Do-not-pay list saves millions, but policies need revision

September 1, 2010

Controversy continues to swirl around Medicare's two-year-old policy of not paying for what it considers preventable hospital-acquired condtions. CMS has decided for now not to expand its list of 12 serious adverse events for which it does not reimburse hospitals.

Controversy continues to swirl around Medicare's two-year-old policy of not paying for what it considers preventable hospital-acquired conditions. The Centers for Medicare & Medicaid Services (CMS) has decided for now not to expand its current list of 12 serious adverse events for which it does not reimburse hospitals.

But even as many private payers have followed Medicare's lead in denying payment for certain adverse events-such as infections, falls and pressure ulcers-a number of experts argue that the policy has gotten ahead of the science, and hospitals are being penalized for events they can't necessarily control. While it's good in theory to hold hospitals financial accountable for preventable adverse events, they say, there are dangers associated with these policies in their present form.

"We first need to measure the bad outcomes and find out roughly the extent to which they are preventable," said Peter Pronovost, MD, a medical professor at Johns Hopkins University who has spearheaded hospital infection control efforts around the country. "I believe in accountability, but it has to have scientific integrity."

Other experts agree, and they've proposed alternative approaches for incentivizing hospitals and physicians to reduce adverse events, such as paying hospitals extra for infection control. But so far there's no consensus on how to do it better, and Medicare and many payers are sticking with the do-not-pay model even though it's shown limited effectiveness.

The initial impetus for Medicare's do-not-pay policy came from the often quoted 1999 report by the Institute of Medicine, which found that up to 98,000 Americans die every year from preventable medical errors in hospitals. In 2002, the National Quality Forum agreed on a list of 27 "serious reportable events" (expanded to 28 in 2006) that should never occur in a facility, such as surgery performed on the wrong patient or the wrong body part.

CMS doesn't reimburse for these serious "never events."

In 2005, after holding hearings on medical errors, Congress ordered CMS to establish policy to reduce Medicare payments to hospitals when beneficiaries are found to have certain hospital-acquired conditions (HAC) not reported at admission. CMS implemented the policy in October 2008. It now applies to 12 conditions thought to be reasonably preventable through adherence to evidence-based guidelines.

According to the agency's analysis of 2009 data, the HAC policy resulted in payment adjustments for 3,416 out of 9.3 million total discharges for the 12 conditions. Those adjustments yielded net savings of $18.8 million. In addition, CMS has encouraged states to adopt the same HAC non-payment policy for their Medicaid programs, and many have.

The HAC policy is just one part of CMS's broader value-based purchasing initiative to improve quality of care. A CMS spokeswoman says that the financial impact of the HAC policy is "relatively minor" compared with total Medicare hospital spending.

"But we are receiving feedback that hospitals are taking this policy very seriously, and are adopting measures to prevent these [adverse events] from occurring," she says.

Aetna is one of a number of major payers that has adopted a similar do-not-pay policy. Starting in August of last year, it required providers to waive charges directly and solely related to eight serious reportable events, drawn from the National Quality Forum's list. These include contaminated drugs and devices, incompatible blood and intraoperative or immediately post-operative death in a generally healthy patient. Aetna has received reports of fewer than 10 such events since it adopted the policy.

"The payment policy allows us to engage in additional quality improvement efforts, while also offering financial protection to our members," said James Cross, MD, head of Aetna's national medical policy and operations.

Philadelphia-based Independence Blue Cross (IBC) also implemented a do-not-pay policy last year. IBC does, however, pay individual providers for treating the complications-as long as they were not involved in the original adverse event, according to the insurer's spokeswoman.