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Kansas: Medicaid Mirrors Medicare Policy on Adverse Events

The Kansas Medical Assistance Program, the state's Medicaid program, designed its nonpayment policy to mirror Medicare's policy; as of January 2009, Medicaid does not reimburse providers for the CMS list of hospital-acquired conditions. The state plans to implement a nonpayment policy for three preventable surgical errors, or never events, in February 2010. Kansas used a Medicaid State Plan Amendment (rather than legislation) to establish its policy, an approach suggested by CMS.

Kansas relied on Medicare's precedent and guidance to build support for its nonpayment policy. Medicare's policy was the starting point for discussions among the Medicaid program, Kansas Hospital Association, and other stakeholders. The state Medicaid program decided to adopt Medicare-severity diagnosis-related groups (MS-DRGs) to replace the state's previous version of DRGs (MS-DRGs indicate whether a condition is present on admission and also adjust for the severity of disease). This approach received support from the Kansas Hospital Association and laid the groundwork for adoption of the state's nonpayment policy for adverse events.

The shift to nonpayment for hospital-acquired conditions posed technical challenges, because it required adjustments to the software that the Medicaid program uses to calculate provider payments. Not only did the system have to be programmed to deny a full payment for a set of services, it also needed to reduce payment for a complicating secondary condition—a programming task that proved time-consuming. However, now that the changes are in place, the system is well positioned to add new hospital-acquired conditions to reflect any future additions to the Medicare list.

Ron Smith, director of institutional reimbursement and finance for the Kansas Health Policy Authority, which administers the state's Medicaid program, noted that the impact of the nonpayment policy will be difficult to evaluate. Ideally, providers will increase their efforts to prevent events that are no longer reimbursed and it will not be possible to discern how often such events would have occurred in the absence of the policy. "While the value [of the policy] is difficult to determine, we think the reaction and the steps taken to avoid these incidents have been significant," he said. Still, he highlighted the importance of analyzing the effects of the policy to the extent possible, including monitoring its potential unintended consequences. Very few hospital-acquired conditions have been identified since the policy was implemented. The Medicaid agency will be examining medical claims to ensure that it is being implemented appropriately—for example to ensure that hospitals are not "gaming" the coding system to avoid triggering a payment penalty.

The state plans to continue to mirror Medicare policy on nonpayment for preventable events and conditions, driven in part by the need to coordinate payment policies for the care of people who are dually eligible for Medicare and Medicaid. While many of the state's providers and hospitals supported the policy because they sought to improve patient care, the Kansas legislature is also focused on the cost implications of adverse events. There is a growing expectation that any new initiatives will improve patient safety while also controlling costs.

For more information

Contact: Ron Smith, director, Institutional Reimbursement and Finance, Kansas Health Policy Authority, at [email protected]

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