HOSPITAL-ACQUIRED CONDITION PAYMENT POLICY

Transcription

1 Health Care Purchaser Toolkit: HOSPITAL-ACQUIRED CONDITION PAYMENT POLICY August 2009 Developed for NBCH by: Developed with support from:

2 Health Care Purchaser Toolkit: HOSPITAL-ACQUIRED CONDITION PAYMENT POLICY Table of Contents I. Executive Summary...2 II. Fact Sheet: HAC Medicare Payment...3 III. Payers and Purchasers Implementation of Payment Policies...4 IV. Options for Conditions/Events Medicare HACs NQF Never Events...10 V. Coding Resources...13 Appendix A. Glossary of Terms...20 Appendix B. Medicare HAC Legislation...22 Appendix C. Sample Contract Language...23 Appendix D. Sample Policy Language # Appendix E. Sample Policy Language #2...25

3 I. Executive Summary As part of an effort to become a more active purchaser of health care, Medicare will no longer pay hospitals for additional costs associated with 10 conditions considered to be preventable medical errors (also known as hospital-acquired conditions, or HACs). Since October 1, 2007 affected hospitals have been required to submit a Present on Admission (POA) Indicator with each claim. As of October 1, 2008, if a Medicare claim includes a selected HAC that was not identified on the POA Indicator the hospital will not receive a higher resulting DRG payment. This document is intended to provide useful background information on a host of topics relating to HAC non-payment in the hopes that private health plans and other purchasers can use it to implement their own non-payment policies. Not paying for avoidable complications represents a clear opportunity to promote improvement in the nation s health care system. In order to see real change throughout the entire health care system using this strategy it is necessary that private health plans and other health care purchasers bridge their own non-payment policies with Medicare. In interviews with 16 private health plans and public payers and purchasers, we found that many policies are doing this. Here we provide some of the findings from these interviews as a way for health plans to gauge where they stand in relation to national trends. Not paying for avoidable complications represents a clear opportunity to promote improvement in the nation s health care system. When implementing non-payment policies, purchasers must make the decision of which conditions they will no longer pay for when occurring within the hospital. CMS has already developed a list that plans may wish to emulate, as has the National Quality Forum (NQF). Beyond selection of conditions there are a number of implementation issues that plans and purchasers must also address. Among them include coding for both the selected conditions and to identify when a condition developed, and application of payment reduction within the current reimbursement structure. As an aid, our toolkit reviews these topics and provides some sample policy language and contracts for non-payment policies. Finally, additional background and informational resources are presented in the Appendices to further aid purchasers with the process of developing a non-payment policy. 1

4 II. Fact Sheet: Hospital-Acquired Condition Medicare Payment Overview: As part of an effort to become a more active purchaser of health care, Medicare will no longer pay hospitals for additional costs associated with these 10 preventable medical errors (also known as hospital-acquired conditions, or HACs) 1. Foreign Object Retained After Surgery 2. Air Embolism 3. Blood Incompatibility 4. Stage III and IV Pressure Ulcers 5. Falls and Trauma (fractures, dislocations, intracranial injuries, crushing injuries, burns) 6. Manifestations of poor glycemic control, including diabetic ketoacidosis, nonketotic hyperosmolar coma, hypoglycemic coma, secondary diabetes with ketoacidosis, and secondary diabetes with hyperosmolarity. 7. Catheter-Associated Urinary Tract Infection (UTI) 8. Vascular Catheter-Associated Infection 9. Deep vein thrombosis or pulmonary embolism following total knee replacement and hip replacement procedures 10. Certain Surgical Site Infections, including Mediastinitis after Coronary Artery Bypass Graft (CABG), following certain orthopedic procedures, and following bariatric surgery for obesity Since October 1, 2007 affected hospitals have been required to submit a Present on Admission (POA) Indicator with each claim. As of October 1, 2008, if a Medicare claim includes a selected HAC that was not identified on the POA Indicator, the hospital will not receive a higher resulting DRG payment. Affected Hospitals: The POA Indicator requirement and HAC payment provision apply to Inpatient Prospective Payment System (IPPS) hospitals. Exempt hospitals include: 1. Critical Access Hospitals (CAHs) 2. Long-term Care Hospitals (LTCHs) 3. Maryland Waiver Hospitals 4. Cancer Hospitals 5. Children's Inpatient Facilities 98,000- number of deaths attributed to medical errors annually $17-$29 billion- total national per year costs due to medical errors Statutory Rule: Signed by the president, the Deficit Reduction Act of 2005, section 5002(c) requires CMS to select at least two conditions for which to eliminate higher DRG payments. The condition has to be: 1. High cost, high volume, or both; 2. Assigned to a higher paying MS-DRG when present as a secondary diagnosis; 3. Could have reasonably been prevented through the application of evidenced based guidelines. Based on these requirements, CMS worked closely with the CDC to identify candidate HACs. After public comment, 8 conditions were selected in FY 2008 final rule, and subsequently 3 additional conditions for the FY 2009 final rule. Medicaid: On July 31, 2008, CMS issued a letter to all state Medicaid directors urging them to coordinate Medicaid reimbursement with the new Medicare HAC policy. Non-payment policies for HACs and Never Events already exist in Massachusetts, New York, and Pennsylvania for the Medicaid population. Future Considerations: Potential next steps for future applications of the policy include: 1. Risk adjustment and implementation into VBP programs through rate-based benchmarking 2. Public reporting of POA Indicators, 3. Adoption of ICD-10 coding 4. Expansion to other settings, specifically outpatient treatment *For more information and an overview on the new HAC payment provision from CMS, see: Background: In 1999 Institute of Medicine released a report titled To Err is Human placed medical errors as the leading cause of morbidity and mortality in the United States. The following are some statistics on the impact of medical errors: 2

