[Federal Register Volume 76, Number 33 (Thursday, February 17, 2011)]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2011-3548]
DEPARTMENT OF HEALTH AND HUMAN SERVICES
Centers for Medicare & Medicaid Services
42 CFR Parts 434, 438, and 447
Medicaid Program; Payment Adjustment for Provider-Preventable
Conditions Including Health Care-Acquired Conditions
AGENCY: Centers for Medicare & Medicaid Services (CMS), HHS.
ACTION: Proposed rule.
SUMMARY: This proposed rule would implement section 2702 of the Patient
Protection and Affordable Care Act of 2010 which directs the Secretary
Health and Human Services to issue Medicaid regulations effective as of
July 1, 2011 prohibiting Federal payments to States under section 1903
of the Social Security Act for any amounts expended for providing
medical assistance for health care-acquired conditions. It would also
authorize States to identify other provider-preventable conditions for
which Medicaid payment would be prohibited.
DATES: To be assured consideration, comments must be received at one of
the addresses provided below, no later than 5 p.m. on March 18, 2011.
ADDRESSES: In commenting, please refer to file code CMS-2400-P. Because
of staff and resource limitations, we cannot accept comments by
facsimile (FAX) transmission.
You may submit comments in one of four ways (please choose only one
of the ways listed):
1. Electronically. You may submit electronic comments on this
regulation to http://www.regulations.gov. Follow the instructions under
the ``More Search Options'' tab.
2. By regular mail. You may mail written comments to the following
address ONLY: Centers for Medicare & Medicaid Services, Department of
Health and Human Services, Attention: CMS-2400-P, P.O. Box 8016,
Baltimore, MD 21244-1850.
Please allow sufficient time for mailed comments to be received
before the close of the comment period.
3. By express or overnight mail. You may send written comments to
the following address ONLY: Centers for Medicare & Medicaid Services,
Department of Health and Human Services, Attention: CMS-2400-P, Mail
Stop C4-26-05, 7500 Security Boulevard, Baltimore, MD 21244-1850.
4. By hand or courier. If you prefer, you may deliver (by hand or
courier) your written comments before the close of the comment period
to either of the following addresses:
a. For delivery in Washington, DC--Centers for Medicare & Medicaid
Services, Department of Health and Human Services, Room 445-G, Hubert
H. Humphrey Building, 200 Independence Avenue, SW., Washington, DC
(Because access to the interior of the Hubert H. Humphrey Building
is not readily available to persons without Federal Government
identification, commenters are encouraged to leave their comments in
the CMS drop slots located in the main lobby of the building. A stamp-
in clock is available for persons wishing to retain a proof of filing
by stamping in and retaining an extra copy of the comments being
b. For delivery in Baltimore, MD--Centers for Medicare & Medicaid
Services, Department of Health and Human Services, 7500 Security
Boulevard, Baltimore, MD 21244-1850.
If you intend to deliver your comments to the Baltimore address,
please call telephone number (410) 786-7195 in advance to schedule your
arrival with one of our staff members.
Comments mailed to the addresses indicated as appropriate for hand
or courier delivery may be delayed and received after the comment
For information on viewing public comments, see the beginning of
the SUPPLEMENTARY INFORMATION section.
FOR FURTHER INFORMATION CONTACT: Venesa Day, (410) 786-8281, or Gary
Jackson, (410) 786-1218.
Inspection of Public Comments: All comments received before the
close of the comment period are available for viewing by the public,
including any personally identifiable or confidential business
information that is included in a comment. We post all comments
received before the close of the comment period on the following Web
site as soon as possible after they have been received: http://www.regulations.gov. Follow the search instructions on that Web site to
view public comments.
