P4P at work with CMS 'never' events policy

Policy relates to organizational ethics

In addition to physician ethics, the pay-for-performance concept also has been instituted by the Centers for Medicare & Medicaid (CMS) related to its statement that its policy will be to no longer pay for any on a list of so-called "never" events that occur at hospitals. The policy became effective Oct. 1.

CMS is suggesting that if a never event does occur, the hospital will not be compensated, which is one method of implementing pay-for-performance policy within the hospital settings, relying on organizational ethics as a backdrop.

"The reason, in my view, that the policy falls under an ethical umbrella is that patients legitimately have certain expectations — when they are admitted to a hospital or treated as an outpatient — that they will receive effective, efficient, timely, patient-centered care that is safe," says Paul B. Hofmann, DrPH, president of Hofmann Healthcare Group in Moraga, CA.

Hofmann is an editorial advisory board member of Medical Ethics Advisor.

"That is a reasonable expectation of patients, that they will become the beneficiaries — not the victims — of care provided by a hospital," Hofmann explains.

As a result of the new CMS policy implementation, Hofmann believes this new incentive, which he calls a "very significant economic sanction," will improve patient care from an organizational perspective — not just in the physician-patient relationship, around which P4P is often discussed. And he believes it will go a long way in achieving its desired result, i.e., to improve quality of care within these facilities.

"I think [hospitals] are incentived as a result of the CMS policy to accelerate their efforts to prevent clinical errors, and that is an ongoing, existing commitment that hospitals have . . . because clearly there is going to be a higher economic cost if they are not consistently successful in reducing the number of preventable adverse events," Hofmann says.

Nancy Berlinger, PhD, Mdiv, deputy director and research associate, The Hastings Center, Garrison, NY, says that CMS is simply "using reimbursement mechanisms to make systems safer." Berlinger also is a member of the editorial advisory board of MEA.

Through its no-payment policy for never events, CMS is "taking the idea of, "Do no harm,' — the absolute standard of 'Do no harm' – and you are writing it into policy in a way that isn't just aspirational, but it has real teeth," she says.

Berlinger suggests real teeth because regardless of whether there is a risk management or malpractice litigation issue associated with a never event, as there often is, the CMS bill is going to come back "denied."

"Sometimes, you can talk about 'do the right thing' or 'don't do the wrong thing' and have check lists and such, but sometimes the way you get the [attention of] business — because healthcare is a business — well, here's the business ethics case," she says. "You want to keep the ship afloat? You want to say 'no margin, no mission'" This is going to hurt you in your margin, because hospitals operate on a 2% profit margin."

While the new policy is punitive, it may be that it was a measure of last resort to improve quality and reduce adverse events in the hospital setting, as other approaches, from ethics to the call of improving quality to professional obligation had been tried as positive incentives. Yet adverse events continued to occur.

"Some people say, 'This is something the bean counters can understand.' But really, in some hospitals it could be that that's how maybe you get their attention, " Berlinger says. "It doesn't mean they're bad people, it may just be that that is the way they see the world."

Unintended consequences?

While the policy is intended so that hospitals responsible for adverse events will not add insult to injury to a patient who was the victim of an adverse event, there may be unintended consequences of the policy for other patients at large, Hofmann says.

"What the general public probably doesn't recognize is the cost that the hospital can no longer bill to Medicare and to a number of other payers that have adopted similar — and in some cases even more extensive — sanctions, will inevitably be passed on to other patients," he says.

So, the cost of adverse events will be transferred, he says, "to either self-paying patients or patients with insurance."

Still, he says, every hospital, when an adverse event occurs, "has an obligation to reduce the burden" to that patient.

When such events do occur, the hospital has an "ethical responsibility" not only to disclose that a mistake has been made and to apologize, but also to inform the patient and his or her family "what steps are being taken to prevent similar occurrences, and when appropriate, offer compensation to the patient or the patient's family when a significant event has occurred."

Again, however, Hofmann suggests that such sanctions are likely to produce positive results related to quality of care.

"Both organizations and individuals respond to incentives, and that's the nature of both organizational culture and individual attitudes and behavior," he says.


For more information, contact:

  • Nancy Berlinger, PhD, MDiv, Deputy Director and Research Scholar, The Hastings Center, Garrison, NY.
  • Paul B. Hofmann, DrPh, President, Hofmann Healthcare Group, Moraga, CA.