A financial ouch for hospitals

Medicare won't pay for some mistakes.

Posted: August 30, 2007

Last year, nine patients got infusions of the wrong type of blood at hospitals around the region, errors that typically added thousands of dollars in treatment charges paid by Medicare.

Hospitals will soon have to bear much of the cost of fixing their own mistakes. Medicare issued rules this month that will end payments for extra care resulting from certain medical mistakes starting Oct. 1, 2008.

The new rules prohibit passing these charges on to patients, so hospitals will end up absorbing the costs - and, Medicare hopes, working harder to prevent mistakes.

The change has been long sought by patient-safety proponents who argue that current reimbursement practices do not discourage avoidable complications. Experts said private health insurers were likely to follow Medicare's lead.

The federal health program specified eight medical errors and preventable conditions that it will no longer cover. They range from the removal of surgical sponges or instruments accidentally left in the body - 46 cases in the eight-county region last year, according to an Inquirer analysis of billing records - to the treatment of urinary-tract infections linked to catheters - contracted by 362 patients locally.

"Up until now the only strong disincentive to medical errors has been the malpractice system, which is grossly inefficient, costly and often inaccurate," said Robert I. Field, chairman of the health policy and public health department at the University of the Sciences.

He called the change "the most direct and aggressive initiative" aimed at the problem since the Institute of Medicine's groundbreaking 1999 report estimated that mistakes killed 98,000 patients a year.

Medicare is by far the biggest health-care payer, covering 42 million seniors and disabled people nationwide.

"Withholding Medicare reimbursement is certainly a strong incentive to get everybody on the same quality-improvement page," said Ron Czajkowski, a spokesman for the New Jersey Hospital Association.

Statewide, Medicare accounted for nearly $5 billion, or 34 percent of all New Jersey hospital revenue last year. Pennsylvania hospitals got $10.4 billion, or 35 percent, of revenue from the program.

In the Philadelphia region, many hospitals rely on Medicare for 40 percent or more of their revenue.

The actual impact of the change on hospital revenue is not yet clear.

The circumstances to be excluded from reimbursement appeared in bills for an estimated 35,156 hospitalizations last year, according to the analysis of records for general hospitals in the eight counties. Currently, however, the records do not note whether the condition existed before the patient entered the hospital or developed there.

Beginning Oct. 1, hospitals will be required to indicate whether the condition was present at admission; as a result, additional tests may be conducted on Day One. The following October, the reimbursements will end.

The goal is not to punish hospitals but to spur action to improve patient safety.

The Centers for Medicare and Medicaid Services administer the health-care program for the elderly out of Washington, while Medicaid, which provides care to the poor, is run by the states.

Pennsylvania's Medicaid program plans to quickly adopt similar rules and may expand them to other preventable conditions. The National Quality Forum, a nonprofit that focuses on quality of health care, has identified 27 events that should never happen, ranging from wrong-site surgery to serious medication errors.

Medicare limited its changes to avoidable complications that could be readily identified in hospital bills.

Gov. Rendell included plans for Medicaid and other state insurance programs to stop reimbursing medical mistakes as part of his "Prescription for Pennsylvania" health-care overhaul announced in January.

The state has been at the vanguard of the patient-safety movement. It requires all hospitals to report errors that cause serious injury, and was the first in the nation to mandate public reporting of hospital-acquired infections.

Rendell estimated that such complications added billions of dollars annually to the cost of health care in Pennsylvania.

Medicare's new rules support Rendell's contention that the state is not required to pay for the resulting care, said Rosemarie B. Greco, director of the Governor's Office for Healthcare Reform.

The financial power of Medicare plus the added influence of state Medicaid spending are likely to propel progress in the fight against medical errors. And the industry has little choice but to join the effort.

"Hospitals believe that these are reasonable approaches and that for things that were truly preventable there should not be an additional payment," said Paula Bussard, senior vice president for policy at the Hospital and HealthSystem Association of Pennsylvania.

New Medicare Rules in Brief


In an effort to improve patient care and to cut

costs, Medicare will stop reimbursing hospitals for the costs of treating certain medical errors and other preventable conditions.


Oct. 1, 2007: Bills to Medicare will begin indicating preexisting vs. hospital-acquired conditions.

Oct. 1, 2008: Medicare will end payments for conditions (listed below) that developed in the hospital; patients cannot be charged.

Local impact

Total cases of affected conditions (including preexisting) reported by all 66 general hospitals in the eight-county region last year:

Condition that will not be covered              Number of cases

Catheter-associated urinary-tract infections           362

Objects left in body during surgery                   46

Air embolism (obstructive air bubble)                     1

Incompatible blood type                                 9

Vascular catheter-associated infections*             2,033

Mediastinitis (infection after heart bypass)               11

Bedsores (pressure ulcers)** 10,890

Hospital-associated injuries (breaks, burns, etc.)    21,804

* 2006 data include more than catheters

** Excludes patients transferred from nursing homes, who often develop bedsores

SOURCES: Analysis by Inquirer staff writer Josh Goldstein of data from New Jersey Department of Health and Senior Services (Burlington, Camden and Gloucester Counties) and Pennsylvania Health Care Cost Containment Council (Bucks, Chester, Delaware, Montgomery and Philadelphia Counties)

Contact staff writer Josh Goldstein at 215-854-4733 or jgoldstein@phillynews.com.

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