Comments received timely will also be available for public
inspection as they are received, generally beginning approximately 3
weeks after publication of a document, at the headquarters of the
Centers for Medicare & Medicaid Services, 7500 Security Boulevard,
Baltimore, Maryland 21244, Monday through Friday of each week from 8:30
a.m. to 4 p.m. To schedule an appointment to view public comments,
To assist the reader, the following is list of the acronyms used in
this proposed rule:
AHRQ Agency for Healthcare Research and Quality
BPM Benefit Policy Manual
CABG Coronary artery bypass graft
CBO Congressional Budget Office
CDC Centers for Disease Control and Prevention
DVT Deep vein thrombosis
ESRD End-stage renal disease
DRA Deficit Reduction Act of 2005 (Pub. L. 109-171, enacted on
February 8, 2006)
FFP Federal financial participation
FY Fiscal year
HAC Hospital-acquired condition
HCAC Health care-acquired condition
ICR Information collection requirement
IPPS Inpatient prospective payment system
MS-DRG Diagnosis-related group
NCA National coverage analysis
NDC National coverage determination
NQF National Quality Forum
OACT [CMS] Office of the Actuary
OIG Office of Inspector General
OMB Office of Management and Budget
OPPC Other provider-preventable condition
PE Pulmonary embolism
POA Present on admission
PPC Provider-preventable condition
PRA Paperwork Reduction Act
RFA Regulatory Flexibility Act (September 19, 1980, Pub. L. 96-354)
RIA Regulatory impact analysis
SMDL State Medicaid Director Letter
SPA State plan amendment
UMRA Unfunded Mandates Reform Act of 1995 (Pub. L. 104-04, enacted
on March 22, 1995)
UTI Urinary tract infection
Title XIX of the Social Security Act (the Act) authorizes Federal
grants to the States for Medicaid programs to provide medical
assistance to persons with limited income and resources. While Medicaid
programs are administered by the States, they are jointly financed by
the Federal and State governments. Each State establishes its own
eligibility standards, benefits packages, payment rates, and program
administration for Medicaid in accordance with Federal statutory and
regulatory requirements. Operating within broad Federal parameters,
States select eligibility groups, types, and range of services, payment
levels for services, and administrative and operating procedures. Each
State Medicaid program must be described and administered in accordance
with a Federally-approved ``State plan.'' This comprehensive document
describes the nature and scope of the State's Medicaid program, and
provides assurances that it will be administered in conformity with all
The Federal government pays its share of medical assistance
expenditures to the State on a quarterly basis according to a formula
described in sections 1903 and 1905(b) of the Act. Specifically,
section 1903 of the Act requires that the Secretary (except as
otherwise provided) pay to each State which has a plan approved under
this title, for each quarter, an amount equal to the Federal medical
assistance percentage of the total amount expended during such quarter
as medical assistance under the State plan.
Among the statutory requirements for Medicaid State plans, section
1902(a)(4) of the Act requires that State plans provide for methods of
administration as are found to be necessary by the Secretary for the
proper and efficient operation of the plan. Section 1902(a)(6) of the
Act requires that a State plan for
medical assistance provide that the State agency will make such
reports, in such form and containing such information, as the Secretary
may from time-to-time require, and comply with such provisions as the
Secretary may from time-to-time find necessary to assure the
correctness and verification of such reports. In addition, section
1902(a)(19) of the Act requires that a State plan for medical
assistance provide such safeguards as may be necessary to assure that
eligibility for care and services under the plan will be determined,
and such care and services will be provided, in a manner consistent
with simplicity of administration and the best interests of the
A. The Medicare Program and Quality Improvements Made in the Deficit
Reduction Act of 2005 (DRA) (Pub. L. 109-171)
Title XVIII of the Act provides authority for the Secretary to
operate the Medicare program, which provides payment for certain
medical expenses for persons 65 years of age or older, certain disabled
individuals, and persons with end-stage renal disease (ESRD). Medicare
benefits include inpatient care, a wide range of medical services, and
outpatient prescription drugs.
The Medicare statute authorizes the Secretary, in the course of
operating the Medicare program, to develop, implement, and monitor
quality measures, as well as take other actions, to ensure the quality
of the care and services received by Medicare beneficiaries.
Payment under the Medicare program for inpatient hospital benefits
is generally based on the ``inpatient prospective payment system''
(IPPS) described in section 1886(d) of the Act. Hospitals receive a
payment for each inpatient discharge based on diagnosis codes that
identify a ``diagnosis-related group'' (MS-DRG). Assignment of an MS-
DRG can take into account the presence of secondary diagnoses, and
payment levels are also adjusted to account for a number of hospital-
Section 5001(a) of the Deficit Reduction Act of 2005 (Pub. L. 109-
171, enacted on February 8, 2006) (DRA) amended section 1886(b)(3)(B)
of the Act to expand the set of hospital quality measures collected by
Medicare. In particular, this provision directed the Secretary to start
collecting baseline measures set forth by the Institute of Medicine in
its November 2005 report in fiscal year (FY) 2007. These measures
include 22 Hospital Quality Alliance measures and 3 process measures.
In FY 2008 and subsequent years, the Secretary was required to add
other measures that reflect consensus among affected parties. The
provision also allowed the Secretary to replace and update existing
quality measures. The statute mandates that the Secretary establish a
process for hospitals to review data that will be made public and,
after that process is complete, requires the Secretary to post measures
on the Hospital Compare Internet Web site. The quality measures
required under section 5001(a) of the DRA were integral to the
direction under section 5001(b) of the DRA for the Secretary to develop
a plan to implement value-based purchasing commencing FY 2009 for most
Medicare hospital services. We are currently developing a hospital
value-based purchasing system as required by the Patient Protection and
Affordable Care Act (Pub. L. 111-148, enacted on March 23, 2010)
(Affordable Care Act).