5 III. Payers and Purchasers Implementation of Payment Policies Regarding Never Events and/or Hospital Acquired Conditions Contents a. Executive Summary b. Project Methodology c. Summary of Findings 1. Typical policy design 2. Exceptions to typical design 3. Implementation challenges and solutions 4. Evidence base e. Project Next Steps a. Executive Summary With support from Sanofi-aventis, the National Business Coalition on Health (NBCH) began an initiative in mid-2008 to bridge private health plan and other health care purchasers policies with the new Medicare policy in which it will no longer elevate payment to reimburse for care in which certain preventable conditions develop that were not present in patients on admission to the hospital. NBCH enlisted Discern Consulting to assist in the execution of this project, with the guidance of an expert advisory committee. As a first step, NBCH sought to gather as much information as possible from private health insurance companies and public purchasers and payers regarding their evolving policies for hospital acquired conditions and serious reportable adverse events, more commonly referred to as never events. Among 16 private health plans and public payers and purchasers, we found that most of their policies mirrored Medicare s. Striving to improve patient safety, the policies typically require that hospitals be responsible for the added costs they incur when caring for patients who acquire particular avoidable medical conditions during their hospital admissions. To date, the Centers for Medicare and Medicaid Services (CMS) have focused on a list of eleven hospital-acquired conditions and methodologies to determine whether they were present on admission. Most other payers and purchasers focus on the same list and, like CMS, launched their policies on October 1, The incentive for hospitals to improve, signaled by this more restrictive approach to reimbursement (no longer elevating the DRG payment), is the main focus of most of these policies. A small number of payers and purchasers also seek cooperation from hospitals in agreeing to apologize to patients, report the never events or hospital acquired conditions, and analyze the root cause to make sure it will not happen again (as stimulated by The Leapfrog Group). No-pay policies provide several challenges, especially in the private sector. Not all private payments to hospitals are in the form of DRGs. As a result, some are innovating, investigating how to reduce per diem reimbursements at the same proportion at which CMS is restricting DRG payments. Plans face additional challenges including issues with contracting, coding, POA indicators, and administrative burden. The path toward implementing no-pay policies has been smoother in cases where local hospital associations are supportive and collaborative, where State regulations require public reporting of never events, and when health insurance companies have contracts with hospitals that do not require new negotiations for every update to payment policy. As the vast majority of these efforts are brand new, 3

6 there is not yet clear evidence about which policies are most effective in leading to improved outcomes for patients. NBCH hopes to pave the way toward more effective policies and a smoother implementation process through its evalue8 tool as well as a toolkit for payers and purchasers considering the adoption of similar policies. b. Methodology With support from Sanofi-aventis, the National Business Coalition on Health (NBCH) began an initiative in mid-2008 to bridge private health plan and other health care purchasers policies with the new Medicare policy in which it will no longer elevate payment to reimburse for care in which certain preventable conditions develop that were not present in patients on admission to the hospital. NBCH worked to (1) identify approaches to payment reform related to serious reportable adverse events (also called never events ) and hospital-acquired conditions (HACs) in the private sector; (2) include content about never events and HACs in its evalue8 survey tool; and, (3) produce a toolkit to assist health plans and direct purchasing coalitions implement their own payment policies to create incentives for hospitals to reduce the incidence of never events and HACs. Released each year by NBCH, evalue8 is the leading evidence-based request for information tool for assessing the performance of health plans. NBCH enlisted Discern Consulting to assist with this project. All phases of the project are being completed under the guidance of an expert advisory committee. The committee consists of 17 members and includes representatives from national health plans, employer health coalitions, major individual employers, academia, medical professional associations, and health care quality organizations. As part of the first phase of the project, Discern worked to gather information directly from the health plans and other payers and health care purchasers who had publicly announced new payment policies to address never events and HACs. Discern hired Suzanne Delbanco, Ph.D. as an independent contractor to carry out interviews via telephone. Suzanne was the founding CEO of The Leapfrog Group and, since finishing this project, has become President, Health Care Division, Arrowsight, Inc. During August and September of 2008, Suzanne interviewed 16 national and local health plans as well as state agencies and Medicaid agencies, which represent the vast majority of payers and purchasers implementing these policies. Both Discern and Suzanne are very grateful to the interviewees whose time and supporting documents were critical to the project. c. Summary of Findings 1. The typical design of a never events and hospital acquired conditions policy for a health plan includes the following elements: i. Goals Safety through reduction of HACs and never events. Zero or reduced payment for identified conditions or events ii. Timing Most of the interviewees announced their efforts in the spring of 2008 with a planned start date, like Medicare s, of October 1, iii. Hospital Acquired Conditions and other never events 4

