The policy by Medicare to no longer pay for preventable illnesses and injuries suffered in a hospital is not expected to be financially significant for hospitals and has been lauded by employers, patient advocates and health insurers.

The federal Centers for Medicare and Medicaid Services estimates that the policy to not pay for these errors—known as “never events” —because they are considered preventable, will save $21 million out of a total of $110 billion in inpatient health care costs it expects to pay in 2009.

“This is a part of a growing trend across the health care system to improve patient safety and quality and enhance the value consumers are getting for their health care dollars,” said Robert Zirkelbach, a spokesman for the health insurance lobbying group America’s Health Insurance Plans. “Whether it’s employer or individual consumers, when their health plan doesn’t pay for mistakes at individual hospitals, that will help keep costs low.”

“This would not have a catastrophic effect on hospitals,” said Ellen Griffith, a spokeswoman for the Centers for Medicare and Medicaid Services. “But it is having a significant impact on hospitals, from what we are hearing, that are looking at these issues and working with their staff to make sure prevention guidelines are adhered to. This is an efficient way to gain significant improvements in quality and avoid significant costs downstream.”

The list of medical errors for which payment will not be made includes the treatment of injuries that result from falls and traumas suffered inside hospitals, urinary tract infections from catheters, foreign objects left inside a person’s body during surgery, air embolism, blood incompatibilities, pressure ulcers  and other conditions.

The list will be updated annually and could grow, Griffith said.

The new rules only cover payments made by Medicare, the health insurance program for elderly and disabled Americans. Medicaid programs in several states, meanwhile, have begun to issue their own rules on suspending payment for certain medical errors.

A number of large insurers, including Aetna, WellPoint, Cigna and several Blue Cross Blue Shield plans, have already said they will not pay for some medical errors. Three years ago, Minnesota-based health insurer HealthPartners became the first insurer in the country to do so.

Employers have applauded the move to stop paying for never events.

The National Business Group on Health, an employer-sponsored group in Washington, said it would like to extend the nonpayment policy to physicians who commit preventable errors. The group says Medicare’s efforts to stop paying for never events should be part of a broader campaign to pay physicians based on the quality of the health care they provide. That policy, known as pay for performance, has been largely opposed by doctors and some of their patients.

While the savings from the Medicare initiative may be small, the annual cost of medical errors is thought to be much higher. A report by the Institute of Medicine in 1999 estimated annual cost of as many as 98,000 medical errors at $17 billion to $29 billion in health care costs and lost income and productivity.

A report issued this week by consulting firm Aon and the American Society for Healthcare Risk Management found that infections and injuries acquired in hospitals account for 12 percent of the facilities’ liability costs. The new payment rules are intended to improve care and thereby reduce hospitals’ risk of lawsuits and other liabilities, the authors of the Aon report said.

Helen Haskell, a patient safety advocate and president of Mothers Against Medical Error in Columbia, South Carolina, said the threat of losing reimbursement will force hospitals to pay greater attention to preventing medical errors.

Haskell’s son, Lewis, went into a South Carolina hospital for a cosmetic procedure in November 2000 and died four days later after doctors failed to realize medication he had received burned a hole in his stomach.

“There’s been a lot of sloppiness in medicine because none of these mistakes have affected the bottom line,” Haskell said. “There seems to be no action to prevent these things from happening unless there is a dollar attached.”

—Jeremy Smerd

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