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State Patient Safety Initiatives and Nonpayment for Preventable Events and Conditions

States' efforts to improve patient safety have grown in number and scope in recent years, prompted by concerns for patients' welfare as well as rising health care budgets and evidence of the excessive costs associated with medical errors. In 1999, the Institute of Medicine (IOM) reported that between 44,000 and 98,000 Americans die annually as a result of medical error. The central concept of the IOM report—that bad systems and not bad people lead to most errors—fueled a national conversation about ways to improve patient safety.

By November 2007, 26 states had enacted legislation, regulation, or executive orders creating reporting systems for preventable "adverse events" (see Table 1 for a definition of adverse events and other terms related to patient safety). Many of these reporting systems focus on "serious reportable events" identified by the National Quality Forum (NQF) that should never occur in a health care setting, often called "never events." In 2006, the NQF expanded its list of never events to include 28 categories, which are now in widespread use (Table 2). As reported in the last issue of States in Action, states are also accelerating the use of health information technology and health information exchange to create more powerful tools for reporting.

In addition, states are leveraging their purchasing power through Medicaid, state employee health programs, and other agencies to enforce reporting requirements and using patient safety data for public reporting and pay-for-performance initiatives. In a trend that is quickly gaining momentum, some states are denying payment for preventable events and conditions.

Table 1. Definitions of Terms Related to Patient Safety  

 

Term

Definition

Examples

Source

Health Care–Associated Infection (HAI)

An infection that a patient acquires while receiving treatment for medical or surgical conditions.

Surgical site infection, central line–associated bloodstream infection, ventilator-associated pneumonia, and catheter-associated urinary tract infection

Centers for Disease Control and Prevention

Hospital-Acquired Condition (HAC)

A condition that is (a) high cost or high volume or both, (b) results in the assignment of a case to an MS-DRG that has a higher payment when present as a secondary diagnosis, and (c) could reasonably have been prevented through the application of evidence-based guidelines.

12 categories (e.g., foreign object retained after surgery, pressure ulcer stages III and IV)

Centers for Medicare and Medicaid Services (CMS)

 

CMS uses HACs as the basis for Medicare nonpayment policies

Serious Reportable Event (SRE) or "Never Event"

Unambiguous, serious, preventable adverse events that should never occur in a health care setting. SREs are identifiable and measurable, and their risk of occurrence is influenced by the policies and procedures of health care organizations.

28 events  (e.g., surgery performed on wrong patient, infant discharged to the wrong person)

National Quality Forum.

 

Most states use the SRE list or a variation of it as the basis for nonpayment policies.

Adverse Event

Any harm to a patient as a result of medical care. "Adverse event" is a broad term that does not always involve errors, negligence, or poor quality of care and may not always be preventable. A "preventable adverse event" should never occur in a health care setting.

Medical errors, general substandard care that results in harm

Office of the Inspector General  (OIG)

Present on Admission (POA)

A coding system in hospital discharge billing data used by Medicare to identify events or conditions for which payment will be denied because they arise during hospital stays and can be considered complications.

 

Centers for Medicare and Medicaid Services (CMS)


  Source: Health Management Associates, 2009

 

Building the Case for Nonpayment
In a January report, the National Academy for State Health Policy (NASHP) concludes that nonpayment for preventable adverse events or conditions is a relatively easy, visible, and noncontroversial first step that states can take to promote patient safety. "Nonpayment policies are an opportunity for purchasers to use their leverage to drive health system improvement," says NASHP project director Jill Rosenthal. "States in particular are in a strong position to achieve meaningful improvements in patient safety and health system performance based on the large volume of health services they purchase."

The report includes observations on nonpayment initiatives and issues made by state and national leaders at an October 2009 meeting hosted by NASHP and sponsored by The Commonwealth Fund. According to participants, state and federal policymakers and public and private purchasers are adopting similar nonpayment policies. In general, they say, these policies are driven by a desire to improve patient safety, rather than achieve cost savings—although there will be greater potential for cost savings as the number of adverse events deemed ineligible for payment expands. State leaders who have implemented nonpayment policies say they are valuable because they are less controversial than other payment reforms and can spur discussion among stakeholders about concrete ways to align payment with high-quality, safe care.