7 Generally, policies focus on the CMS list of HACs and never events and may also include wrong patient, wrong procedure, and/or wrong body part. Moving forward, most plans interviewed intend to keep up with the CMS list as it expands. iv. Involvement of patient The typical policy includes no communication regarding the policy to patient members. Patients are insulated from any unreasonable out-of-pocket liability. Hospitals are also not allowed to balance bill (a rule that typically has been in place for a while). If the event is egregious enough (i.e. not medically necessary, like wrong-site surgery), the patient pays nothing. If the scheduled care is largely correct but a problem develops, patient might pay the usual co-pay. The typical policy does not include the apology element of the Leapfrog policy. v. Involvement of hospitals Applies to all hospitals (most plans ignore CMS exceptions for children s, cancer, and psychiatric hospitals) Includes collaboration with hospital associations and various communications to hospitals Some health plans need to negotiate changes as contracts come up for renewal, while others have existing policies in place that allow them to make changes without opening hospital contracts (e.g. an update to the provider manual). Does not include the root cause analysis and reporting elements of the Leapfrog Group policy vi. Mechanics of the non-payment approach For the HACs, plans are largely following Medicare s approach with Diagnosis Related Groups (DRGs) and Present on Admission (POA) Indicators. There is no elevated payment for HACs, and no payment for medically unnecessary serious reportable events (SREs). Plans will require review and negotiation with hospitals over others on the list. Approaches vary tremendously for hospitals paid on a per-diem basis, discount on charges basis, and for the other NQF never events included in their policies. The typical policy allows hospitals normal routes and rights of appeals. 2. Exceptions to typical approach and rationale i. Rationale for non-payment Some plans rationale behind non-payment for some of the cases or events is that the care is medically unnecessary. Many plans stated that they have never reimbursed for medically unnecessary care. One plan discussed embedding it s never events policy within a larger context of non-payment for complications in general. One State is building its new no-pay policy on its past experience with a policy of not paying for readmissions within 14 days. ii. Identifying cases One plan pointedly said that they want all hospitals to bill because that is the only way the plan can get complete data about what is happening to its patient members. They will then have to contest the claims. Hospitals have to report never events to the plan, which is how they are identified. 5

8 A few plans are making investments in creating computer algorithms to sweep claims data in order to find potential cases of never events and HACs. iii. iv. Non-DRG situations To solve the problem of how to apply non-payment or a reduction of payment in the per diem situation, one plan is looking to reduce payments to per diem hospitals by the same percent reduction in hospital payments through DRGs as a result of payments no longer being elevated for these events. Involvement of physicians Some have parallel policies for physicians, asking them not to bill in the case of never events or HACs as well. v. Involvement of patient members A very small number of interviewees provide consumer-oriented messages about the never events and non-payment policy for employers to use with employees. A couple of the larger plans have included adherence to the Leapfrog never events policy in their calculations of hospital ratings for patient members. 3. Implementation: challenges and solutions i. Implementing a non-payment policy for SREs and HACs involves several challenges. Contracting: One plan tried mailing a contract addendum, but it turned into individual negotiations with the vast majority of hospital systems and individual hospitals. This is further complicated by the fact that the lists of conditions vary by state as influenced by state hospital associations and state laws. Coding: CMS coding paves the way, but coding for most of the NQF never events is not yet sorted out and plans may end up spending more money finding the cases of never events than they will save in restricting reimbursement. Payment Methodology: In a per diem situation, charges may still be within the original range despite the occurrence of a never event or hospital acquired condition. When this is the case, how should payers calculate a reduction in payment, if at all? Outliers: Outlier payments for extraordinary cases may create a financial loophole for hospitals in some never events or HAC cases. Present on Admission Indicators: POA tests on every incoming patient may waste hospital resources. Burden: Related to several of the challenges, non-automated reviews of cases are very labor intensive. ii. The interviews did identify some factors that help implementers to overcome challenges. In many cases, supportive hospital associations were found to have made a big difference. When state laws are already on the books that require hospitals to report never events and HACs, conduct a root cause analysis and to not bill, it paves the way for private health insurance plans to implement their own policies. It is often easier to follow the lead of public payers, at least initially. Policy change is much easier when plans are allowed to update the provider or policy manual without contract changes, and the general contracts refer to those manuals. 4. Evidence base: As the vast majority of these efforts are brand new, there is not yet clear evidence about which policies are most effective in leading to improved outcomes for patients. Health Partners has the most experience by far but its approach will not capture these outcomes. 6

9 d. Future Directions a. Hospitals will likely push for consistency on which never events and HACs are included in payer and purchaser policies. b. Implementers are likely to begin communicating with patient members about the policies and the rationale behind them. c. The never events and HAC non-payment approach may lead to additional efforts to tie payment to outcomes in other ways. d. Hospitals willingness to agree to the Leapfrog Group policy or to sign health plan contract amendments on never events and HACs are likely to get incorporated increasingly into hospital ratings. e. More health plans are likely to create policies around physician reimbursement in the case of never events or the HACs that parallel the hospital policies, so that incentives between physicians and hospitals are aligned. 7

