Page 6 - Medicare Benefit Policy Manual
P. 6

See the Medicare Secondary Payment (MSP) Manual, Pub. 100-05.

                   40.4 - Items Covered Under Warranty
                   (Rev. 1, 10-01-03)
                   A3-3152.D, HO-260.2.D

                   When defective equipment or a defective medical device is replaced under a warranty,
                   hospital or other provider services rendered by parties other than the warrantor are
                   covered despite the warrantor’s liability.  However, see the Medicare MSP Manual (CMS
                   Pub. 100-05) for requirements for recovery under the liability insurance provisions.

                   With respect to payment for the device itself under cost reimbursement, the following
                   rules apply:

                       •  If equipment or a device is replaced free of charge by the warrantor, no program
                          payment may be made, since there was no charge involved.

                       •  If replacement equipment or device from another manufacturer had to be
                          substituted because the replacement offered under the warranty was not
                          acceptable to the beneficiary or the beneficiary’s physician, payment may be
                          made for the replaced device.

                       •  If the warrantor supplied the replaced equipment or device, but some charge or a
                          pro rata payment was imposed, program payment may be made for the partial
                          payment imposed for the device furnished by the warrantor.

                       •  If an acceptable replacement could have been obtained free of charge under a
                          warranty but the provider chose to purchase one instead, payment cannot be made
                          for the purchased device under the prudent buyer rules.  (See Provider
                          Reimbursement Manual, Part 1, §2103.)

                       •  If an acceptable replacement could have been purchased at a reduced price under
                          a warranty but the full price was paid to the original manufacturer or a new
                          replacement was purchased from a different manufacturer or other source,
                          coverage is limited to the amount that would have been paid under the warranty.

                   While payments to a hospital for inpatient services under the prospective payment system
                   (PPS) are not reduced to reflect collections under warranty provisions for medical
                   devices, cost-based reimbursed hospitals and exempt units are subject to the prudent
                   buyer rules.

                   40.5 - Members of Religious Orders
                   (Rev. 1, 10-01-03)
                   A3-3152.E, HO-260.2.E
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