WASHINGTON—HHS’ Office of Inspector General isn’t happy with what Medicare pays for negative pressure wound therapy pumps. In a report issued Thursday, the OIG said providers pay an average of $3,604 for new pumps compared to Medicare’s purchase price of $17,165--“more than four times the average price” paid by providers.

Medicare reimburses $1,716 monthly for the pumps for the first three months. At that rate, the OIG said, providers “recouped the average cost of a new pump model in about two months. Moreover, if a beneficiary were to rent the pump for all of the 13 months allowed by Medicare, the beneficiary’s coinsurance alone ($3,599) would cover almost the entire average cost of a new pump model.”

Medicare began paying for the pumps in 2001 when there was only one manufacturer--KCI--in the market. Since then, the OIG said a number of manufacturers have introduced new pump models and are charging "substantially less" for them. Aside from its pricing analysis, the OIG noted that all of the winning bids for the pumps in the first round of competitive bidding, averaging about $1,446 a month, were lower than Medicare’s current reimbursement.

The review also found that providers were not communicating as required with almost a quarter of beneficiaries’ clinicians, and without that input, the OIG said, providers “cannot determine whether there is a continued medical need for a pump.”

The OIG included NPWT in its workplan for 2009 after a review in 2007 found that 24 percent of claims did not meet Medicare coverage criteria.

In addition, utilization rates put the category on the OIG radar. Between 2001 and 2007, Medicare payments for the pumps increased 583 percent, from $24 million to $164 million. The industry has argued, however, that use is going up because the therapy is effective.

Based on its findings, the OIG recommended that CMS should use its inherent reasonableness authority to reduce the reimbursement amount for pumps and should also include the pumps in the second round of competitive bidding.

Earlier this year, CMS said it would review all of the devices and codes in the NPWT category.

Read the full OIG report here.