10 IV. Options for Conditions/Events Considerations for Selecting Conditions When designing a hospital-acquired conditions non-payment policy and deciding which conditions and/or events to include, purchasers have several options. They may research and select their own list of conditions, mirror lists of conditions included in existing non-payment policies, select conditions identified by reputable quality organizations like NQF, or some combination of the three. Whichever the case, criteria for selecting conditions should revolve around three themes: 1. Consequences of occurrence, in terms of patient safety and/or cost 2. Preventability of occurrence: Hospitals must be able to reasonably prevent the occurrence of condition based on evidence-based guidelines. 3. Administrative feasibility: Within a reasonable level of burden it must be possible to identify the occurrence of a condition and whether or not it occurred while in the hospital. The occurrence must also be able to be tied to cost and applied to a payment adjustment. CMS operates under statutory restrictions that limit the scope of their non-payment policy and the conditions which they can include. To an extent, NQF also operates under its own restrictions. As a direct purchaser of health care, plans have a unique flexibility to select conditions according to their own criteria, which opens the door for inclusion of many potentially avoidable events beyond what has been identified in the aforementioned lists. Despite, developing a new list of conditions for inclusion in a non-payment policy may not always be advisable when considering administrative feasibility. Hospitals across the nation are already collecting data for both the CMS and NQF identified conditions, thereby reducing additional burden for collecting data for a health plan s non-payment policy. Existing sources for conditions/events that can be readily implemented into a non-payment policy include CMS Hospital Acquired-Conditions and NQF Serious Reportable Events. Medicare Hospital-Acquired Conditions 1 Perhaps the easiest path to selecting which preventable conditions to include in a non-payment policy is to mirror the established policy of CMS. Ten conditions, referred to as Hospital-Acquired Conditions (HACs), have been selected by CMS, each identified as: 1. High cost, high volume, or both; 2. Assigned to a higher paying MS-DRG when present as a secondary diagnosis; 3. Could have reasonably been prevented through the application of evidenced based guidelines. If the selected conditions are included on a Medicare claim but were not identified as present on admission, the hospital will not receive a higher resulting DRG payment. The selected conditions are: 1. Foreign Object Retained After Surgery 2. Air Embolism 1 National Records and Archives Administration. Dept. of HHS. CMS. (2008). Federal Register. Vol. 73, No Washington, DC.: Author 8

11 3. Blood Incompatibility 4. Stage III and IV Pressure Ulcers 5. Falls and Trauma (fractures, dislocations, intracranial injuries, crushing injuries, burns) 6. Manifestations of poor glycemic control, including diabetic ketoacidosis, nonketotic hyperosmolar coma, hypoglycemic coma, secondary diabetes with ketoacidosis, and secondary diabetes with hyperosmolarity. 7. Catheter-Associated Urinary Tract Infection (UTI) 8. Vascular Catheter-Associated Infection 9. Deep vein thrombosis or pulmonary embolism following total knee replacement and hip replacement procedures 10. Certain Surgical Site Infections, including Mediastinitis after Coronary Artery Bypass Graft (CABG), following certain orthopedic procedures, and following bariatric surgery for obesity Selection of these conditions is more turn-key as they have already been vetted against strict statutory inclusion criteria, undergone an extensive process of public comment, and been implemented into actual practice. A CMS-released fact sheet on the selected conditions, including their corresponding ICD-9 CM codes is publicly available online at: NQF Serious Reportable Events 2 The National Quality Forum has established a list of Serious Reportable Events (SREs), sometimes referred to as Never Events, that should never occur. In constructing this list, events had to be characterized as: Of concern to both the public and healthcare professionals and providers. Clearly identifiable and measurable, and thus feasible to include in a reporting system. Of a nature such that the risk of occurrence is significantly influenced by the policies and procedures of the healthcare facility. Each of these measures has gone through the rigorous NQF Consensus Development Process that includes representatives from the entire spectrum of health care. Classified into 6 categories, the 28 events currently included on the NQF list are found in Table 1: Table 1: Environmental Events: Patient death or serious disability associated with an electric shock while being cared for in a healthcare facility Any incident in which a line designated for oxygen or other gas to be delivered to a patient contains the wrong gas or is contaminated by toxic substances Patient death or serious disability associated with a burn incurred from any source while Care Management Events: Patient death or serious disability associated with a medication error (e.g. errors involving the wrong drug, wrong dose, wrong patient, wrong time, wrong rate, wrong preparation or wrong route of administration) Patient death or serious disability associated with a hemolytic reaction (abnormal breakdown of red blood cells) due to the administration of ABO/HLA incompatible blood or blood products 2 National Quality Forum. (n.d.). Fact Sheet: Serious Reportable Events Transparency & Accountability are Critical to Reducing Medical Errors. Retrieved April 1, 2009 from 9

