Not Paying For Preventable Errors: A Big Step – Brian Klepper

Fee-For-Service (FFS) reimbursement has been disastrous for the American health care system because, instead of encouraging the delivery of the RIGHT products and services, it simply encourages MORE, and independent of quality and safety.  The system lacks transparency, so we haven’t been able to distinguish appropriateness from inappropriateness. As a result we pay for everything, rewarding excess. The industry has seized on this and cultivated excess as a core value. It’s a big part of why we’re in the fix we’re in today.

But FFS’ other insidious impact is that it has enabled  – and I mean this in the clinical sense – doctors and hospitals to engage in behaviors fundamentally counter to their patients’ interests as well as their own. FFS has allowed physicians to remain in small practices where they lacked the scale to invest in information technology tools, group purchasing or offshore medical malpractice arrangements. As a result, care in the little practices that currently dominate the medical landscape is often more expensive and of lower quality than is typical in larger practices.

In the same way, hospitals have been paid for their services without regard to their quality or safety performance, which has fostered a much laxer attitude toward improving care than if they were rewarded for high performance and penalized for poor outcomes.

For example, current Medicare rules sometimes require higher payment if a complication develops as a result of poor care. A surgical infection or pneumonia that develops while a patient is on a ventilator can lead to increased payments, because a DRG with complications is paid more than one without complications. Of course, this approach is counter to rewarding hospitals for investing in quality and reducing the frequency of adverse events.

In a major step last week, CMS threw down a gauntlet by announcing that, beginning next year October, it will no longer reimburse hospitals for preventable medical errors. In an article in the Newark Star Ledger, Tom Valuck, a CMS physician and administrator, explained "We are transforming Medicare from a passive payer simply processing
claims to an active purchaser with a stake in quality and efficiency." Big news indeed.

A little more than a year from now, Medicare will no longer pay for the care and costs required to recover from mistakes that clearly are the hospital’s fault: e.g., hospital-acquired infections (particularly those associated with catheters and intravenous lines), bedsores, objects inadvertently left in the body during surgery, transfusing patients with the wrong blood types, or falls in the hospital. Suddenly, hospitals have a financial incentive to make sure that these problems don’t happen.

It’s important to note that this change in attitude didn’t just happen; it has been in the works for several years. (A great background document on this problem is MedPac’s Report to the Congress: Promoting Greater Efficiency in Medicare, released in June.) Congress included a provision in the Deficit Reduction Act of 2005 that requires CMS, by October 2007, to identify at least two preventable hospital-acquired complications that are either high cost or high volume. The rule changes announced last week include a requirement that hospitals provide an indication of whether a complication is acquired in the hospital or present on admission. MedPac made this recommendation in it March 2005 report to Congress.

A related issue, "never events," include serious reportable events that have been identified by the National Quality Forum. The Leapfrog Group has recommended to Congress that Medicare require hospitals to report these events and that hospitals be precluded from billing for them.

Suddenly refusing to pay hospitals for preventable errors probably won’t save enormous sums in the scheme of things. But the impacts of the action will reach much farther than the action itself. With Medicare taking the lead, commercial health plans undoubtedly will follow very quickly, and that will produce a large multiplier effect.

But most importantly, this decision acknowledges that many hospitals have already taken quality management steps that have significantly driven down their preventable error rates. It IS doable. By creating serious financial incentives – rewards for high performers and penalties for poor performers – for quality improvements in Medicare’s payment redesign, CMS has taken a big and important step that will likely encourage not just leading hospitals, but those in the rank-and-file, to begin focusing on quality and safety in ways that most have not until now.

And that can only be good news for patients.

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11 replies »

  1. What is the review and approval process for these regulations? When do they become final? (The devil is always in the details.) Hospitals and others are fighting them and seeking changes.

  2. Bush Should Force Restitution Of Medicare Funds Paid For Harm Done
    “the extra revenues received by the providers for care caused by their own neglect constitute “perverse payment incentives.”….HealthGrades estimates that Medicare paid more than $9.3 billion to cover the costs associated with medical errors suffered by Medicare beneficiaries during 2002-2004. At this rate, Medicare is paying over $3 billion per year to hospitals for substandard care. If you add nursing homes and outpatient clinics to the mix, the cost only escalates.”
    [Amen, amen!! As we say, poor care pays more, whether it’s a doctor, hospital or nursing home.]

  3. A few points:
    The new rules only apply to hospital inpatients, where Medicare pays on a prospective payment system. So the changes don’t directly affect whether or not the physician would be reimbursed for procedures to fix an error. (This is very unlike the ER, which is paid under Medicare Part B).
    “refusing to pay for these errors without addressing why they occur would be foolhardy.”
    I think the point here is that Medicare is using it’s most powerful tool – payment policy – to encourage hospitals to address the source of the errors. To me, such incentives seem wiser and more effective than for Medicare to try to implement some sort of general rule to prevent errors at all hospitals.
    Finally, it will be interesting to see what the actual financial impact of the change is. In addition to the possibility of cost-shifting (to privately insured patients), the details of the new rule limit the number of cases where it would apply. For instance, if a patient develops a pressure ulcer, but ALSO develops S. aureus septicemia, the new rule won’t apply. Only in cases where the 8 preventable conditions are the sole complications will payment will be reduced.

