In addition to the other recent reports of the Centers for Medicare and Medicaid Services (CMS) overpaying hospitals, the Office of Inspector General (OIG) has just announced that Medicare has been giving hospitals too much for cochlear implant replacements. According to the investigation, CMS shelled out an unnecessary $10 million for cochlear devices replaced without cost between 2012 and 2014.

When a cochlear implant is recalled and has to be replaced, this swap is coded in one of two specific ways. Prior to 2014, the service would have been coded with Modifier FB (Item provided without cost to provider, supplier or practitioner, or full credit received for replaced device) appended to the procedure code, not the code for the device itself. Since 2014, however, the guidelines changed to instead require value code FD (Credit received from the manufacturer for a replaced medical device) and condition code 49 (Product replacement within product lifecycle) or condition code 50 (Product replacement for known recall of a product). If the new device is more expensive than the old one, the facility can charge for the difference.

The procedure for replacing the cochlear implant should be billed as usual. However, there are a few scenarios that will result is a lower overall reimbursement:

• Replacing the implant does not constitute a cost to the patient or to the provider
• The provider receives full credit for the cost of replacing the implant
• The provider receives at least 50% of the credit for the cost of replacing the implant

If you work for a hospital or other facility that performs a large number of these cochlear implant replacements, be sure to review the proper code and modifier usage to ensure that you’re filing your claims correctly. Even if an error is working in your favor and getting you extra reimbursement, that sort of issue makes a prime target for a costly audit down the road.