12 being cared for in a healthcare facility Patient death or serious disability associated with a fall while being cared for in a healthcare facility Patient death or serious disability associated with the use of restraints or bedrails while being cared for in a healthcare facility Product of Device Events: Patient death or serious disability associated with the use of contaminated drugs, devices or biologics provided by the healthcare facility Patient death or serious disability associated with the use or function of a device in patient care in which the device is used or functions other than as intended Patient death or serious disability associated with intravascular air embolism that occurs while being cared for in a healthcare facility Patient Protection Events: Infant discharged to the wrong person Patient death or serious disability associated with patient leaving the facility without permission Patient suicide, or attempted suicide, resulting in serious disability while being cared for in a healthcare facility Maternal death or serious disability associated with labor or delivery in a low-risk pregnancy while being cared for in a healthcare facility Patient death or serious disability associated with hypoglycemia, the onset of which occurs while the patient is being cared for in a healthcare facility Death or serious disability associated with failure to identify and treat hyperbilirubinemia (condition where there is a high amount of bilirubin in the blood) in newborns Stage 3 or 4 pressure ulcers acquired after admission to a healthcare facility Patient death or serious disability due to spinal manipulative therapy Artificial insemination with the wrong donor sperm or wrong egg Surgical Events: Surgery performed on the wrong body part Surgery performed on the wrong patient Wrong surgical procedure performed on a patient Unintended retention of a foreign object in a patient after surgery or other procedure Intraoperative or immediately postoperative death in an ASA Class I patient Criminal Events: Any instance of care ordered by or provided by someone impersonating a physician, nurse, pharmacist, or other licensed healthcare provider Abduction of a patient of any age Sexual assault on a patient within or on the grounds of a healthcare facility Death or significant injury of a patient or staff member resulting from a physical assault (i.e., battery) that occurs within or on the grounds of a healthcare facility Like the CMS list, this list of events has been developed by a credible organization and has gone through a rigorous approval process to affirm validity and preventability. While they were not originally developed as a tool to adjust reimbursement, SREs are being utilized throughout the country for quality improvement. Five events are included in the CMS HAC list and 25 states require licensed medical health care facilities to report SREs. Plans looking to develop an adverse event non-payment policy should further research NQF s list of SREs, as they have been accepted and applied throughout the health care industry. 10

13 Some literature may use the terms hospital-acquired infections or healthcare-associated infections. Having the same meaning, these are general terms referring to any infection that a patient acquires within a hospital or health care facility when the infection was not present at the time of admission 3. These terms do not exclusively include only preventable conditions and care should be taken in the use of these terms. 3 World Health Organization. (2002). Prevention of hospital-acquired Infections: A Practice Guide. Retrieved May 11, 2009 from 11

14 V. Coding Resources Implementing an HAC non-payment policy comes with its own set of coding challenges. Feasibility is directly tied to administrative identification of selected conditions and whether or not they were acquired during a patient s hospital stay. Table 2 lists the ICD-9-CM codes used by CMS to identify selected conditions on Medicare claims 4. Table 2: HAC CC/MCC (ICD-9-CM Codes) Foreign Object Retained After Surgery Air Embolism Blood Incompatibility Pressure Ulcer Stages III & IV Falls and Trauma: Fracture Dislocation Intracranial Injury Crushing Injury Burn Electric Shock Catheter-Associated Urinary Tract Infection (UTI) (CC) (CC) (MCC) (CC) (MCC) (MCC) Codes within these ranges on the CC/MCC list: (CC) Also excludes the following from acting as a CC/MCC: (CC) (CC) (MCC) (MCC) (CC) (CC) (CC) (CC) (CC) (CC) Vascular Catheter-Associated Infection (CC) 4 Centers for Medicare and Medicaid Services. (2008). Fact Sheet: Hospital-Acquired Conditions (HAC) and Present on Admission (POA) Indicator Reporting. Retrieved April 15, 2009 from 12

15 Manifestations of Poor Glycemic Control Diabetic Ketoacidosis Nonketotic Hyperosmolar Coma Hypoglycemic Coma Secondary Diabetes with Ketoacidosis Secondary Diabetes with Hyperosmolarity Surgical Site Infection, Mediastinitis, Following Coronary Artery Bypass Graft (CABG) Surgical Site Infection Following Certain Orthopedic Procedures Spine Neck Shoulder Elbow (MCC) (MCC) (CC) (MCC) (MCC) (MCC) And one of the following procedure codes: (CC) (CC) And one of the following procedure codes: , , , 81.83, or Surgical Site Infection Following Bariatric Surgery for Obesity Laparoscopic Gastric Bypass Gastroenterostomy Laparoscopic Gastric Restrictive Surgery Principal Diagnosis (CC) And one of the following procedure codes: 44.38, 44.39, or Deep Vein Thrombosis and Pulmonary Embolism Following Certain Orthopedic Procedures Total Knee Replacement Hip Replacement (MCC) (MCC) (MCC) And one of the following procedure codes: , , or To determine whether or not the selected condition occurred during a hospital stay, CMS has implemented a present on admission (POA) indicator requirement into its claims process. Since October 1, 2007 affected hospitals have been required to submit a POA indicator with each claim. As of October 1, 2008, if a Medicare claim includes a selected HAC that was not identified as present on admission with the POA indicator the hospital will not receive a higher resulting DRG payment. As outlined by CMS, general reporting requirements include 5 : POA indicator reporting is mandatory for all claims involving inpatient admissions to general acute care hospitals or other facilities. POA is defined as present at the time the order for inpatient admission occurs. Conditions that develop during an outpatient encounter, including emergency department, observation, or outpatient surgery, are considered POA. 5 Centers for Medicare and Medicaid Services. (2009). Hospital-Acquired Conditions (Present on Admission Indicator). Retrieved April 22, 2009 from, 13