Section 5001(c) of the DRA amended section 1886(d)(4) of the Act to
prohibit payment to hospitals for certain preventable hospital-acquired
conditions (HACs) identified by the Secretary. Specifically, under
section 1886(d)(4)(D)(iv) of the Act, the Secretary is required to
identify HACs for which no payment for hospital services would be made.
These conditions are required to have the following characteristics:
(a) High cost or high volume or both; (b) result in the assignment of a
case to a MS-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. Section 5001(c) of the DRA
provides for revision of the list of conditions from time to time, as
long as it contains at least two conditions.
B. Previously Specified Medicare HACs
As amended by section 5001(c) of the DRA, section 1886(d)(4) of the
Act provides that the Secretary must ensure that additional payment
under the IPPS is not made to hospitals for identified HACs including
infections. By October 1, 2007, the Secretary was required under
section 1886(d)(4)(D) of the Act to select, in consultation with the
Centers for Disease Control and Prevention (CDC), diagnosis codes
associated with at least two HACs that: (a) Are high cost, high volume,
or both; (b) are assigned to a higher paying MS-DRG when present as a
secondary diagnosis (that is, conditions under the MS-DRG system that
are complications or co-morbidities or major complications or co-
morbidities); and (c) could reasonably have been prevented through the
application of evidence based guidelines. The list of conditions can be
revised from time-to-time as long as the list contains at least two
Under the provisions of section 1886(d)(4)(D)(ii) of the Act, when
an HAC is not present on admission (POA), but is reported as a
secondary diagnosis associated with the hospitalization, the Medicare
payment under IPPS to the hospital may be reduced to reflect that the
condition was hospital-acquired. More specifically, the hospital
discharge cannot be assigned to a higher paying MS-DRG if the secondary
diagnosis associated with the HAC would otherwise have caused this
assignment. If an HAC were POA, then the Medicare payment under IPPS to
the hospital would not be reduced. Since October 1, 2007, hospitals
subject to the IPPS have been required to submit information on
Medicare claims specifying whether diagnoses were POA. The POA
indicator reporting requirement and the HAC payment provision apply to
IPPS hospitals only. This requirement does not apply to hospitals
exempt from the IPPS.
The following is a list of the current Medicare HACs (75 FR 50084
Foreign Object Retained After Surgery.
Stage III and IV Pressure Ulcers.
Falls and Trauma.
+ Intracranial Injuries.
+ Crushing Injuries.
+ Electric Shock.
Manifestations of Poor Glycemic Control.
+ Diabetic Ketoacidosis.
+ Nonketotic Hyperosmolar Coma.
+ Hypoglycemic Coma.
+ Secondary Diabetes with Ketoacidosis.
+ Secondary Diabetes with Hyperosmolarity.
Catheter-Associated Urinary Tract Infection (UTI).
Vascular Catheter-Associated Infection.
Surgical Site Infection Following:
+ Coronary Artery Bypass Graft (CABG)--Mediastinitis.
+ Bariatric Surgery.
- Laparoscopic Gastric Bypass.
- Laparoscopic Gastric Restrictive Surgery.
+ Orthopedic Procedures.
Deep Vein Thrombosis (DVT)/Pulmonary Embolism (PE).
+ Total Knee Replacement.
+ Hip Replacement.
The Secretary may revise this list upon review.
C. Previously Specified Medicare National Coverage Determinations (NCD)
In 2002, the National Quality Forum (NQF) published ``Serious
Reportable Events in Healthcare: A Consensus Report'', which listed 27
adverse events that were ``serious, largely preventable and of concern
to both the public and health care providers.'' These events and
subsequent revisions to the list became known as ``never events.'' This
concept and need for the proposed reporting led to NQF's ``Consensus
Standards Maintenance Committee on Serious Reportable Events,'' which
maintains and updates the list which currently contains 28 items.
The Medicare program has addressed certain ``never events'' through
national coverage determinations (NCDs). Similar to any other patient
population, Medicare beneficiaries may experience serious injury and/or
death if they undergo erroneous surgical or other invasive procedures
and may require additional healthcare in order to correct adverse
outcomes that may result from such errors. In order to address and
reduce the occurrence of these surgeries, Medicare issued three NCDs.
Under these NCDs, Medicare does not cover a particular surgical or
other invasive procedure to treat a particular medical condition when
the practitioner erroneously performs: (1) A different procedure
altogether; (2) the correct procedure but on the wrong body part; or
(3) the correct procedure but on the wrong patient. Medicare will also
not cover hospitalizations and other services related to these non-
D. Prior Guidance on Medicaid HACs and NCDs in Response to Medicare's
Section 5001(c) of the DRA addressed only the Medicare program and
did not require that Medicaid implement nonpayment policies for HACs.
However, in light of the Medicare requirements, we encouraged States to
adopt payment prohibitions on provider claims for HACs to coordinate
with the Medicare prohibitions under section 1886(d)(4)(D) of the Act.
