Hospitals to lose ‘never event’ reimbursement

Starting Oct. 1, hospitals throughout the country will stop receiving Medicare reimbursement for so-called “never events,” such as pressure sores and falls. And many private insurers such as Aetne Inc. and WellPoint Inc. are incorporating similar restrictions in their contracts with hospitals.

Hospitals receive Medicare reimbursement under the Medicare Inpatient Prospective Payment System, and the amount of reimbursement is based on the diagnosis-related group that describes a patient’s treatment. Under the upcoming change, hospitals will not receive additional reimbursement for certain secondary illnesses caused by the hospital, or that occurred while a patient is in the hospital.

For example, if a patient is admitted for knee replacement surgery, the hospital is paid a set amount for that treatment. However, if the patient develops a pressure sore at the hospital following knee replacement surgery, the hospital will not be paid for treatment of the pressure sore.

The concept of never events was developed by the National Quality Forum and the Leapfrog Group. The National Qualify Forum, a nonprofit group that was created to develop a national strategy for healthcare quality measurement, has a list of 28 never events. And the Leapfrog Group, a national coalition of major employers and health plans, gives recognition to hospitals that take responsibility for never events, including waiving the costs associated with the event, apologizing and reporting the event.

The Centers for Medicare and Medicaid Services, the agency that administers the Medicare and the Medicaid programs, has identified eight never events. They include objects left in patients during surgery, air embolism, blood incompatibility, catheter-associated urinary tract infection, vascular catheter-associated infection, pressure sores, certain surgical site infections and hospital-acquired injuries such as fractures, dislocations, intracranial injuries, burns and crushing injuries.

One of the goals of restricting never-event reimbursement is to improve patient care, but the mandate given to CMS was to identify conditions that had a high cost or occurred frequently so as to lower Medicare payments.

Many of the conditions described above, like leaving an object in a patient during surgery, would clearly be the result of negligence. However, some never events, like the development of pressure sores, can be clinically unavoidable based on a patient’s condition. Other never events, like falls, can occur regardless of the amount of care planning and supervision of the patient.

Because the determination as to payment will be based on whether the secondary illness developed in the hospital, hospitals will be required to do a more thorough job of screening patients when they are admitted. They also will be required to report the occurrence of the never events themselves.

In testimony to the House Committee on Ways and Means on Feb. 14, 2008, acting CMS Administrator Kerry Weems, proposed that hospitals failing to report never events be subject to a 2 percent annual reduction in their reimbursement levels. And major insurers have begun to include never event provisions in their new contracts with hospitals. The new contract language requires reporting the occurrence of the never event, and prevents payment to the hospital by the insurance company and the hospital from billing the patient directly.

The effects of these rule changes may be seen throughout the hospital industry.

Care will likely improve – money is a serious cudgel – but hospitals will act more defensively with respect to never events, which will probably increase costs due to more paperwork and tests. And plaintiffs who have suffered an injury will likely argue that because the injury is classified as a never event, the hospital is liable, regardless of whether the injury was unavoidable – which will probably increase malpractice insurance costs.

One can expect this trend to continue, and for CMS and insurers to expand the list of never events and to apply similar payment restrictions to other providers, such as skilled nursing homes and physicians.


Aaron Besen is an of-counsel attorney at the Vancouver office of Bullivant Houser Bailey PC, where he represents long-term care providers, landlords to these providers and related businesses. He can be reached at 360-737-2300 or