Back office relief: Automating the arcane world of device warranties

When devices such as pacemakers and defibrillators malfunction or are recalled, manufacturers may refund part or all of the cost of the replacement based on how old it is. The CMS requires hospitals to pass the credits on to Medicare, which pays for the surgeries of replaced devices. Yet, providers can keep the credits if they are less than 50% of what the hospital paid for the replacement device, which can complicate things. In addition: only certain devices are eligible for credits; electronic health records are not equipped to track warranties; vendor requirements for claims vary by device; and vendor turnaround can take months, requiring coordination across a number of departments within a hospital.

"This impacts all health systems," Schafer said. "It's a very resource intensive process and requires a proactive approach to tackle it head on."

Cardiac rhythm implants such as pacemakers and defibrillators account for more than half of all Medicare overpayments, but warranty credits could also involve cochlear implants, neurostimulators and orthopedic implants, Schafer added.

The Warranty Tracker, which is in the pilot stage, is a centralized platform that aggregates the logistics workflow—estimating the eligibility of the return, tracking when the manufacturer receives the device and notifying on the credit outcome. The reason for the explant is logged in the EHR, the EHR sends an on-screen notification to return the device to the vendor, it sends automated alerts when the 50% threshold is reached and reconciles vendor credit reports with hospital records. This minimizes risk, reduces liability and creates a more efficient process, Casady said.

Providers are also using new tools to keep them informed of safety warnings and recalls when they are purchasing equipment and devices. Tracking such warnings can help health systems improve safety measures and save time and money by avoiding potentially dangerous devices, especially as organizations look to merge and scale up, said Michael DeLuca, executive vice president of technology and client services for healthcare supply chain technology company Prodigo Solutions.

Updating back-office tasks such as warranty tracking poses cultural hurdles, because transitioning from long-standing processes that require new infrastructure, training and IT support can be difficult, said Eric Wilson, a vice president at purchasing tech company Basware. "Many just stick with manual processes because it's what they know," he said.

Coordinating back-office work can also prove challenging as systems consolidate. Jeff Friant, vice president of finance at Edward-Elmhurst Health in Illinois, said that before Edward Hospital and Elmhurst Memorial Healthcare merged in 2013, their capital acquisition processes varied—some were on paper and some were digitized. It partnered with OpenMarkets, software that helps hospitals and suppliers create a better equipment procurement process, to standardize equipment across the organization and align its data, which allowed the organization to be more proactive, Friant said.

"Oftentimes with the old materials management system, we wouldn't know what was being purchased until it got on our desks for approval, and at that point it hampers the negotiation process," he said. "It raises visibility not just with our materials management but within our leadership as well—it's not as much of a black hole. Having similar equipment also allows us to reduce variation and perform better."

But all this transformation is more than rolling out new technology. It requires a cultural shift across the organization, Friant said.

"I would describe it as a multiyear journey to get where we are today," he said. "You need everyone to buy in to a collective culture."​