16 A POA indicator must be assigned to principal and secondary diagnoses (as defined in Section II of the Official Guidelines for Coding and Reporting) and the external cause of injury codes. CMS does not require a POA Indicator for an external cause of injury code unless it is being reported as an "other diagnosis." Issues related to inconsistent, missing, conflicting, or unclear documentation must be resolved by the provider. If a condition would not be coded and reported based on Uniform Hospital Discharge Data Set definitions and current official coding guidelines, then the POA indicator would not be reported. Table 3 lists the options and definitions for the POA indicator 6. Table 3: Code Y N U W Reason for Code Diagnosis was present at time of inpatient admission. CMS will pay the CC/MCC DRG for those selected HACs that are coded as "Y" for the POA Indicator. Diagnosis was not present at time of inpatient admission. CMS will not pay the CC/MCC DRG for those selected HACs that are coded as "N" for the POA Indicator. Documentation insufficient to determine if the condition was present at the time of inpatient admission. CMS will not pay the CC/MCC DRG for those selected HACs that are coded as "U" for the POA Indicator. Clinically undetermined. Provider unable to clinically determine whether the condition was present at the time of inpatient admission. CMS will pay the CC/MCC DRG for those selected HACs that are coded as "W" for the POA Indicator. 1 Unreported/Not used. Exempt from POA reporting. This code is equivalent to a blank on the UB-04, however; it was determined that blanks are undesirable when submitting this data via the 4010A. CMS will not pay the CC/MCC DRG for those selected HACs that are coded as "1" for the POA Indicator. The "1" POA Indicator should not be applied to any codes on the HAC list. For a complete list of codes on the POA exempt list, see page 110 of the Official Coding Guidelines for ICD-9-CM. Depending on the form used to file a Medicare claim, location of the POA indicator will vary. CMS has provided a POA Fact Sheet describing how to report the POA indicator on both paper and electronic claims. Below are instructions for where the POA indicator is recorded 7. 6 Centers for Medicare and Medicaid Services. (2009). Hospital-Acquired Conditions (Present on Admission Indicator). Retrieved April 22, 2009 from, 7 Centers for Medicare and Medicaid Services. (2008). Fact Sheet: Present on Admission (POA) Indicator and Hospital-Acquired Conditions (HAC) Reporting. Retrieved April 15, 2009 from 14

17 UB-04 Paper Claim: The appropriate POA indicator must be reported for both the principle diagnosis and any secondary diagnosis, in the eighth digit of Field Locator (FL) 67, Principal Diagnosis, and the eighth digit of each of the Secondary Diagnosis fields, FL 67 A-Q. For diagnoses exempt from POA reporting, this field can be left blank Electronic Claim: The POA indicator is reported in segment K3 in the 2300 loop, data element K301. Example 1: A POA indicator for an electronic claim with one principle diagnosis, and five secondary diagnoses should be coded as POAYNUW1YZ. Table 4 explains this code and its indicators. Table 4: POA is always required first, followed by a single indicator for every diagnosis reported on POA the claim. The principal diagnosis is always the first indicator after POA. In this example, the principal Y diagnosis was present on admission. N The first secondary diagnosis was not present on admission, designated by N. It was unknown if the second secondary diagnosis was present on admission, designated by U U. It is clinically undetermined if the third secondary diagnosis was present on admission, W designated by W. 1 The fourth secondary diagnosis was exempt from reporting for POA, designated by 1. Y The fifth secondary diagnosis was present on admission, designated by Y. The last secondary diagnosis indicator is followed by the letter Z to indicate the end of the Z data element. Example 2: POA indicator for an electronic claim with one principal diagnosis without any secondary diagnosis should be coded as POAYZ.. Table 5 explains this code and its indicators. Table 5: POA is always required first, followed by a single indicator for every diagnosis reported on POA the claim. The principal diagnosis is always the first indicator after POA. In this example, the principal Y diagnosis was present on admission. Z The letter Z to indicate the end of the data element. Specific instructions on ICD-9-CM coding and POA reporting, such as selecting the correct POA indicator code, categories of codes excluded from reporting, and POA example are available from the CDC at: The POA reporting section is found in Appendix 1 beginning on page 92. Application for Payment Reduction A major hurdle to implementing a non-payment policy is applying a reduction of payment in the event a selected condition presents itself. In a fee-for-service structure the process is fairly simple and a purchaser cannot reimburse a hospital for services rendered as a result of a selected HAC occurrence. With varying payment systems, including diagnosis related group (DRG), per diem, case rates and more, the methodology for payment reduction will need to be tailored accordingly in order to accurately reflect 15

