“The medical device area is particularly susceptible to kickbacks for physicians…..because there are so many different types of devices that there is more room for physicians’ discretionary decisions about whether or not to prescribe or recommend certain devices for their patients,” says Sara Lord, a former Justice Department attorney.

She notes, for example, that incentives for doctors to use products, particularly new products, are rarely a direct payment for using a device. Instead, device companies or distributors may ask a prominent physician to try their product and then offer to pay them for spreading the word about it.

Providers also need to ensure that any discounts they receive from a manufacturer or distributor are reflected in Medicare billing. “Hospitals have to be scrupulous in their accounting and submission of claims,” says Lord, adding that can require a lot of diligence about what products actually cost at the time they are purchased or ordered for patients.

It’s not just kickbacks and fraud that take a toll on Medicare. Recalls and high failure rates associated with just seven devices cost Medicare $1.5 billion and beneficiaries $140 million in out-of-pocket costs, according to a preliminary report by OIG. The OIG urged CMS to incorporate device-specific information on claims forms to identify and track costs related to defective or recalled devices.

To help prevent fraud, the Centers for Medicare & Medicaid Services issued guidance this summer warning physicians about kickbacks, billing Medicare for free samples, and sham consulting arrangements that aim to buy product loyalty. The agency also released a toolkit for avoiding fraud, waste, and abuse.

The Physician Payments Sunshine Act, part of the Affordable Care Act, requires device, drug, and biologics companies to publicly report all gratuities to physicians and teaching hospitals totaling more than $10. “If you are uncertain whether a conflict exists, apply the ‘newspaper test’ and ask yourself whether you would want the arrangement to appear on the front page of your local newspaper,” the guidance says.

Overall, Lord believes hospitals and other providers are doing a good job of preventing medical device fraud. “I would say it’s prevalent, but … what tends to happen is that the government focuses on a certain practice and the industry gets the idea pretty quickly that this is an area that they need to be very careful about,” she says. “So they make sure that they’re being careful in their claims for those kinds of products or that type of conduct.”