To accomplish this task, we issued State Medicaid Director Letter
(SMDL) 08-004 on July 31, 2008. In the July 31, 2008 SMDL, we
noted that there was variation in how State Medicaid programs had
addressed such claims in the past. The letter noted that nearly 20
States already had, or were considering, eliminating payment for some
or all of the 28 conditions on the NQF's list of Serious Reported
Events. Other States had more limited efforts to deny payment for
services related to such conditions because the services were
``medically unnecessary'' in light of the primary diagnosis.
Recognizing this variation and addressing the immediate concern of
the States over Federal cost-shifting that could result from the
Medicare HAC policy as applied to those who are dually-eligible for
Medicare and Medicaid, we took a flexible position in the July 31, 2008
SMDL guidance on State Medicaid handling of the issue. The SMDL
indicated that States seeking to implement HAC nonpayment policies
could do so by amending their Medicaid State plans to specify the
extent to which they would deny payment for an HAC. Those interested
only in avoiding secondary liability for Federal Medicare denials of
HACs and NCDs in the case of dual-eligibles could do so by amending
their State Plan to indicate that payment would not be available for
HACs and the procedures described in the 3 NCDs that are not paid by
Medicare. States that wanted broader payment prohibitions could
indicate that payment would not be available for conditions specified
in the State plan amendment (SPA), or that meet criteria identified in
E. Section 2702 of the Affordable Care Act
Section 2702 of the Affordable Care Act requires that the Secretary
implement Medicaid payment adjustments for health care-acquired
conditions (HCACs). Section 2702 of the Affordable Care Act did not
grant the Secretary new authorities, indicating that existing statutory
authorities are sufficient to fulfill the obligation. Section 2702(a)
of the Affordable Care Act sets out a general framework for application
of Medicare prohibitions on payment for HCACs to the Medicaid program.
Section 2702(a) of the Affordable Care Act first directs the Secretary
to identify current State practices that prohibit payment for HCACs and
to incorporate the practices identified, or elements of such practices,
which the Secretary determines appropriate for application to the
Medicaid program in regulations. Section 2702(a) of the Affordable Care
Act then requires that, effective as of July 1, 2011, the Secretary
prohibit payments to States under section 1903 of the Act for any
amounts expended for providing medical assistance for HCACs specified
in regulations. Such regulations must ensure that the prohibition on
payment for HCACs shall not result in a loss of access to care or
services for Medicaid beneficiaries.
Section 2702(b) of the Affordable Care Act defines the term
''health care-acquired condition'' as ``a medical condition for which
an individual was diagnosed that could be identified by a secondary
diagnostic code described in section 1886(d)(4)(D)(iv) of the Act.''
Section 2702(c) of the Affordable Care Act specifically requires
that the Secretary, in carrying out section 2702 of the Affordable Care
Act, apply the regulations issued under section 1886(d)(4)(D) of the
Act relating to the prohibition of payments based on the presence of a
secondary diagnosis code specified by the Secretary in such
regulations, as appropriate for the Medicaid program. The Secretary may
exclude certain conditions identified under title XVIII of the Act for
nonpayment under title XIX of the Act when the Secretary finds the
inclusion of such conditions to be inapplicable to beneficiaries under
F. Requirement To Review Existing State Practices Prohibiting
Nonpayment Policies for HCACs
Section 2702 of the Affordable Care Act requires that the Secretary
identify current State practices that prohibit payment for HCACs and
incorporate those practices, as appropriate, into Medicaid regulations.
To fulfill the statutory direction, we reviewed existing SPAs
originally submitted in response to the July 31, 2008 SMDL
(08-004). We also researched State HCAC-related nonpayment
policies that had been implemented outside of Medicaid State plans. We
reviewed State quality assurance programs, pay-for-performance
programs, reporting requirements and procedures, and payment systems.
We reviewed various articles, reports, summaries, and data bases
pertaining to States' existing practices concerning hospital and HCACs
and infections including, but not limited to:
Nonpayment for Preventable Events and Conditions: Aligning
State and Federal Policies to Drive Health System Improvement, Jill
Rosenthal and Carrie Hanlon, December 2009.
``Estimating the Costs of Potentially Preventable Hospital
Acquired Complications,'' Richard L. Fuller M.S., et al, Health Care
Financing Review, Summer 2009, Volume 30, Number 4.
``Identifying Potential Preventable Complications Using a
Admission Indicator,'' John S. Hughes, M.D., et al, Health Care
Financing Review, Spring 2006, Volume 27, Number 3.
State Government Tracking of Hospital-Acquired Conditions,
Nathan West, MPA et al, April 2010.
``The Triple Aim: Care, Health, and Cost,'' Donald
Berwick, et al., Health Affairs, Volume 27, Number 3 (2008).