  4. Lindley is right and cost-shifting will be the only way to recover the funds. Otherwise all hospitals will ultimately have to close their doors. The best approach is to reduce the errors as much as possible, though a system of quality transparency rather than price.
    Efforts are underway to develop online patient databases to track physician and hospital performance, and patients could greatly benefit from these, like the VA’s VisTa, which is excellent and available as free open-source software. The government (or a private consortium) could and should expand VisTa into a national patient database.
    I would expect the ultimate system to allow a patient to sit in front of a computer and answer a one-time health questionnaire that would be turned over to the physician for evaluation. But first it would instantaneously search for patients around the country with similar diseases and provide a list of physician treatments and successes, grouped by the most common treatments.
    Obviously, patient identities would remain secured with a private password, but the cross-compared physiological data would provide valuable assistance to every physician, especially newcomers. Physicians can accept or reject what others have done, based on the patient’s particulars, and a cross-compare of prescription and other meds would alert the physician to potential conflicts — even those that may be causing the patient’s current problems.
    This would significantly cut the errors and costs thereof, but the tort system Peter mentions must also be addressed (preferably with medical courts).
    But refusing to pay for these errors without addressing why they occur would be foolhardy.

  5. Well we had/have a system for dealing with “who pays” for medical error – it’s the tort system and the dreaded trial lawyers. But political action by doctors and hospitals has taken that avenue away from patients. So now when Medicare is attempting to elevate standards by forcing monitary penalty those involved say “It’s not fair, you’re not in a position to judge”. These are the same people that take their auto mechanic to court for errors to determine, “who pays”. What a great system.

  6. Unfortunately, refusing to pay for services the patient needs due to medical error is not going to make the costs go away. Which leads us to the obvious question, “Who bears the resulting costs?”
    I find it difficult to imagine that the health care provider committing the error will ultimately wind up paying for the costs of correcting the errors. Either the patient will be billed, or the usual cost shifting will occur, driving up the costs of other services, or to other payors. In spite of the good intentions that may or may not be driving this decision, it appears to be is another action taken by a payor to avoid paying for services.
    Another assumption that I find problematic is that small clinics and individual practitioners (“little practices” are by default providing lower quality higher cost care. Do we actually have data on this? And if so, where can is it being published?
    And finally there is the obvious issue with health care providers in areas with low population density. Growing up on the outskirts of several small towns, with no major hospital within a 30 mile radius, the fact that there were several “little practices” operating in the area not only ensured that people had access to health care, but a variety of doctors with different styles, different philosophies and values. I’m really struggling with the blanket critique of the individual health care provider as a negative thing.

  7. As an Emergency Department Physician, this new ruling does not effect me. I do see some good things coming from this, however, there may be some very bad things coming from these new medicare regulations. I totally agree with not paying for obvious medical errors such as leaving a sponge inside a patient or giving a patient the wrong blood type. However, mediastinitis after open heart, bladder infection after catheter insertion, pneumonia after intubation, and hospital falls are not necessarily medical mistakes. You cannot sterilize the human body, no matter how much you try and there is an accepted rate of infections for these procedures. You can do everything right, and still get a bladder infection after Foley placement or mediastinitis after open heart surgery. Just because you get one of these infections, does not mean that there was a mistake in the hospital. I agree, if your hospital or a certain physician is above the norm for those infections, then you have a case…but not paying for any of them is ridiculous. As for falls, you cannot tie every patient down. There are regulations as to who you may restrain. If the hospital has followed all of the regulations (such as bed rails up, etc.) and the patient gets up in the middle of the night and falls and breaks her hip — is that the hospitals fault? Of course not, you couldn’t tie her down. These injuries will happen and they are not all hospital mistakes. The other question is….what orthopedic physician will fix that patient’s hip if he’s not going to be reimbursed to do so. EMTALA does not cover patients already in the hospital and therefore you cannot force an on call orthopedic physician to treat the patient. This may become a major problem. I also work in wound care from time to time and treat many decubitus ulcer patients. These ulcers are difficult to treat and sometimes very difficult to prevent…even with proper turning, etc. Now, I am going to be forced to review the patient’s records and if they developed the ulcer while in the hospital for a prolonged stay, then I won’t be able to treat them for there ulcer because I won’t be reimbursed.

  8. I still worry about underfunded hospitals not being able to bring about these changes and having to pass the unpaid bill to the, arguably, since poor areas tend to have this problem, poor patient.
    I agree it’s a strong incentive, and for many facilities, this will be a driving force. But I also would argue that it leaves behind those who can’t comply, or the patients of those who simply won’t.
    Maybe I’m over worrying about this, but rural healthcare is an exercise in making do, and removing funding has unwanted effects.
    Good idea. Great idea, even. Not a complete solution by a long shot, and penalizes the more needy.

  9. As for getting honest code submissions maybe all the caregivers (nurses and docs) should sign off on the code, putting their respective license on the line. My wife audits charts for care issues on her unit. She knows when an error has occured – doc, drug, or nurse. Maybe nurses would be good quality control for Medicare – if the docs allow them to be.

  10. Peter,
    I believe the answers to that are:
    1) Yes, they pay for the errors and then bill the patient for their contractual percentage.
    2) Yes.
    3) Many probably will.
    4) Good question.
    At the end of Robert Pear’s NYT’s report on this developing, he addresses this through Ken Kizer, former head of the National Quality Forum.
    “Dr. Kenneth W. Kizer, an expert on patient safety who was the top health official at the Department of Veterans Affairs from 1994 to 1999, said: “I applaud the intent of the new Medicare rules, but I worry that hospitals will figure out ways to get around them. The new policy should be part of a larger initiative to require the reporting of health care events that everyone agrees should never happen. Any such effort must include a mechanism to make sure hospitals comply.”

  11. Does private insurance pay for errors and bill the patient the appropriate co-pay?
    Do the uninsured pay for errors?
    Will hospitals just do creative code submissions to get paid for errors?
    Who’s going to check for Medicare?