CMS Finalizes Rule to Cease Paying Hospitals for Preventable Infections and Medical Errors

On August 1, the Centers for Medicare and Medicaid Services (CMS) issued a final rule to end Medicare payments to hospitals for the added costs associated with specified avoidable conditions that develop in the hospital. This change was part of CMS’s 2008 payment rule for inpatient prospective payment to acute care facilities; it goes into full effect October 1, 2008. Although the rule also incorporates an average of a 3.5 precent increase in payments to hospitals for the upcoming fiscal year, the initiative to stop paying for additional care caused by medical errors and infections has the potential to result in significant payment reductions for individual cases. In 2005, Congress had mandated that CMS stop paying for the additional costs associated with hospital-acquired conditions, such as infections, in the Deficit Reduction Act of 2005 (DRA). The DRA mandated that acute care institutions report to Medicare all secondary diagnoses that are present on admission of a patient as of October 1, 2007. Under the DRA, as of October 1, 2008, CMS would also be required to identify secondary preventable conditions that develop after a hospital admission and for which Medicare should no longer pay hospitals. CMS used this mandate to create a list of eight diagnoses in the final rule. Currently, this list of preventable secondary diagnoses includes five conditions caused by hospital care: 1) catheter-associated urinary tract infections; 2) pressure ulcers (otherwise known as deceits ulcers or bed sores); 3) vascular catheter-associated infections; 4) mediastinitis surgical site infections after coronary artery bypass grafts and 5) specified hospital-acquired injuries, including fractures, dislocations, intracranial injuries, burns or “other unspecified effects of external cause” that occur in the hospital. In the case of each of these diagnoses, CMS has determined that there are unique diagnosis-related group (DRG) codes that identify these secondary diagnoses, as well as good prevention guidelines in place that hospitals should be using to avoid these problems once a patient is admitted to the hospital. Consistent with the requirements of the DRA, CMS has also concluded that each diagnosis either creates a high cost to Medicare or has sufficiently high volume nationwide to justify its inclusion. The final rule also incorporates three “serious preventable events” that CMS has determined should not occur in healthcare in any circumstances. These three are: 1) leaving a foreign object, such as a sponge or clamp, in a patient after surgery; 2) providing the wrong type of blood to a patient and 3) a hospital-created air embolism. CMS has specified certain ICD-9-CM codes to identify these events. CMS is seriously considering adding three other diagnoses in future years: 1) ventilator-associated pneumonia (VAP), 2) staphylococcus aureus septicemia and 3) deep vein thrombosis (DVT)/pulmonary embolism (PE). The rule does not provide a separate appeal mechanism for hospitals. The burden will be on the hospital to convince Medicare that the secondary condition developed prior to a hospital admission. As with any DRG assignment by Medicare, a hospital has 60 days from the date of the notice of the initial assignment of a discharge to a specific DRG to request a review of that assignment. The hospital may submit additional information as a part of its request but does not receive payment until the fiscal intermediary decides in its favor. This initiative has the potential to cause serious unintended consequences. First, hospitals will likely implement more extensive measures to identify all secondary conditions present in a patient upon admission. These measures may include additional tests, which may slow down the admission process. Particularly for patients from nursing homes and long-term-care facilities, this rule may make the admission of certain patients less desirable. Second, acute care institutions may look for ways to change physician behavior and to hold physicians accountable for additional preventable secondary diagnoses. As a result, the relationships between hospitals and independent physicians may deteriorate. If they are held responsible, independent physicians may become more likely to transfer the care of certain patients to hospitalists, especially those employed by the admitting physician. Many experts are predicting that private insurers and state Medicaid agencies will follow Medicare and seek to avoid paying for costs that purportedly could have been avoided by the hospital. The association for many private payers, America’s Health Insurance Plans, has indicated that many of its members are reviewing the new regulations to see if they may provide a basis for similar private initiatives. It is also likely that this initiative will expand to payment denials for physicians and other healthcare practitioners when it is determined that these practitioners caused the additional healthcare expense. September 2007