``Lessons from the Pioneers: Reporting Healthcare-
Associated Infections,'' Anna Spencer, et al. National Conference of
State Legislatures, July 2010.
``OIG Report: Adverse Events in Hospitals: National
Incidence Among Medicare Beneficiaries,'' OEI-06-09-00090, November
``OIG Report: Adverse Events in Hospitals: Public
Disclosure of Information About Events,'' OEI-06-09-00360, January
``OIG Report: Adverse Events in Hospitals: State Reporting
Systems,'' OEI-06-07-00471, December 2008.
To Err is Human: Building a Safer Health System, A report
of the Committee on Quality of Health Care in America, Institute of
Medicine, National Academy Press, 2000, L.T. Kohn, J.M. Corrigan, and
M.S. Donaldson, eds.
We discussed internally within CMS, as well as with interagency
partners at the Agency for Healthcare Research and Quality (AHRQ) and
the CDC to ensure that the proposed regulations are consistent with
other regulations, policies, and procedures currently in existence
surrounding this issue. We also met with them to gain information on
areas where we could mirror existing processes to eliminate undue
burdens on States or providers.
We issued a State survey to capture data from all related payment
policies regardless of whether they were implemented as a result of the
July 31, 2008 SMDL or whether such practices are currently detailed in
the State plan. The survey is still undergoing the Paperwork Reduction
Act (PRA) process and has not been made mandatory. However, we have
received information from a few States through the survey and have
reviewed other information that has been helpful in explaining current
State processes for making payment adjustments for HCACs. Subsequent to
the publication of the survey, we held all-State calls where we
answered questions in response to the survey, had States with existing
policies talk about their experiences, and listened to discussion
regarding the implementation of the HCAC policy.
We met with nongovernmental partners including the NQF, the
National Academy for State Health Policy, the National Association of
Children's Hospitals, the Joint Commission, and State Medicaid Medical
Directors. Most of these organizations are primarily focused on State
program development and/or quality issues. We reached out to them to
ensure that the proposed policies would be consistent with current
industry understanding of both State payment and quality improvement
goals. In our discussions with these organizations, we were able to
discuss State experiences on a broad, national level that had been
gained from working with States. During these meetings, we discussed a
number of issues related to the proposed rule and State concerns in
implementing this provision. For instance, it was clear from many of
our discussions that States hoped to be able to look to this provision
to provide additional definition regarding the types of conditions to
identify for nonpayment, as well as to provide some support in working
with provider communities to which these policies would be applied.
G. Current State Practices Prohibiting Payment for HACs, HCACs, and
Other Similar Events
We found that 29 States do not have existing HCAC-related
nonpayment policies. Most of the 21 States that currently have HCAC-
related nonpayment policies identify at least Medicare's HACs for
nonpayment in hospitals. However, it is important to note that at least
half of the existing policies we reviewed exceeded Medicare's current
HAC requirements and policies, either in the conditions identified, the
systems used to indicate the conditions, or the settings to which the
nonpayment policies applied. These policies vary tremendously from
State to State in the authority used to enact the policies, the
terminology used, the conditions identified, State's utilization of the
current Medicare HAC list, the service settings to which nonpayment
policies are applied, reporting requirements, and the claims processing
of the nonpayment policies.
All of the States with HCAC-related nonpayment policies have
implemented provisions that would protect the State from dual-eligible
liability either by directly prohibiting payment for Medicare crossover
claims or by relying on existing State plan authority to deny payment
for claims previously denied by Medicare.
We found that 17 of the States implemented Medicaid specific
policies that reduce payment for services provided to Medicaid
beneficiaries. Most of the States implementing Medicaid specific
policies identify at least Medicare's current list of HAC, and nearly
half of those States defined a list that was different from Medicare's
current list of HACs for nonpayment.
Similar variation exists in States' plan language identifying
Medicare's NCD for nonpayment ranging from mirroring Medicare to
completely breaking from Medicare. We do note, however, that the nature
of the NQF serious reportable events, like surgery on the wrong body
part, proper surgery wrong patient, and wrong surgery, is so severe
that States were likely to have relied on State coverage provisions and
appropriate care requirements to deny payment for these events.
We also found that States use different general terminology for
HCAC-related nonpayment policies even though many of the conditions
identified overlap, are from the same sources, and do not generally
vary in medical definition from one list to the other. For example, 3
States identify ``air embolism'' as a condition for nonpayment under
its plans with the condition understood to be consistently defined for
medical purposes. However, one State includes air embolisms on its list
of ``HACs''; another includes the same condition as a ``Serious Adverse
Event''; and the third includes it on a list of ``Medical Errors.''
We also found that at least 7 of the States with HCAC-related
nonpayment policies apply those policies to settings other than the
inpatient hospital setting required by Medicare, including both
physicians and ambulatory surgical centers.
