High-Risk Areas
Central Processes

Hospital-Acquired Conditions/Present-on-Admission Reporting

In 2007, CMS announced that it will curtail payments to hospitals for specific conditions that a patient acquires while an inpatient and that can be “reasonably prevented” by following established evidence-based guidelines. These “hospital-acquired conditions” (HAC) include but are not limited to bedsores, complications from extended use of catheters, and injuries caused by falls. CMS also will reduce reimbursement for events identified by the National Quality Forum as serious reportable adverse events — also called “serious preventable events” or “never events” — such as medical equipment left in a patient’s body following surgery.

To identify which diagnoses were present on admission, hospitals must report a present-on-admission (POA) indicator for all diagnoses on the claim. Hospitals will see the actual payment impact of this policy beginning in FY 2009.

Summary of the Risk Area

Medical conditions that a patient acquires while hospitalized add enormous costs to medical care and result in significant number of deaths. A study on preventable death published in the January/February 2008 issue of the journal Health Affairs found that the United States ranks poorly among other developed countries. The U.S. failed to prevent deaths from treatable conditions more often than the 18 other countries included in the study. Research also has shown that hospitals are not following recommended guidelines to avoid the most common hospital-acquired infections — 87% of 1,256 hospitals, according to one survey. Total national costs for treating these conditions due to lost productivity, disability, and health care costs have been estimated at $17-to-$29 billion. 73 Fed. Reg. 48471-91.

In an effort to address the costs and quality issues, the Deficit Reduction Act of 2005 imposes a payment penalty for certain conditions acquired while the patient is in the hospital and required the secretary of HHS to select, by Oct. 1, 2007, at least two conditions that meet the following requirements:

1. They are high cost, high volume or both;
2. They result in the assignment of a case to a DRG that has a higher payment when present as a secondary diagnosis; and
3. They could reasonably have been prevented through the application of evidence-based guidelines.

To comply with the act, CMS introduced an initiative to reduce payments to providers for HACs. The effect is a negative payment incentive for complications or infections that were not present on admission (POA) and may be the result of substandard quality of care.

As finalized in the FY 2009 Inpatient Prospective Payment System (IPPS) rule,eleven HACs will no longer receive payments for services on or after Oct. 1, 2008, if the condition was not reported as a diagnosis at the time of the patient’s admission.

The presence of these conditions on the claim would change the diagnosis-related group (DRG) assignment to a DRG assignment with a complication or comorbidity (CC) or major CC (MCC) and thus merit higher payment, but Medicare will only pay the base DRG amount, not the higher amount. The hospital cannot bill the beneficiary for any charges associated with the hospital-acquired complication.

The HACs Subject to the Policy

The following conditions are subject to the POA reporting and payment reduction initiative as of Oct. 1, 2008:

1. Object left in surgery (serious preventable error (SPE) or “never event”)
2. Air embolism (SPE)
3. Blood incompatibility (SPE)
4. Vascular catheter-associated infection
5. Surgical site infection — mediastinitis after coronary artery bypass graft (CABG) surgery
6. Catheter-associated urinary tract infections
7. Pressure ulcers (decubitus ulcers), Stages III and IV
8. Hospital-acquired injuries, such as fractures, dislocations, intracranial injury, crushing injury, burns, and other unspecified effects of external cause
9. Surgical site infections following orthopedic and bariatric surgery for obesity
10. Poor glycemic control associated with certain conditions
11. Deep vein thrombosis or pulmonary embolism following total knee and hip replacement

CMS has identified each of the conditions by their ICD-9-CM codes and listed the evidence-based guidelines that may be used for prevention.

POA Reporting

Hospitals have to follow specific POA reporting procedures to comply with the policy. The requirements apply only to hospitals paid under the IPPS; the following hospitals are exempt from the POA reporting requirement and payment reductions: critical access hospitals, long-term care hospitals, Maryland waiver hospitals, cancer hospitals, children’s inpatient facilities, inpatient rehabilitation facilities, psychiatric hospitals.

“Present on admission” (POA) is defined as any diagnosis present at the time the order for inpatient admission occurs; conditions that develop during an outpatient encounter — including emergency department, observation or outpatient surgery — are considered present on admission.

To identify which diagnoses are present on admission, CMS has designed a set of indicators that must be assigned to every diagnosis on a claim. The POA indicators are as follows:

If a condition would not be coded and reported based on Uniform Hospital Discharge Data Set definitions and current official coding guidelines, then the POA indicator would not be reported. Otherwise, all diagnoses must have a POA indicator.

