce Medicaid payments for certain medical equipment and supplies. This will be assessed both through a review of the competitive bidding process as well as assessing some the negotiated rebates provided by manufacturers. The OIG report highlighted that rebates for items like blood glucose strips resulted in lower net payments.  Look for this review in FY 2015.

Medicare Costs Associated with Defective Medical Devices

In November 2014, the Washington Post, citing a recent report from the Department of Health and Human Services, published an article regarding the potential for hospitals to be making “millions” of dollars for charging Medicare for replacement medical devices that they are receiving for free from the manufacturer.1 Such examples highlight why the OIG is taking a closer look at the billing and tracking of devices in these types of scenarios. Although the focus of the OIG’s work plan is on hospital compliance and billing practices, there is an inherent reliance on manufacturers and an underlying assumption that they are effectively tracking their medical devices and sampling methodologies. The implications?  Manufacturers need to ensure that they have procedures in place that adequately track and control their sampling, as well as policies that define when and how they provide free samples and the amount of samples to be provided. These policies not only need to encompass the sampling that is often common in order for physicians to review certain products while working in the field, but also should take into account practices regarding warranties and replacements. Medical device companies also need to make sure not that only that they have an effective device recovery procedure in place, but also that the procedure is being effectively executed with clear delineation of responsibilities and appropriate measures to account for non-compliance regarding returns of medical devices and capital equipment. Last, but not least, there needs to be a supported program in place to ensure that compliance is monitoring and auditing the process to ensure that procedure is being followed. The industry should expect to see a review from the OIG on this issue in FY 2015.

Conclusion

Many of the items seen in the OIG work plan are items that industry has seen before, but some of the newer items indicate that we should prepare for changes down the road. For many suppliers, the focus seems to continue to be on improving controls and documentation around billing and medical necessity. For medical device manufacturers, they should keep a close eye on two new items (1) the reviews regarding open payments and how the OIG review might bring new insights into payment reporting expectations in the future, and (2) the OIG’s review of FDA and post-marketing trials data collection, as this could have an impact on the manufacturer’s post-marketing data collection process as well as impact the cost of how they structure their post-marketing studies overall.

The views and opinions expressed in this article are those of the author and do not necessarily reflect the opinions, position, or policy of Berkeley Research Group, LLC or its other employees and affiliates.

Reference

1. Johnson, D. (2014 November 13).“Hospitals Pocketing Taxpayer Cash for Free Devices.” The Washington Times. Retrieved from: http://www.washingtontimes.com/news/2014/nov/13/golden-hammer-hospitals-pocketing-cash-for-free-de/#ixzz3c16ZylrG