Physician Practice-Expense Inputs: Why a Device Cost Is Not a Medicare Fee

Medical device practice expense reimbursement puts device costs into the calculation of a physician’s Medicare service fee. If a manufacturer presents that input as money the practice will receive, we want to know what it told the buyer and how the claim followed. That is the medical device fraud concern for a reimbursement, sales or practice-finance insider: a misleading payment pitch reaching the health care bill.

A product name and dollar amount in a Centers for Medicare & Medicaid Services pricing table can make a sales pitch look official. The amount the practice pays its supplier, the expense Medicare allocates to the procedure and the final physician fee answer different questions. Calling all of them reimbursement makes a sales presentation easier. It makes the economics harder to see.

How Does Reimbursement Work for Medical Devices?

Medicare generally includes an implanted device’s cost in payment for the procedure or hospital stay. In a physician’s office, supplies and equipment enter the Physician Fee Schedule through practice expense. In a hospital or ambulatory surgery center, the facility payment generally carries those direct costs. The site of service determines which payment system accounts for the device.

FDA authorization, coding, coverage and payment each answer a separate question. The Food and Drug Administration decides whether a device may be marketed. A procedure code identifies the service. Coverage determines whether Medicare covers it under the applicable conditions. Payment determines the amount and what that amount buys. A named product in a rate-setting table belongs to this last calculation.

Temporary pass-through payments in hospital outpatient care and new technology add-on payments for inpatient care are exceptions to packaging. Those facility payments serve a different purpose from a physician’s practice-expense input.

For a practice evaluating a product, the reimbursement discussion therefore reaches beyond the supplier’s price. It includes the service being performed, the coverage conditions and the setting in which the physician will perform it.

What Enters the Physician Fee Schedule

The Centers for Medicare & Medicaid Services establishes relative value units for physician work, practice expense and malpractice insurance. Practice expense includes direct clinical labor, medical supplies and medical equipment, along with allocated indirect costs such as administrative labor and office expenses.

In the office, the physician payment accounts for the staff, supplies and equipment used to deliver the service, as well as physician work and indirect expense. In a facility, another payment system carries the facility’s direct costs. The physician’s rate still accounts for professional work and allocated indirect practice expense.

That is why a device’s purchase price cannot stand in for the final service fee. The supply price enters the practice-expense calculation. The resulting relative value sits alongside the other components of physician payment, and a conversion factor translates relative values into dollars.

We want to know which number a manufacturer put in front of the practice, and which number the practice understood it was seeing.

The Brand Name Inside the Payment Table

The Centers for Medicare & Medicaid Services’ calendar-year 2026 direct practice-expense input file includes a TULSA-PRO Disposable Kit at $8,967. The same file contains descriptions naming Ellipsys, Wavelinq, Optilume and other products. A brand name is written directly into the inputs used to value a physician’s service.

That specificity can make the figure look like a product reimbursement rate. Its role in the file is narrower: it is a supply input to the payment calculation. The table identifies an item and a price used in setting relative values. The practice’s purchase agreement records what it actually pays for the item.

A slide that places the CMS input beside a purchase price needs to explain how the input reaches the service payment. Otherwise, the calculation has skipped the very step that decides what the practice can expect to receive.

We want the sales presentation to answer a plain question: what, exactly, does this number pay for?

Why the Room Changes the Number

For procedure code CPT 27278, CMS’s calendar-year 2026 file carries approximately $11,677 in nonfacility supply cost and $8 in facility supply cost. These are supply inputs for the same procedure. The office amount includes a Dorsal SI Joint Arthrodesis Implant input of $11,500.

The difference reflects where Medicare accounts for the direct expense. In the office calculation, the implant is a supply used by the practice. In the facility setting, the device cost moves into the facility’s payment system, while the physician receives the professional payment.

Same procedure. A different payment system.

This matters when a manufacturer presents office economics to a surgeon who also operates in a hospital or surgery center. The office supply input belongs to the office calculation. Hospital outpatient payment generally packages the implant into the service, and inpatient payment absorbs device cost into the payment for the stay. A comparison needs to follow the expense to the provider and payment system that carry it.

