How is nonpayment for 'never events' affecting Medicaid?

Medicare no longer pays for a list of "never events"—serious medical mistakes in hospitals that occur at hospitals, such as wrong-site surgery and serious medication errors—for discharges occurring on or after Oct. 1, 2008.

State Medicaid payment policies are following suit. In a July 2008 letter to state Medicaid directors, the Centers for Medicaid & Medicare Services (CMS) provided guidance to states related to coordination of state Medicaid payment policies with those adopted by the Medicare program, to prevent payment liability as a secondary payer. According to the letter, nearly 20 states already have, or are considering, methods to eliminate payment for never events.

"States have traditionally been the innovators that Medicare has built off of, such as the Medicaid medical homes model," says Patricia MacTaggart, lead research scientist and associate professorial lecturer in the Department of Health Policy at George Washington University in Washington, DC.

However, the reverse is also true. When Medicare pilots an approach to payment or service delivery, states often leverage the Medicare pilots. "States are positioned to say to their providers, 'Why not?' for Medicaid rather than 'Why?' once the provider is already engaged in the initiative with Medicare," she says.

Ms. MacTaggart notes that Pennsylvania Medicaid has a preventable serious adverse events initiative as one component of that state's efforts to promote quality health care, building off the broader national focus on preventing medical errors. "This is one of the first states to link nonpayment to preventable serious adverse events," she points out.

Minnesota's experience

In Minnesota, state law requires all hospitals and same-day surgery facilities to report never events, and the Minnesota Department of Health is responsible for producing reports of these. Two years ago, Governor Tim Pawlenty announced an agreement among all hospitals in Minnesota that they would not bill any payer, including Medicaid, for a never event.

"Since that agreement, we have not identified any reduction in billing, because it was considered common practice among providers not to bill," says Vicki Kunerth, director of measurement and quality improvement for the Minnesota Department of Human Services.

"Minnesota has been proactive with our adverse events reporting system, which gets the credit for improving safety for all patients in all hospitals in Minnesota," she reports. "Because results are reported only by hospital, not by payer, we cannot determine a specific effect for Medicaid."

Colorado is in the process of establishing a Medicaid list of serious reportable events. According to Jenny Nate, MSW, a health policy analyst with the state's Department of Health Care Policy and Financing, the policy on Medicaid nonpayment to hospitals for serious reportable events has been completed.

"An executive order has been drafted and is awaiting the governor's signature," she says. "The purpose of this policy is not to reduce costs in our Medicaid program. We realize the savings will be nominal, due to the low incidence rate of never events among our Medicaid providers."

The policy was established, says Ms. Nate, to increase awareness of the need for improved quality of care in Colorado, and also to set an example for other payers in the state to develop their own nonpayment policies.

New York's goals

New York has a goal to not pay for avoidable complications and errors, using the CMS and National Quality Forum lists as the starting points. As of October 2008, the New York State Medicaid program has stopped reimbursement for three never events, with implementation of 11 other events to follow in early 2009.

Hospitals receiving payment under New York Medicaid will be required to provide information on each admission designating which complications were present on admission, and which ones occurred during or as a result of hospital care.

"This information will help the Medicaid program determine when increased payment for complications will be denied," says Deborah Bachrach, Medicaid director and deputy commissioner in the Office of Health Insurance Programs. "Our initiative with respect to never events and preventable complications is one part of an overall goal of paying for value in Medicaid."

That goal is represented in many payment reforms, she says, including paying more for high-quality primary care, reimbursing for services based on the complexity of the patient's illness and the services provided, and selective contracting for services such as bariatric surgery and specialty pharmacy.

"Our specific goals, with respect to inpatient payments, is to pay for service and medical care that has value, improves outcomes, and is medically necessary," says Ms. Bachrach. "Through our payment policy on never events, we will no longer pay for services that result in avoidable harm or care that does not benefit our members."

The hope, she says, is that the policy will provide additional incentives for hospitals to improve care, enhance patient safety, and prevent many avoidable hospital-acquired complications that harm patients and are costly. "We expect to see increased attention and focus in this important area of health care," she says.

Contact Ms. Bachrach at (518) 474-3018 or, Mr. Duarte at (775) 684-3677 or, Ms. MacTaggart at (202)530-2337 or, Ms. Nate at (303) 866-2038, or