18 additional costs attributed to a hospital s failure to prevent a selected avoidable condition. Below are examples of different methods for achieving this within varying payment structures. Diagnosis-Related Group (DRG): CMS operates on a Medicare Severity DRG basis and has designed their methodology as such. There are 258 sets of MS-DRGs, and based on the presence or absence of a complicating condition (CC) or major complicating condition (MCC), each is divided into 2 or 3 subgroups. Previously, when one of these CCs or MCCs presented themselves while the patient was in the hospital, it moved the case to a higher paying DRG. Under the HAC non-payment policy, when a CC or MCC occurs that is one of the selected preventable conditions and was not identified as presented on admission, the hospital will be paid as if that condition were not present. 8 Below is a table from the CMS website demonstrating the policy: Table 6 9 : Primary and Secondary Diagnoses Service: MS-DRG Assignment Present on Average Payment* Admission (Status (Based on 50 th percentile (Examples below are for a single secondary diagnosis only) of Secondary for FY 2008) Diagnosis) Principal Diagnosis -- $5, MS-DRG 066 Intracranial hemorrhage or cerebral infarction (stroke) without CC/MCC Principal Diagnosis Y $6, Example Secondary Diagnosis Dislocation of patella-open due to a fall (code (CC)) MS-DRG 065 Intracranial hemorrhage or cerebral infarction (stroke) with CC Principal Diagnosis - Stroke N $5, Example Secondary Diagnosis Dislocation of patella-open due to a fall (code (CC)) MS-DRG 066 Intracranial hemorrhage or cerebral infarction (stroke) without CC/MCC - 8 U.S. Department of Health and Human Services. Centers for Medicare and Medicaid Services. (2009). Federal Register, Part II. 73(161). 39. Washington, D.C.: Author. 9 Centers for Medicare and Medicaid Services. (2009). Hospital-Acquired Conditions (Present on Admission Indicator). Retrieved April 22, 2009 from, 16

19 Primary and Secondary Diagnoses Service: MS-DRG Assignment Present on Average Payment* Admission (Status (Based on 50 th percentile (Examples below are for a single secondary diagnosis only) of Secondary for FY 2008) Diagnosis) Principal Diagnosis - Stroke Y $8, Example Secondary Diagnosis Stage III pressure ulcer (code (MCC)) MS-DRG 064 Intracranial hemorrhage or cerebral infarction (stroke) with MCC - Principal Diagnosis - Stroke N $5, Example Secondary Diagnosis Stage III pressure ulcer (code (MCC)) MS-DRG 066 Intracranial hemorrhage or cerebral infarction (stroke) with MCC - *Operating amounts for a hospital whose wage index is equal to the national average With the implementation of a POA indicator code, the same policy is well suited for use by a health plan operating under a DRG payment basis. As the above health plan activity report shows, many plans have chosen to follow this approach. Per Diem: When a hospital receives payments under a per diem basis, a different payment reduction methodology must be implemented to reflect the additional costs associated with the occurrence. Approaches for per diem payment vary more widely among health plans. One way to tie a dollar amount reduction with occurrence of a selected condition is to reduce the per diem payment by the same percentage reduction that would be seen in hospital payments under a DRG system when the particular condition presents itself during a hospital stay. In the first example in Table 6, the payment for the stroke case with a dislocation of patella-open due to a fall is $5, when the dislocation occurs during the hospital stay, as opposed to $6, if the condition is marked as present on admission. This represents a 13.4% lower payment to the hospital when this dislocation occurred during the patients hospital stay. If the same scenario occurred when reimbursing on a per diem basis, that 13.4% reduction can be applied to the typical per diem rate considering all diagnoses. Evidence-informed Case Rates: Evidence-informed Case Rates (ECRs), such as that utilized in the Prometheus TM Payment System, creates common incentives across the entire spectrum of patient care to reduce complications. This system distributes payments per an episode of care based on expected cost of providing evidence based, quality care. Providers at every level of a patient s care have the incentive to reduce complications. When complications are minimized, providers are able to avoid additional costs and increase their margins. This incentive also applies to complications in the form of HACs and SREs, 17

20 and is an innovative way for payers to avoid reimbursing providers for the additional cost of preventable conditions. 10 Any attempt to estimate the actual amount of additional costs stemming an HAC or SRE remains an inexact science. Like many other aspects of a non-payment policy, each of the methodologies described above comes with their own unique set of pros and cons. Already widely implemented, mirroring the methodology of reduction of payment on a DRG basis is a good approach to capturing and not paying for additional costs of selected complications. Any health plan implementing their own HAC/SRE nonpayment policy will have to carefully assess their current payment structure and contracts to determine the best way to calculate payment reduction. Regardless of the approach utilized for payment reduction, it is essential that plans maintain their hospital s normal rights of appeals as there are sure to be questions and contentions when a payment methodology is altered. 10 Camillus, J. A. de Brantes, F. (2007). Evidence-Informed Case Rates: A New Health Care Payment Model. Retrieved April 12, 2009 from 18

