Replacement of Implanted Devices Reimbursement

In recent years, there have been several field actions and recalls with regard to failure of implantable cardiac defibrillators (ICDs) and pacemakers. In many of these cases, the manufacturers have offered replacement devices without cost to the hospital or offered credit for the device being replaced if the patient required a more expensive device. In some circumstances, manufacturers have also offered to pay specific amounts for un-reimbursed expenses to persons who had replacement devices implanted through a warranty package. 

Based on this information, TRICARE will no longer be reimbursing the full cost of a replacement device if the hospital receives a partial or full credit due to a recall or service during the warranty period.  Hospitals are required to bill the amount of the credit in the amount portion for value code FD on the UB-04 form when the hospital receives a credit for a replaced device that is 50 percent or greater than the cost of the device. 

Beginning with admissions on or after October 1, 2009, TRICARE will reduce the hospital reimbursement for those diagnosis related groups (DRGs) subject to the replacement policy by the full or partial credit a provider received for a replaced device. The specific DRGs subject to the replacement device policy can be found on TRICARE’s DRG Web page at http://www.tricare.mil/drgrates/. As necessary, the DRGs subject to the replacement device policy will be updated as part of the annual DRG update.

To identify and track claims billed for replacement devices, the following condition codes must be submitted on the claim:

• Condition code 49: Product replacement within product lifecycle – Replacement of a product earlier than the anticipated lifecycle due to an indication that the product is not functioning properly – warranty.
• Condition code 50: Product replacement within product lifecycle earlier than the anticipated lifecycle due to an indication that the product is not functioning properly. Condition code 50 is used to describe that the manufacturer or the U.S. Food and Drug Administration (FDA) has identified the product for recall and replacement.

For admissions on or after October 1, 2009:

• Hospitals must use the combination of condition code 49 or 50, along with value code ‘FD’ to correctly bill for a replacement device that was provided with a credit or no cost.  The condition codes 49 or 50 will identify a replacement device while value code FD will communicate to TRICARE the amount of the credit, or cost reduction, received by the hospital for the replaced device
• TRICARE will deduct the partial/full credit amount, reported in the amount for value code FD from the final DRG reimbursement when the assigned DRG is one of the DRGs subject to the replacement device policy

For further information, please refer to www.tricare.mil. 

Published Date: 10/14/2009