CMS: "Payment and Performance Need to Be Linked"
The Deficit Reduction Act of 2005 required the Centers for Medicare and Medicaid Services (CMS) to select at least two hospital-acquired conditions for nonpayment under Medicare. Medicare reimbursement to hospitals is generally determined by grouping patient conditions into diagnosis-related groups (DRGs) based on the average cost of care for patients with similar conditions. Historically, if a Medicare beneficiary experienced harm from an adverse event that resulted in assignment of a more expensive DRG, CMS paid the full claim without any payment reduction—a policy Congress wanted to change.

In response to the Deficit Reduction Act, CMS created a list of DRGs called Medicare severity diagnosis-related groups (MS-DRGs) to determine if a condition is "present on admission" (POA) or acquired in a health care setting. Using the MS-DRG system, CMS denies payment and prohibits hospitals from billing patients for 12 hospital-acquired conditions (effective October 1, 2008) and three preventable surgical errors (effective January 15, 2009). The CMS nonpayment policy applies only to fee-for-service Medicare in general acute-care hospitals, but on January 1, 2010, CMS began collecting data from Medicare managed care plans to determine how they can be held accountable for adverse events.

Medicare's list of hospital-acquired conditions and the National Quality Forum's list of serious reportable events contain many similar or identical conditions (Table 2). In July 2008, CMS issued a letter to state Medicaid directors encouraging them to implement Medicaid payment policies to coordinate with the Medicare nonpayment policy for hospital-acquired conditions. In addition to coordinating Medicare/Medicaid payment interaction for beneficiaries dually eligible for both programs, CMS also encouraged states to consider the entire Medicaid population and all of the NQF "never events" in the creation of state policies. The agency's letter noted that "the guiding principle should be that payment and performance need to be linked."

 

Table 2. National Quality Forum "Never Events" and Medicare Nonpayment Events

National Quality Forum "Never Events"

Medicare Nonpayment Events

Surgical Event

1.        Surgery performed on the wrong body part.

Yes

2.        Surgery performed on the wrong patient.

Yes

3.        Wrong surgical procedure performed on a patient.

Yes

4.        Unintended retention of a foreign object in a patient after surgery or other procedure.

Yes

5.        Intraoperative or immediately post-operative death in an American Society of Anesthesiologists (ASA) Class 1 (healthy, no medical problems) patient.

 

Product or Device Events

6.        Patient death or serious disability associated with the use of contaminated drugs, devices, or biologics provided by the healthcare facility.

 

7.        Patient death or serious disability associated with the use or function of a device in patient care in which the device is used for functions other than as intended.

 

8.        Patient death or serious disability associated with intravascular air embolism that occurs while being cared for in a healthcare facility.

Yes

Patient Protection Events

9.        Infant discharged to wrong person.

 

10.     Patient death or serious disability associated with patient elopement (disappearance).

 

11.     Patient suicide, or attempted suicide resulting in serious disability, while being cared for in a healthcare facility.

 

Care Management Events

12.     Patient death or serious disability associated with a medication error (e.g., errors involving the wrong drug, wrong dose, wrong patient, wrong time, wrong rate, wrong preparation, or wrong route of administration).

 

13.     Patient death or serious disability associated with a hemolytic reaction due to the administration of incompatible blood or blood products.

Yes

14.     Maternal death or serious disability associated with labor or delivery in a low-risk pregnancy while being cared for in the healthcare facility.

 

15.     Patient death or serious disability associated with hypoglycemia, the onset of which occurs while the patient is being cared for in a healthcare facility.

Yes

16.     Death or serious disability (kernicterus) associated with failure to identify and treat hyperbilirubinimia/jaundice in neonates (babies < 28 days).

