Hospital-Acquired Conditions/Present-on-Admission Indicators

More Health Plans Adopt ‘Never-Event’ Policies That Don’t Reimburse for Treatment Needed to Correct Medical Errors

Reprinted from AIS’s HEALTH PLAN WEEK.

More payers say they are adopting so-called “never-event” payment policies, under which providers will not be reimbursed for procedures and treatments needed as a result of certain preventable errors made in hospitals. But choosing which errors to focus on, incorporating language into hospital contracts and auditing hospitals’ claims can pose challenges, experts warn.

The National Quality Forum (NQF) identified 27 medical events that are “serious, largely preventable and of concern to both the public and health care providers.” Examples include an infant discharged to the wrong person, and death or serious disability resulting from a medication error.

Aetna, Inc. and the Pennsylvania Medicaid program last month said they each would withhold hospital payments for certain serious preventable errors. Other payers that have adopted such policies include CMS, HealthPartners, Inc. and WellPoint, Inc. subsidiary Anthem Blue Cross and Blue Shield of Virginia.

The insurers emphasize that they are instituting these policies not to save money, but to heighten awareness among hospitals of steps that can be taken to prevent serious medical errors. “We and our employers and customers and hospital patients think patient safety should be high on the list,” says Charles M. Cutler, M.D., Aetna’s national medical director. Because they are such rare events, withholding payment is not likely to result in significant savings to the insurer, he adds.

Moreover, “some of these events don’t have recoverable costs,” Cutler says. Examples include a patient death stemming from a serious error or a baby discharged to the wrong parent.

Since CMS pays hospitals on a DRG basis, it is fairly simple for Medicare to refuse to pay for an increase in DRG payments triggered by a complication or comorbidity caused by a never event, Cutler says. The agency in August said that starting Oct. 1, 2007, hospitals would be required to report secondary diagnoses that are present on the admission of patients. Starting in 2009, hospitals would not receive a higher payment rate for patients with certain conditions unless they were present on admission.

Insurers that reimburse hospitals on a per diem basis have a bigger challenge ahead of them, since it’s more difficult to determine which days of a hospital stay were the result of a serious preventable error and which stemmed from appropriate care. What’s more, Cutler says, Aetna’s hospital contracts are “all over the place,” with payment terms varying from hospital to hospital, and sometimes service line to service line within one facility.

Aetna on Jan. 15 said it would adjust hospital contract templates to require hospitals to report certain medical errors, take action to prevent future errors, waive all costs related to never events and apologize to affected patients and families.

Since Aetna plans to implement this policy upon contract renewal with hospitals, “we haven’t worked out all the details,” Cutler says. “We don’t take the approach for the huge majority of our [hospital] contracts that CMS does, so we’re not able to implement complex DRGs” as a mechanism to withhold payments.

Aetna would identify that such an event had occurred through utilization review, Cutler says. “We’ll find out about it because we assign a length of stay for every admission,” so it would investigate any admission that exceeded the expected length. At that point, “what we would need to do is sit down and negotiate it out with the hospital.…It isn’t really a formulaic approach. But this will evolve over time,” he says. “This is a learning experience.”

Anthem Starts With Four Events

Anthem is inserting never-event payment policies into hospital contracts as they come up for renewal, says Jay Schukman, M.D., medical director at the Virginia plan. So far, 13 of the insurer’s 90 hospitals have adopted the new contract language, with several more in negotiations now, he reports.

The insurer decided to start with four events Schukman calls the “core surgical four”: surgery on the wrong patient, surgery on the wrong body part, the wrong surgical procedure and retention of a foreign object in a patient after surgery. “We initially tried to work with all 28, but that…protracted negotiations with the hospitals,” he says, because some of the more controversial events prompted institutions to bring in their legal counsel. Events like a patient elopement or suicide “become a much more problematic thing in terms of having a health insurance company adjudicate,” he explains.

By contrast, the core surgical four “are pretty much without argument,” Schukman says. “We wanted to start with these four so we could work through all the operational and logistical issues” before adding more events in the future.

Anthem also is including the language in all physician contracts. The insurer notified all physicians in October 2007, and the language takes effect automatically starting April 1.

Most of Anthem’s hospital contracts are based on a case rate or DRGs, he explains. “The position we’re going to take is that the services associated with the adverse event will not be reimbursed, whether they’re at the hospital or physician level.” However, the insurer will pay for services provided by consultants, such as an anesthesiologist who assisted at a never-event surgery. He says he doesn’t anticipate problems with identifying which medical costs stemmed from the never event versus appropriate care.

Anthem is inserting a fifth event into contracts with skilled nursing facilities. Those institutions will not be paid for care related to stage three or four pressure ulcers if the patient was not admitted with the condition, Schukman says.

HealthPartners Bases Policy on Minn. Law

HealthPartners has had its never-event payment policy in place since January 2005, says Babette Apland, the insurer’s senior vice president of health and care management and provider relations. A year before, Minnesota enacted a law requiring all hospitals to report never events, conduct an investigation into root causes and put in place a corrective action plan, she says.

“Our policy reinforced a practice that had already begun in hospitals [as a result of the law], which is not to bill” for never events. “It makes it easier for them to stop [processing claims] payment, because they have systems in place to identify and report never events to the state.”

HealthPartners pays hospitals using a blend of DRG case rates and a per diem, Apland says. “Ours is a per diem approach, but we front-load the first day, so the first day is a much higher payment than subsequent days.”

Apland emphasizes that such events are very rare. But “if there is a question on what services are related to the never event or what services are not, we look at those cases individually,” she says. “And if there’s a need for clarification, first we go back to the hospital and ask to review their investigation, so that supplies us with additional information. And then we have a committee that includes medical directors” to review the findings, she says.

The Pennsylvania Department of Public Welfare (DPW) on Jan. 14 issued a medical assistance bulletin informing acute care hospitals that it is not responsible for medical costs for services required as the result of a preventable serious medical event.

The Medicaid program said it would adopt CMS’s requirement that hospitals report any conditions that were present on admission. On a monthly basis, the Medicaid program will review claims to identify those that might indicate that a preventable serious medical event had occurred. A physician reviewer will examine medical records for those patients, along with the hospital’s claims submission, to ensure that payment is for only services unrelated to the adverse event.

At present, the policy applies only to fee-for-service payments made on a DRG basis, says Roger Baumgarten, a spokesperson for the Hospital and Healthsystem Association of Pennsylvania (HAP), which helped craft the rules. “Managed care organizations that contract with DPW may seek to implement a similar process, and HAP will work to make sure that MCO policies are consistent with the process laid out under the new DPW bulletin,” he adds.