Medicare will not pay for the incremental costs of any HAC diagnoses carrying a “N” or “U” POA indicator; if one of the designated HACs was not present on admission and is reported on the claim, the hospital will be paid as though the secondary diagnosis is not present.

POA indicators are reported in the segment K3 of the 2300 loop of the 837I. For electronic claims, the reporting string begins with POA, then the principal diagnosis, then the secondary diagnosis (es), and ends with the letter “Z.”

For example, the POA string for an electronic claim with one principal and five secondary diagnoses would look like this: POAYNUW1YZ

Here is what this string tells CMS:

CMS may use the “X” to identify special data processing situations in the future.

For the UB-04, the POA indicator is the eighth digit of field locator 67, principal diagnosis, and the eighth digit of FLs 67A-Q, secondary diagnoses. If the diagnosis is exempt from POA reporting, leave the field blank on the paper claim.

The Common Working File (CWF)/ National Claims History (NCH) will capture and store nine POAs and a POA end indicator.

Training and Education

Training and education for personnel assigning the POA indicators should be conducted pursuant to the official POA guidelines in Appendix I of the ICD-9-CM Official Coding and Reporting Guidelines. The guidelines also contain specific examples of how to apply the guidelines.

These guidelines may form the basis for your organization’s POA training material. Affected personnel should be able to identify which indicators are to be reported under various hypothetical circumstances. The organization should be ready to adapt their procedures for POA data collection and reporting as CMS adds to the list of HACs that are non-payable in the future.

Risk Factors Associated with HAC/POA Reporting

The compliance risks associated with billing for HACs include the following:

• Failure to take basic preventive steps at the point of care to prevent HACs;
• Failure to determine whether a diagnoses was present at the time of the Medicare beneficiary’s admission as an inpatient;
• Failure to document the POA status for all diagnoses on the Medicare claim;
• Failure to follow billing and reimbursement guidelines for the specific HACs that are subject to payment reduction.

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Best Practices: Tips and Recommendations

• According to Appendix I in the ICD-9-CM Official Guidelines for Coding and Reporting, the POA indicator is assigned to principal and secondary diagnoses and the external cause of injury codes. However, in Trans. 1240, CMS clarified that it would not require a POA indicator for an external cause of injury code unless it is reported as an “other diagnosis.”
• The final check of a Medicare claim prior to submission should include a review of the sequencing of POA codes. The billing office, third-party billing agents, and anyone else involved in the transmission of the electronic claims data must verify that any re-sequencing of diagnoses codes prior to their transmission to the payer also includes a re-sequencing of the POA indicators.
• In addition to conducting a billing audit review for POA, your organization may wish to conduct a separate or simultaneous review of the HACs occurrence rate. Use the results from this comprehensive review to determine where it may be advantageous to implement stricter clinical care guidelines that promote optimal patient care, as well as maximize legitimate reimbursement.
• Although hospitals will not be reimbursed for costs associated with the designated HACs, this payment reduction will not affect outliers. The hospital’s total charges for all inpatient services provided during the stay will continue to be used to determine whether the case qualifies for an outlier payment. 72 Fed. Reg. 47201.
• Many private payers are adopting a similar payment reduction policy if a diagnosis was not present on admission, and some will not pay at all for “never events.”

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Official Resources

Guidance

• CMS HAC/POA Web page
• List of HACs Subject to POA Reporting
• Present on Admission Indicator, Trans. 1240, CR 5499 (May 11, 2007)
• POA reporting instructions, MM5499
• CMS, POA Fact Sheet
• POA system implementation, Trans. 249, CR. 5679 (July 20, 2007)
• Present on Admission Reporting Guidelines, Appendix I
• ICD-9-CM Official Guidelines for Coding and Reporting
• CMS, Trans. 354, CR 6086 (June 13, 2008) (explaining how system will recognize claims from hospitals exempt from POA reporting)

Regulations

• CMS, Discussion of selection and identification of conditions, Final IPPS rule, FY 2008, 72 Fed. Reg. 47200–219 (Aug. 22, 2007)
• CMS, Preventable Hospital-Acquired Conditions (HACs) Including Infections, Final IPPS rule, FY 2009, 73 Fed. Reg. 48471-91 (Aug. 19, 2008)

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