Variation across States is not surprising given the States have
been permitted broad flexibility in defining their HCAC policies and
programs. However, we attribute some of the variety on this issue to
the wealth of information and evidence-based guidelines available to
States, either through their own experiences and resources or through
industry researched and developed resources related to health system
quality. Data gathered on the conditions identified, reporting
strategies, and implementation guidelines indicate that States have
relied heavily on existing health system quality improvement research
to define requirements while tailoring policies appropriate to their
own systems. In addition, our research indicates that States' HCAC-
related nonpayment policies are mainly intended to drive broader health
system agendas to promote quality outcomes. We believe the use of
evidence-based measures and the push for health system quality are an
appropriate foundation for the
proposed regulation. We propose to implement Medicaid HCAC regulations
that would provide some consistency across health care payers (Medicare
and Medicaid). At the same time, we also propose to accommodate State
flexibility to design individual HCAC policies for nonpayment, quality-
related programs suitable for their own Medicaid program and health
marketplace to the extent such policies go beyond Federally-established
minimum standards. We request comment on this issue.
The July 31, 2008 SMDL (08-004) instructed States to
submit SPAs to enact nonpayment provisions. Thirteen States complied
with this requirement. Other States that implemented these policies
through some other authority like State law or administrative
procedures will be required to submit new SPAs for review and work with
CMS to ensure their policies, effective July 1, 2011, are in line with
the final provisions of this rule.
H. Provider Preventable Conditions
We are proposing to exercise our authority under sections
1902(a)(4), 1902(a)(19), and 1902(a)(30)(A) of the Act to provide for
identification of Provider Preventable Conditions (PPCs) as an umbrella
term for hospital and nonhospital conditions identified by the State
for nonpayment to ensure the high quality of Medicaid services. These
statutory provisions authorize requirements that States use methods and
procedures determined by the Secretary to be necessary for the proper
and efficient administration of the State plan, to provide care and
services in the best interests of beneficiaries, and to provide for
payment that is consistent with efficiency, economy, and quality of
With the introduction of this term, we propose to include two
categories of PPCs--HCACs and OPPCs. HCACs would apply as required
under the statute. OPPCs would be applicable to other conditions that
States identify and have approved through their Medicaid State plans.
The inclusion of the new terms, PPCs and OPPCs, is consistent with
the implementation of a broader application of this policy which allows
us to appropriately incorporate existing State practices. The adoption
of a new term is necessary because the term, ``health care-acquired
condition'' is very narrowly defined in the Statute and does not
provide for the inclusion of conditions other than those identified as
HACs for Medicare, even excluding the 3 Medicare NCDs. Additionally,
the statutory definition of HCACs only applies to the inpatient
hospital service setting.
We considered a broader definition of the term, ``health care-
acquired conditions,'' attempting to isolate the idea of the actual
condition from the setting in which it occurred, however after
conferring with Medicare to clearly understand the statute at section
1886(d)(4)(D)(iv) of the Act, we came to understand that it applies
specifically to conditions applicable to inpatient hospitals as defined
in that section and reimbursed by diagnosis related groups. For
example, section 1886 of the Act is titled, ``Payment to Hospitals for
Inpatient Hospital Services.'' Section 1886(d) of the Act applies
specifically to ``the amount of the payment with respect to the
operating costs of inpatient hospital services.'' Section 1886(d)(4) of
the Act requires that, ``The Secretary shall establish a classification
of inpatient hospital discharges* * *'' Section 1886(d)(4)(D) of the
Act is specific to the assignment of diagnosis-related groups which
apply solely to Medicare payment for inpatient hospital services.
We did look to the Affordable Care Act in creating these terms.
Section 3008(b) of the Affordable Care Act, ``Study And Report On
Expansion Of Healthcare Acquired Conditions Policy To Other
Providers,'' requires that Medicare study the effects of expanding its
existing policy to other providers. We adopted the ``Other Providers''
term to remain consistent with Medicare in the expansion of its policy.
In looking to expand the overall policy, we considered a number of
other terms but determined that many of them like ``adverse events'' or
``serious reportable events'' would generate confusion because they had
existing industry definitions that did not necessarily overlap with our
policy aims. We adopted the term ``Provider Preventable Condition''
after discussion with Medicare because it appropriately identified the
scope of the conditions and could act as a ``catch-all.'' Also, the
term had not been narrowly defined by use in Medicare, Medicaid, or in
the industry at-large.
I. Reporting of Results
After researching State, industry, and Federal information related
to the importance of reporting of quality data in driving improved
health outcomes, we propose that a simplified level of reporting is
essential to creating a successful nonpayment policy both from the
payment and quality perspectives. We believe that any requirements for
provider reporting should provide a consistent format for States to
report State-specific measures; require that providers report
conditions identified for nonpayment when they occur regardless of a
provider's intention to bill; and not cause undue burden on States or
Quality reporting across States is inconsistent. There are 27
States that require reporting of either hospital-acquired infections,
conditions, or some combination of both. Some of those States require
quality reporting but have not implemented associated HCAC-related
nonpayment policies. Others have HCAC-related nonpayment policies, but
have not implemented quality reporting requirements.