 

17.     Stage 3 or 4 pressure ulcers acquired after admission to a healthcare facility.

Yes

18.     Patient death or serious disability due to spinal manipulative therapy.

 

19.     Artificial insemination with the wrong donor sperm or egg.

 

Environmental Events

20.     Patient death or serious disability associated with electric shock or elective cardioversion while being cared for in a healthcare facility.

Yes, and other injuries

21.     Any incident in which a line designed for oxygen or other gas to be delivered to a patient contains the wrong gas or is contaminated by toxic substances.

 

22.     Patient death or serious disability associated with a burn incurred from any source while being cared for in a healthcare facility.

Yes, and other injuries

23.     Patient death associated with a fall while being cared for in a healthcare facility.

Yes, and other injuries

24.     Patient death or serious disability associated with the use of restraints or bedrails while being cared for in a healthcare facility.

 

Criminal Events

25.     Any instance of care ordered by or provided by someone impersonating a physician, nurse, pharmacist, or other licensed healthcare provider.

 

26.     Abduction of a patient of any age.

 

27.     Sexual assault on a patient within or on the grounds of a healthcare facility.

 

28.     Death or significant injury of a patient or staff member resulting from a physical assault (i.e., battery) that occurs within or on the grounds of a healthcare facility.

 

NOTE: Medicare nonpayment events include three National Coverage Determinations related to "preventable surgical errors" (the first three "never events" on the NQF list) and 12 categories of "hospital-acquired conditions" (some but not all of which correspond to the NQF list). A complete list of Medicare nonpayment events is available here.

 Source: Centers for Medicare and Medicaid Services, 2009

 

State Action on Patient Safety
As large purchasers, regulators, conveners, and providers of health care services, states have considerable influence to improve patient safety and safeguard the public. For example, Medicaid and the Children's Health Insurance Program spend more than $320 billion per year in state and federal funding and account for one-sixth of all health care spending in the U.S.

The NASHP report identified 12 states in which Medicaid and/or other health care purchasers deny payment (or in Maryland's case adjust payments) for certain adverse events or preventable conditions (Table 3). All of the states established their nonpayment policies in their Medicaid programs except Oregon, which established nonpayment policies in its Public Employee Benefits Board and Educators Benefit Board. Nonpayment policies in Maine, Maryland, and New Jersey apply to all payers—not just Medicaid. All but one of these states base their nonpayment policies on either the Medicare list of hospital-acquired conditions (five states) or the NQF list of serious reportable events (six states). The exception, Maryland, uses a list of 50 potentially preventable complications developed through a contract with 3M Health Information Systems.

In general, NASHP found that the states with nonpayment policies are among the nation's leaders in quality improvement and patient safety initiatives. These states are well represented among those developing public/private partnerships for health system improvement, operating adverse event reporting systems, promoting medical homes, ranking in the top or second quartile on the 2009 Commonwealth Fund State Scorecard on Health System Performance, and having hospitals that have voluntarily agreed not to bill for certain preventable conditions. They can serve as models for other states considering nonpayment policies for preventable adverse conditions. The Snapshots in this issue explore nonpayment policies in place in four states.

Table 3. State Policies Prohibiting Payment for Certain Preventable Conditions, as of December 2009

State

Payers Affected by Policy

Medicaid

Other State Programs

All Payers

Colorado

Yes

No

No

Kansas*

Yes

No

No

Maine

Yes

Yes

Yes

Maryland*

Yes

Yes

Yes

Massachusetts

Yes

Yes

No

Minnesota*

Yes

Yes

No

Missouri*

Yes

No

No

New Jersey

Yes

Yes

Yes

New York

Yes

No

No

Oregon

No

Yes

No

Pennsylvania

Yes

No

No

Washington

Yes

No

No

*Described in more detail in the Snapshots

SOURCE: National Academy for State Health Policy, "Nonpayment for Preventable Events and Conditions: Aligning State and Federal Policies to Drive Health System Improvement" (Washington, D.C., January 2010).

 

 

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