The code, setting and payment year belong beside the number in the reimbursement model. Without that connection, the same device can appear to support very different revenue projections simply because the presentation has moved between physician and facility payments.

Equipment Expense Depends on More Than Purchase Price

The agency spreads equipment expense across use through assumptions about available minutes, utilization, useful life, interest and maintenance. A machine’s capital price is the starting input for a cost-per-minute calculation. It is a different kind of input from a disposable supply used for a procedure.

In its calendar-year 2026 methodology, the Centers for Medicare & Medicaid Services uses a utilization assumption of 50% for most equipment and 90% for expensive diagnostic imaging equipment. The higher imaging assumption is set by law. It is a prescribed input, rather than a measurement of how often a particular practice uses its scanner.

Maintenance makes the distinction especially clear. The agency uses a 5% annual maintenance factor and acknowledges that the factor likely understates the cost for some equipment and overstates it for others. The agency says commenters had not identified an auditable data source it could use widely to replace the assumption.

We would not mistake that standardized estimate for the cost of maintaining a particular machine. Too low for some equipment, too high for others, and still the number in the method. The maintenance agreement tells us what that buyer agreed to pay.

The same applies to utilization. The agency’s utilization assumption and a sales projection for a particular practice serve different purposes. The projection’s equipment price, expected use and expense assumptions need to remain identifiable as the number travels from the manufacturer to the purchasing decision.

When Reimbursement Advice Reaches the Claim

Manufacturer reimbursement advice can supply the instructions a provider uses to bill Medicare. The device cases show why the connection between the sales message and the claim matters.

THD America agreed to pay $700,000 in September 2024 to resolve allegations concerning inflated Medicare and Medicaid reimbursement. The Department of Justice alleged that the company encouraged additional or substitute procedure codes to get around denials associated with a temporary code. A former employee brought the whistleblower case. The alleged mechanism ran through instructions to the surgeons who billed for the procedure.

Paradigm Spine agreed to pay $585,000 in May 2016 to resolve allegations involving unapproved coflex-F uses and false coding recommendations for coflex. A sales employee brought the case. The whistleblower’s complaint alleged that the company kept contrary coverage and coding information out of the materials used to sell the product:

That allegation puts the reimbursement message inside the sales operation. The question reaches what the company told customers and what its own materials left out.

Jet Medical’s January 2023 civil resolution also addressed alleged improper coding advice for procedures using its Allevio catheter. The government alleged that the procedure was not covered and that customers received advice to use improper codes. Here again, the manufacturer’s reimbursement advice connected the product sale to a provider’s bill.

For a disputed practice-expense representation, we follow the price or expense statement through the same business relationships: who supplied it, who relied on it and how it affected the service claim or payment calculation.

The Evidence Behind the Expense Representation

The useful evidence connects the number, its source, the company’s knowledge and its effect on payment. A price file speaks to the stated cost. The purchase agreement or invoice speaks to the transaction. Reimbursement materials and internal instructions show how the company presented those figures to the customer.

A 2020 analysis in the Journal of Forensic and Investigative Accounting, A Forensic Accountant’s Guide to the Most Potent Federal Laws Used Against Healthcare Fraud, argues that investigators need evidence directed to each part of the alleged offense. For us, that means connecting the expense statement to what the company knew and the payment it influenced.

We examine what the expense submission actually asserted, what supported it at the time and what the people preparing or approving it knew.

We also follow the reimbursement instructions into the customer practice: what reached the purchasing team, what reached billing and what the practice claimed.

A Medicare claim may not identify the particular implanted device. Purchase records, device records and clinical charts can supply details the billing data leave out. An insider who knows how the reimbursement materials were prepared may also explain why the figures in the sales presentation differ from the figures finance used.

We work through that connection with you, from the manufacturer’s representation to the provider’s payment. A whistleblower case under the False Claims Act can pay 15% to 30% of what the government recovers.

When You Know How the Number Was Chosen

If you prepared the expense submission, reviewed the reimbursement model or saw the instructions sent to a practice, speak with our whistleblower experts about the number behind the sale. We work with you to connect that inside knowledge to the payment and build your strongest medical-device whistleblower case. We bring in healthcare fraud whistleblower lawyers who understand manufacturer reimbursement advice and physician billing, and stay beside you throughout the case.