Medicare takes the plunge

Medicare will soon stop paying hospitals for the cost of treating "preventable errors, injuries, and infections that occur in hospitals" according to a front-page story in yesterday's New York Times. I'm not an expert in this area, but my naive observation is that this single policy change will mark the beginning of dramatic changes in health care reimbursement -- and perhaps health care delivery -- in the coming years. (Plenty of experts have weighed in on this -- Paul Levy has some links to them).

Commerical plans have been slowly but surely moving into the so-called P4P era of reimbursement, and Medicare is making its way there as well (David Harlow last week posted an excellent summary of Medicare's programs -- CMS forges ahead with pay-for-performance (P4P) initiatives). Up til now, the P4P conversation hasn't focused much on safety. There's been plenty of attention given to voluntary efforts and reporting on safety at the state and national levels (e.g., in Pennsylvania, Massachusetts, Indiana, and IHI's various campaigns). And, of course, there's Beth Israel Deaconness Medical Center which, under the leadership of Paul Levy, has been taking the lead in this type of reporting. But this focus on reporting and prevention had not really penetrated the conversation on payment and incentives. Until now.

On the face of it, the issue seems pretty straightforward. I pay you to do something, and if you screw up along the way, you should pay to fix the screw-up that you created. In practice, of course, it's much more complicated. A couple of issues that come to mind are:

Measurement. Are there clear ways to distinguish preventable from non-preventable errors? The issue is both with respect to categories (e.g., central line infections but not other types of infections) and threshholds (e.g., zero tolerance vs deviations from a baseline). If it's like most measurement, the majority of cases will be relatively easy to categorize, but some won't, and this minority of cases will constitute 90% of the measurement effort and 100% of the pushback.

Payment. Who's going to pay for the treatment of preventable errors? While we'd like to think of these as potentially zero-incident events, we live in a messy world, and statistically it's never going to be zero. So, let's say I suffer a "preventable error" in the hospital, and my insurance carrier tells the hospital that they're not paying for my treatment. Well, who does pay at that point? Supposedly the Medicare rules are going to say that the hospitals can't pass this cost to the patient. Is the hospital on the hook for the payment? What if the error was caused by a physician who isn't a hospital employee -- is s/he responsible for the payment? Will hospitals and physicians have to take out more or a different type of insurance to cover such payments? Will their malpractice liability exposure go up if Medicare determines that a particular patient suffered from a preventable error? Will their malpractice insurance premiums be affected if Medicare determines that they caused preventable errors, even if no litigation arises from the incident?

I don't think these complexities are show-stoppers -- after all, health care reimbursement addresses very complex issues every day (the new 2008 rules on inpatient prospective payments are over 2000 pages long -- and that's just this year's changes). I think this is a watershed moment in health care financing because it constitutes a real step away from the current "cost-plus" paradigm of reimbursement. I don't count current P4P efforts as real change because there's much more smoke there than fire owing to weak measures, dubious connections between those measures and actual quality, and correspondingly, shallow financial incentives.

Not paying for preventable errors seems different than current P4P efforts because it's something that patients/consumers (and the media) understand, it deals with reimbursement at the individual case level rather than the patient panel level and, finally, there's real money on the table. The fact that Medicare is taking this step is perhaps the biggest news of all. Medicare is the biggest player in the health care market, and commercial plans are generally loathe to make fundamental changes in reimbursement approaches without Medicare's participation because they don't want to "go it alone" against physicians and hospitals, and because their efforts are ineffectual anyway if they are diluted or contradicted by Medicare policies. Medicare's making these changes gives commercial plans the cover and the incentive to make more far-reaching changes in their own reimbursement approaches than they've been willing or able to make for a very long-time.