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CMS’ Final HAC Rule Baffles Hospitals

 |  By cclark@healthleadersmedia.com  
   June 09, 2011

The Obama administration last week released another health reform jigsaw puzzle piece when it issued its final rule governing Medicaid payment adjustments for preventable medical errors.

But several hospital representatives I've spoken with say they're baffled by what the rule requires.  And as I read through the rule's 122 pages, I was confused as well.

"Your confusion is not unfounded," Beth Feldpush, senior associate director for policy at the American Hospital Association, assured me in an interview. "It's one of the challenging things...: There's a lot in there that's unclear."

Feldpush explains that with this rule, the Centers for Medicare & Medicaid Services appears to be giving states tremendous flexibility to interpret what a healthcare-associated condition (HAC) is and isn't, and what the expanded care necessitated by that unfortunate event includes and costs.

States must use Medicare's list of HACs as a base: retained surgical object, air embolism, blood incompatibility, stage III and IV pressure ulcers, falls and trauma, poor glycemic control, catheter-associated urinary tract, vascular catheter-associated and surgical site infections, and deep vein thrombosis.

But they can add newly termed "other provider-preventable conditions," or "OPPCs," as they see fit, as long as the new list includes, wrong procedure, wrong body part, or wrong patient as an OPPC base.
 
Interpreted one way, the rule could pave a path for states to augment their damaged budgets by avoiding paying state Medicaid funds for a lot of hospital care that they determine is necessitated by a hospital error, Feldpush says.

Some states could use this "as a means to really recoup some cost savings," she said. They could save the money perhaps for other Medicaid services, or use it for other state needs.


"We know states have been struggling across the country, and we'd hate to see this used as a cost-saving or cost-cutting methodology, instead of focusing on the serious nature of preventing patient harm," Feldpush added.

Naturally, when a hospital makes a preventable error, not paying the hospital to manage and correct the mistake is a good incentive to improve quality.
But policy makers need to be sure that those incidents are truly preventable, and not a consequence of patient mix and co-morbidities. Under this rule, there will be no uniform policy state to state on what legitimately constitutes an OPPC.

Medicaid, which paid $380 billion to care for 50.1 million people in 2009 – roughly one in five people ­– is a joint state and federal operation. Roughly 66% of Medicaid comes from federal funds, the other half from the states. More than 40% of these funds are used to pay hospitals, plus there are billions more for Medicaid managed care to pay for acute care.

Asked to give their views, several hospital representatives who usually jump to comment confessed this week they don't understand the rule well enough.  A spokesman for the agency that oversees Medi-Cal, the $52 billion Medicaid program in California, said state officials are still reviewing its potential impact.

Feldpush says CMS did not give needed guidance in several other areas. It didn't identify the criteria states should use to select OPPCs and how to evaluate the cost of these medical mistakes that they then withhold from providers' payments.

Some states reimburse hospitals for Medicaid patient care based on a DRG system, while some do it with per diem rates. "How do you even determine the added cost of care?" Feldpush asks.

In its rule, CMS explains that some states have already extended their list of HACs far beyond the required Medicare base list.

"It was clear from many of our discussions that states hoped to be able to look to this provision to provide additional definition regarding the types of conditions to identify for nonpayment, as well as to provide some support in working with provider communities to which these policies would be applied."

At least half of the existing state policies in the country, CMS continued, "exceeded Medicare's current HAC requirements and policies, either in the conditions identified, the systems used to indicate the conditions, or the settings to which the nonpayment policies applied."


Most states with specific Medicaid HAC policies identify at least half of Medicare's current list of HACS, and "nearly half of those states defined a list that was different than Medicare's current list of HACs for nonpayment."

Feldpush pointed to other parts of the rule that provoke questions, such as:

 

  • Does the rule apply to critical access hospitals, which make up one in four hospitals in the country?
  • Will states with a longer list of provider-preventable conditions than what is required for the base be obligated to pay hospitals the federal portion of those costs?
  • What about payments Medicaid makes to managed care plans? When a provider preventable condition occurs, will states demand a refund?
  • Also unclear is how the policy would affect hospital systems with facilities in multiple states with different OPPC lists. "Many hospitals belong to health systems that cross several state borders," AHA executive vice president Rick Pollack said in a comment letter to CMS March 18. "If states are able to finalize completely different lists of healthcare-acquired conditions, it would be extremely difficult to manage across a health system....We strongly recommend that CMS and states focus on a core set of healthcare-acquired conditions that are consistent across all states."

What's at stake?
CMS estimates minimal financial impact when the rule takes effect in July 2012, with denied payments amounting to only $20 million for the federal share and $15 million for the state share for each year through 2015. However, the agency says, "these estimates could be higher if states elect to expand beyond the minimum requirements of this rule."  It also doesn't indicate what hospitals will be required to absorb.

One issue CMS did clear up in the rule is that it will not restrict payment to a hospital that fixed a mistake another hospital made. This could pave the way for a hospital exchange of patients who had endured harm, even if it is an extremely informal one.


For example, Hospital A would not receive payment for expanded care required for a patient who developed a preventable stage IV pressure ulcer. But if that patient were transferred to Hospital B, Medicaid funds would pay.

But, Feldpush says, that's won't happen in any systematic way.

"That would take a degree of sophistication and almost trickery that I don't believe occurs," she said. Hospitals want to do right by their patients the first time around. We worked on this issue for many years. They want to make it right," she said.

With state coffers so distressed, it might seem prudent for the agency to provide more uniformity across state lines. That might incentivize hospitals to work harder in these categories where they are tightly compared with their peers.

It seems wrong that hospitals in some states might be held to a much lower standard in how they are penalized for causing harm. By pushing out such a vaguely worded rule, CMS may have placed a piece of the jigsaw puzzle that will take a long time to correctly fit.

 

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