21 VI. Appendices Appendix A: Glossary of Terms 837-I (ANSI ASC X12N) The ANSI ASC X12N Health Care Claim (837) Transaction is a standard Electronic Data Interchange (EDI) format. It was developed by the American National Standards Institute s (ANSI) X12 Accredited Standards Committee (ASC). Commonly called an 837, this transaction is the only accepted electronic format for professional (HCFA 1500), institutional (UB 92), or dental claims as mandated by HIPAA. The 837 is designed to be sent between computers and is not human readable. 11 Complicating Condition/Major Complicating Condition (CC/MCC) Diagnosis-Related Group (DRG) Evidence-informed Case Rate (ECR) Healthcare-Associated Infections (HAIs) Hospital-Acquired Conditions (HACs) Categories of complications used by CMS in its Diagnosis-Related Group (DRG) payment system. CCs/MCCs may divide the 258 individual MS- DRGs into subgroups based on their presence. Under the HAC nonpayment policy, when a CC or MCC occurs that is one of the selected preventable conditions and was not identified as presented on admission, the hospital will be paid as if that condition were not present. 12 A categorization of patient cases carrying a corresponding payment weight, based on average cost of treating patients within that DRG. 13 Payment system under which providers are paid a single, risk-adjusted payment across the entire spectrum of care for a specific condition, including both the inpatient and outpatient settings. Rates are set based on expected cost of providing evidence-based care. The model also involves withholding a portion of the payment for a rewards distribution for good performance on clinical process, outcomes, and patient experience measures 14. Used interchangeably with hospital-acquired infections, this is a general term referring to any infection that a patient acquires within a hospital or health care facility when the infection was not present at the time of admission 15. While some HAIs may appear on the list of HACs or SREs, HAIs are not all necessarily preventable and the term is not synonymous with HACs or SREs. Conditions identified by CMS that are: (a) high cost or high volume or both, (b) result in the assignment of a case to a DRG that has a higher payment when present as a secondary diagnosis, and (c) could reasonably have been prevented through the application of evidence-based guidelines. These conditions are included in CMS HAC non-payment policy and when acquired during a patient s hospital stay, hospitals do not 11 Clear Connect. (n.d.). What is the ANSI ASC X12N Health Care Claim (837) Transaction? Retrieved May 11, 2009 from 12 U.S. Department of Health and Human Services. Centers for Medicare and Medicaid Services. (2009). Federal Register, Part II. 73(161). 39. Washington, D.C.: Author. 13 Centers for Medicare and Medicaid Services. (2009). Acute Inpatient PPS. Retrieved May 11, 2009 from 14 Camillus, J. A. de Brantes, F. (2007). Evidence-Informed Case Rates: A New Health Care Payment Model. Retrieved April 12, 2009 from 15 World Health Organization. (2002). Prevention of hospital-acquired Infections: A Practice Guide. Retrieved May 11, 2009 from 19

22 Hospital-Acquired Infections (HAIs) Inpatient Prospective Payment System (IPPS) Never Events Present on Admission (POA) Indicator Serious Reportable Events (SREs) UB-04 receive a higher payment for the additional costs associated with the selected conditions. Several HACs are also found on the NQF list of Serious Reportable Events 16. Used interchangeably with healthcare-associated infections, a general term referring to any infection that a patient acquires within a hospital or health care facility when the infection was not present at the time of admission 17. While some HAIs may appear on the list of HACs or SREs, all HAIs are not necessarily preventable and the term is not synonymous with HACs or SREs. Medicare Part A payment system for the operating costs of acute care hospital inpatient stays. Rates are set by categorizing each case into a diagnosis-related group (DRG), which carries a corresponding payment weight 18. A term commonly used to refer to NQF s list of Serious Reportable Events. Indicator code used on CMS inpatient hospital claims that indicated if a medical condition showing up on a CMS claim was present before a patient was admitted to the hospital. A list of medical events developed by the National Quality Forum (NQF) sometimes referred to as Never Events, that should never occur. The events are characterized as: Of concern to both the public and healthcare professionals and providers. Clearly identifiable and measurable, and thus feasible to include in a reporting system. Of a nature such that the risk of occurrence is significantly influenced by the policies and procedures of the healthcare facility. Several SREs are included in the CMS list of Hospital-Acquired Conditions 19. Also know as CMS-1450, this is the paper claim form used by institutional health care providers to bill Medicare and Medicaid for services provided. Replaces UB Centers for Medicare and Medicaid Services. (2009). Hospital-Acquired Conditions (Present on Admission Indicator). Retrieved April 22, 2009 from, 17 World Health Organization. (2002). Prevention of hospital-acquired Infections: A Practice Guide. Retrieved May 11, 2009 from 18 Centers for Medicare and Medicaid Services. (2008). Acute Inpatient PPS. Retrieved May 11, 2009 from, 19 National Quality Forum. (n.d.). Fact Sheet: Serious Reportable Events Transparency & Accountability are Critical to Reducing Medical Errors. Retrieved April 1, 2009 from 20 Centers for Medicare and Medicaid Services. (2009). Electronic Billing & EDI Transactions. Retrieved May 11, 2009 from 20