Existing national quality reporting formats do not support the
collection of data on HCACs and OPPCs for Medicaid beneficiaries.
Providers, mainly hospitals, are subject to reporting requirements in
addition to those imposed by States. For instance, most hospitals
report some quality measures to CMS, the Joint Commission, or the CDC.
We considered requiring reporting to Hospital Compare and the National
Health Safety Network, but decided against these formats because: We do
not believe they currently have the capacity to allow State specific
reporting of varied measures; their existing collections may not be
consistent with what most States are currently requiring providers
report; and the reporting formats may impose undue significant burden
for providers--particularly those that do not have full-time quality
staffs or resources.
Without direct reporting requirements, providers have no incentive
to report conditions or adverse events for nonpayment or otherwise.
HACs, HCACs, and related policies represent liabilities for providers
beyond nonpayment provisions. In fact, Medicare and the industry-at-
large, have experienced nonclaiming or nonbilling on the part of
providers seeking to escape the liability that could come with any type
of notification of a particular event or avoid negative health outcome
In consideration of our research, we propose a requirement that
existing claims systems be used as a platform for provider self-
reporting. We also propose to include reporting provisions that would
require provider reporting in instances when there is no associated
bill. For instance, States could employ the widely used POA system in
combination with including edits in their Medicaid claims systems that
would indicate an associated claim and flag it for medical review.
J. States' Use of Payment Systems other than MS-DRG
We also found that States' payment systems will dictate the manner
in which States are able to operationalize PPCs related nonpayment
policies. For instance, some States reimburse using MS-DRG or some
other type of grouper software to price claims. As with Medicare, these
States may use the POA indicator system to identify claims and reduce
payments by programming the grouper to reduce payment through the
grouper. We note that a considerable number of States do not use
grouper systems to reimburse providers. These States may identify and
reduce payment for HCACs using methods appropriate to the specific
reimbursement system used within that State. For instance, at least one
State has elected to carve out a portion of the total system
reimbursements for redistribution based on its own historical quality
measures. We believe that the proposed provision allows States this
type of flexibility in designing methodologies that would isolate
amounts for nonpayment and allow provider payment to be reduced based
on a CMS-approved State plan methodology that is prospective in nature.
We would welcome comment on this issue.
II. Provisions of the Proposed Regulations
A. General Discussion
We propose to codify provisions that would allow States flexibility
in identifying PPCs that include, at a minimum, the HAC identified by
Medicare, but may also include other State-identified conditions. This
flexibility would extend to applying nonpayment provisions to service
settings beyond the inpatient hospital setting. We believe that
establishing Medicare as the minimum for the application of this policy
is appropriate at this point. Many States that have implemented HCAC-
related policies have adhered to Medicare because the conditions have
been researched and are generally accepted by the provider community.
In addition, provider familiarity with Medicare's HACs and
identification processes limits the States' implementation burden.
We also recognize that Medicare's own policy is evolving. The
Affordable Care Act requires that Medicare attach new payment
incentives to its HAC provisions, as well as to study the implications
of applying HCACs policy to providers other than inpatient hospital
providers. We encourage States to consider the benefits and quality
implications of expanding HCAC quality and nonpayment policies as more
information becomes available from Medicare and State Medicaid
programs. We invite comment on the topic of expanding HCAC-related
policies in State Medicaid programs.
We propose that PPCs are defined under two categories: HCACs; and
OPPCs. We are proposing to define the category of PPCs that would be
referred to using the term ``health care-acquired conditions'' (HCACs)
based on the definition of that term in section 2702(b) of the
Affordable Care Act. That definition provides that an HCAC must be a
condition that ``could'' be identified in the Medicare program by a
secondary ICD-9-CM OR ICD-10-CM code as an HAC under section
1886(d)(4)(D)(iv) of the Act for Medicare purposes. Section 2702(c) of
the Affordable Care Act specifically requires that the Secretary shall
apply to State plans (or waivers) under title XIX of the Act the
regulations issued under section 1886(d)(4)(D) of the Act relating to
the prohibition of payments based on the presence of a secondary
diagnosis code specified by the Secretary in such regulations, as
appropriate for the Medicaid program. This means States must, at a
minimum, identify conditions as HACs in accordance with section
1886(d)(4)(D) of the Act. Consistent with this identification, we
propose that every State must, at a minimum, identify as an HCAC, those
secondary diagnosis codes that have been identified as Medicare HACs
when not present on hospital admission. We note that the Secretary has
authority to update the Medicare HAC list as appropriate. As such,
States are required to comply with subsequent updates or revisions in
accordance with section 1886(d)(4)(D) of the Act.
