UDI, Implant Logs and Claims: Connecting the Device to the Paid Procedure

Matching a medical device UDI to Medicare claims means connecting the implant’s identity to the procedure and the hospital’s bill. The manufacturer may record a sale when the product is implanted. The hospital records the operation. Medicare usually pays for the procedure or stay, with the implant’s cost inside that payment. The hospital should not be charged for an implant the surgeon never used. If you work in device sales, the operating room or hospital billing, you may recognize the discrepancy between what was used, what was charged and what the payer was told.

What Does a UDI Identify?

A UDI identifies a medical device on its label. The Food and Drug Administration’s unique device identifier rule generally requires that labeling and requires labelers to submit product information to the Global Unique Device Identification Database. It also generally requires direct marking for devices intended for repeated use and reprocessing.

We examine the identifier alongside available lot and serial records, the implant log and the account of the surgery. The aim is to establish which product reached the patient.

Lot identity can matter as much as the product name. In a whistleblower complaint concerning LivaNova, the whistleblower alleged that the company received repeated complaints about devices from a particular manufacturing lot, continued selling devices from that lot and failed to notify physicians and patients who already had them. The allegation makes the tracing question concrete: which devices from that lot reached patients, and which encounters followed?

Why the Medicare Claim May Not Name the Implant

In August 2019, the Centers for Medicare & Medicaid Services told the Department of Health and Human Services’ Office of Inspector General that the recommendation to put device identifiers on claims remained unimplemented. Auditors had to turn to hospital records to identify the implant behind a bill.

A claims analysis can describe a spinal fusion, a defibrillator implantation or a replacement procedure while leaving the product identity to be established elsewhere. The implant log and purchasing records can supply the product detail the procedure description leaves out.

Public adverse-event and recall data answer another part of the inquiry. The Food and Drug Administration warns that adverse-event reports can be missing, inaccurate, unverified or duplicated, and that they lack the device-use totals needed to calculate an event rate. Recall counts have a similar denominator problem. A public safety signal gives us a product question to investigate. The clinical and financial records connect that question to a patient encounter and its payment.

When Implantation Becomes the Sale

In a consignment arrangement, an implant can be in the hospital without yet belonging to the hospital. The manufacturer may retain ownership until use. That makes the use record part of the commercial transaction as well as the clinical story.

Medtronic’s financial disclosures describe control of consigned inventory transferring when the product is used or implanted. Edwards Lifesciences likewise recognizes revenue on consigned products when the customer implants or uses them, and periodically reviews consignment inventory to confirm customer reporting. The manufacturer has a reason to know which products were used: that is when it recognizes the sale.

The surgeon’s decision sits between inventory and billing. The Office of Inspector General’s alert on physician-owned entities explains that physicians may make or strongly influence both the brand and type of implant, even though the hospital or surgery center buys it. The person choosing the product, the business selling it and the institution submitting the claim have different records of the same event.

For someone in device sales, a restocking record may therefore be more revealing than an invoice total. For someone in hospital finance, a return or credit may change the economics of a replacement.

What Evidence Is Needed to Prove Fraud?

Medical device fraud evidence connects the product and the clinical decision to the claim, along with what the people responsible knew. The strongest account explains the discrepancy across records and who directed or understood it.

We compare the implant log and operative note with purchase, consignment and restocking records, then follow returns and credits into the encounter’s claim and payment. Each record answers a different question about the same procedure.

This comparison can reach a contradiction inside the clinical account itself. In a government complaint concerning spinal surgeries, the United States alleged that operative notes described screws at a spinal level where none had been placed. The complaint also described peer review identifying procedures claimed in operative notes that the underlying medical records contradicted. An implant entry belongs beside the rest of the clinical account, not above it.

The 2020 Journal of Forensic and Investigative Accounting paper, A Forensic Accountant’s Guide to the Most Potent Federal Laws Used Against Healthcare Fraud, places the claim for payment at the center of its False Claims Act analysis. For an implant case, that means following the discrepancy through to what the government was asked to pay for. We work with you on the records you already hold and the records you know exist.

How Does Reimbursement Work for Medical Devices?

Medicare usually includes an implanted device’s cost in payment for the hospital stay or procedure. A device code or charge line can appear on the bill while its cost remains inside that larger payment.

For inpatient care, device costs enter the diagnosis-related group payment for the stay. Hospital outpatient payment generally packages implantable and insertable devices into the payment for the service. Ambulatory surgery centers likewise generally package implanted prosthetic devices and implanted durable medical equipment.

Inpatient new technology add-on payments and outpatient transitional pass-through payments can add payment for qualifying technology. Surgery-center rules also recognize pass-through exceptions. Device-intensive status changes how a surgery-center procedure is paid. The implant remains part of that procedure payment.

The manufacturer’s sale price, the hospital’s charge and Medicare’s payment occupy different places in the transaction. The payment setting determines how a product substitution, a replacement credit or a false description could affect the bill.

The Date Matters to the Device Identifier

The Food and Drug Administration published its UDI rule on September 24, 2013, with a phased timetable. The original timetable set September 24, 2015, for UDI labeling of implantable, life-supporting and life-sustaining devices.

The rule also replaced legacy National Health-Related Item Codes and National Drug Codes assigned to devices. An older implant record may therefore use a different identifier for the same product.

What the Sales and Credit Records Can Reveal

The Restocking Record Told a Different Story

A former DePuy sales representative’s complaint against Johnson & Johnson described an alleged mismatch between the devices used, the items charged and the inventory replenished. The whistleblower said his knowledge of surgeries made the sales ledger’s account of product use implausible:

The complaint’s point is blunt: hospitals were allegedly billed for expensive products that the representative knew had not been used. According to the complaint, the shelves were replenished with those expensive items after cheaper devices went into patients.

Management Compared Surgeon Payments With Product Use

Life Spine agreed to pay $5.5 million in a civil settlement over alleged inducements to use its spinal products in procedures billed to Medicare and Medicaid. The company’s admissions included management reports comparing payments to surgeons with their use of its products and a return-on-investment calculation.

Those reports connect the commercial incentive to the physician’s choice. They also show why an investigation of implant billing reaches beyond the billing department: management may already have measured the connection between money paid to a surgeon and devices used in surgery.

A Replacement Credit Changed What the Government Owed

St. Jude Medical agreed to a $3.65 million settlement in May 2012 over allegations that it withheld warranty credits when billing the Defense Department and Veterans Affairs for replacement pacemakers and defibrillators. The alleged discrepancy was between the replacement bill and the warranty credit owed to the government buyer.

For Medicare hospital claims, replacement credits raise a separate payment question. Qualifying free replacements or manufacturer credits can require a reduction in the hospital payment. We examine the original device, the replacement, the manufacturer’s credit and the hospital’s claim together. The credit record can explain why the amount billed should have changed even though a replacement procedure really occurred.

A Medical Device Whistleblower Case

A whistleblower case under the False Claims Act can pay 15% to 30% of what the government recovers. If you recognize a mismatch between the implant records and the bill, our experts can work with you on what it means for a case.

When You Know What Went Into the Patient

If you know the implant log, sales ledger or credit record tells a different story from the bill, bring that discrepancy to our whistleblower experts. We work with you to build the case from the device through the clinical decision to the claim, and bring in medical device fraud whistleblower lawyers who understand hospital reimbursement. We stay beside you as your partners throughout the case.