The following question was posted in the WorkCompCentral Professional Forum under Medical Topics:

Question:

I am looking for input as to whether any of you have seen this billing practice and if you think the third party has legal standing to bill.

The California Fee Schedule allows additional reimbursement for spinal surgery implants under Regulation 9789.22. The allowance is for the "provider's documented paid cost" plus an additional 10% (not to exceed $250). Industry practice is to request the invoice or documentation of the paid cost before issuing payment to the provider.

A hospital who has been resistant in providing documentation of their cost is now having the manufacturer of the implants bill directly for the supply. The hospital bills for all supplies used in the spinal surgery with the exception of the implants.

Since the manufacturer manufactures the item, there is no documentation of paid cost and we are seeing bills in the $25,000 to $30,000 range for the implants. This could become a growing trend in that the providers of the hardware will get more than they do from the hospitals and as they manufacture the implants, there are no invoices to document the cost and as such, they can charge any amount. What is interesting is that on one bill, an agreement between the hospital, the manufacturer, and a third party biller is attached. In it, the hospital agrees to reimburse the manufacturer at 50% of the current hospital list price in 30 days from the date of surgery performed for any unauthorized workers compensation surgery cases.

Does the manufacturer have a legal standing to bill for the implants directly? It may not be addressed in the workers' compensation forum, but in some other code dealing with distribution and billing of medical items. I see this as a different situation than that where a pharmacy or durable medical equipment provider provides medications, hospital beds, tens units, etc based on a prescription. The implants are only used in the course of surgery yet the hospital has billed for all other supplies used during the course of surgery.

Answer

What date of service is that lien claim for? If it's from on or after 04/13/2001 and prior to 01/01/2004, then the rules in 8 CCR section 9792.1 apply. If it's on or post 01/01/2004, then the applicable rules are those in 8 CCR section 9789.22. With both of these, keep in mind that implant reimbursement is mandated for only certain Diagnosis Related Codes, as indicated below:p 8 CCR section 9792.1(c)(7) (04/13/2001 - 12/31/2003):

"(7) Implantable hardware and/or instrumentation for DRGs 496 through 500, where the admission occurs on or after April 13, 2001. Implantable hardware and/or instrumentation for DRGs 496 through 500, where the admission occurs on or after April 13, 2001, shall be separately reimbursed at the provider's documented paid cost, plus an additional 10% of the provider's documented paid cost not to exceed a maximum of $250.00, plus any sales tax and/or shipping and handling charges actually paid."

8 CCR section 9789.22(f) (01/01/2004 and after):

"(f) Implantable medical devices, hardware, and instrumentation for DRGs 496, 497, 498, 519, 520, 531 and 532 shall be separately reimbursed at the provider's documented paid cost, plus an additional 10% of the provider's documented paid cost, net of discounts and rebates, not to exceed a maximum of $250.00, plus any sales tax and/or shipping and handling charges actually paid. For purposes of this subdivision, a device is an instrument, apparatus, implement, machine, contrivance, implant, in vitro reagent, or other similar related article, including a component part, or accessory which is: (1) recognized in the official National Formulary, or the United States Pharmacopoeia, or any supplement to them; (2) intended for use in the cure, mitigation, treatment, or prevention of disease; or (3) intended to affect the structure or any function of the body, and which does not achieve any of its primary intended purposes through chemical action within or on the body and which is not dependent upon being metabolized for the achievement of any of its primary intended purposes."

(Date of service in this case the date of initial patient admission - see above.)

If the DRG of the inpatient invoice in question doesn't fall into the above DRGs, the implant hardware is not reimbursable.

When a lien claimant claims they cannot provide implant hardware cost invoices (and reimbursement therefor is due based on either of the above), I offer 25-30 cents on the dollar as in my experience the actual costs to the hospital for the hardware including the markup is 70% less than the amount the hospital indicates the supply/implant charges to be on their UB-92.

"Implants were not paid" is an argument I hear quite a bit from lien claimants requesting additional payment, but once I refer to either of the above two regulations and indicate the bill's DRG is not among those listed above they generally withdraw the lien.

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