States will be responsible for ensuring that the conditions
identified under their Medicaid State plans are, at a minimum,
consistent with those identified in Medicare's final annual hospital
IPPS rule. Medicare is required to display its final IPPS rule 60 days
prior to the beginning of the Federal fiscal year to which the update
applies. If Medicare revises its HAC list, we believe States will have
sufficient time to update their corresponding policies. Therefore, we
propose that States' policies will be effective consistent with
Medicare's revisions to its list of HACs. We are soliciting comments on
Because the definition does not require that HCACs must be limited
to Medicare HAC, we propose a definition for an HCAC that would not be
limited to those specifically identified for the Medicare program, but
can include conditions identified by States for nonpayment under their
State plans, as approved by CMS through the State plan review process,
that the State has determined meet the statutory criteria outlined at
section 1886(d)(4)(D)(iv) of the Act. We believe this is appropriate at
this point in time, considering where many States are in development of
their programs but we are seeking comment on this proposed policy. This
proposed definition would establish Medicare as the floor, but allow
further State innovation as determined by each State. However, even if
a State chooses to go beyond Medicare, it will still have to be
implemented through SPAs, and we will publish such policies on the CMS
Web site on an annual basis to encourage States to learn from each
other. With respect to those statutory criteria for identification of
an HCAC, section 1886(d)(4)(D)(iv) of the Act sets forth the following
Cases described by such code have a high cost or high
volume, or both, under this title.
The code results in the assignment of a case to a MS-DRG
that has a higher payment when the code is present as a secondary
The code describes such conditions that could reasonably
have been prevented through the application of evidence-based
In applying these criteria to identify HCACs, we propose that the
term ``code'' would refer to ICD-9-CM OR ICD-10-CM codes assigned in
the International Classification of Diseases coding system, 9th (or
10th) Revision, Clinical Modification or a State-specified alternative
method of identifying conditions for purposes of payment.
In addition, we propose that when analyzing the payment impact of
an inpatient hospital HCAC, the State may consider the nature of its
particular payment methodology. For instance, when a State reimburses
hospitals on a per diem basis and determines that there was an HCAC
that was not POA, the State may need to isolate the increased cost of
the services (possibly through a utilization review) and reduce the per
diem reimbursement accordingly.
While we believe that the broad use of ICD-9-CM OR ICD-10-CM codes
in inpatient hospital payment, as well as the POA indicator system
currently used by Medicare to indicate conditions for nonpayment is the
most consistent methodology for States in identifying HCACs, we are
interested in hearing about other methods of identifying HCACs. We
recognize that there is considerable variation among State hospital
payment methodologies. In
addition, we recognize that there is considerable variation among
States in the availability of data necessary to identify HCACs and
related quality issues. We are proposing to require that States
implement requirements for provider self-reporting of HCACs in the
Medicaid claims payment process.
The rule proposes that States would identify an HCAC similar to the
way Medicare identifies an HAC. However, as the OIG points out in its
report evaluating the usefulness of selected methods for identifying
events that harm hospitalized Medicare beneficiaries, Adverse Events in
Hospitals: Methods for Identifying Events (OEI-06-08-00221), tools like
the Institute for Healthcare Improvement's Global Trigger Tool that
require standardized medical record reviews are considered much more
effective in detection than the POA system. This is significant because
one cannot prevent what one cannot detect. Accurate measurement is the
necessary antecedent of quality improvement. We are soliciting comments
on the efficiency of POA indicators for purposes of this provision.
We are also proposing to provide that States may identify similar
OPPCs related to services furnished in settings other than inpatient
hospitals, which would also be subject to a payment prohibition.
Preventable conditions that are caused or related to the provision
of health care are not limited to inpatient hospital settings. These
conditions can occur in outpatient hospital, nursing facility, and
ambulatory care settings, and other healthcare settings.
We are proposing that the treatment of these OPPCs will be similar
to the treatment of HCACs. State plans must provide for nonpayment for
care and services related to these OPPCs, and Federal financial
participation (FFP) will not be available in State expenditures for
such care and services related to OPPCs.
To establish a base of an OPPC, we propose to define OPPC to
include, at a minimum, wrong surgical or other invasive procedure
performed on a patient; a surgical or other invasive procedure
performed on the wrong body part; and a surgical or other invasive
procedure performed on the wrong patient.
These three conditions were addressed by Medicare in three national
coverage analyses (NCAs) to establish NCDs.
Effective January 15, 2009, Medicare does not cover a particular
surgical or other invasive procedure to treat a particular medical
condition when the practitioner erroneously performs: (1) A different
procedure altogether; (2) the correct procedure but on the wrong body
part; or (3) the correct procedure but on the wrong patient. Medicare
will also not cover hospitalizations and other services related to
these non-covered procedures as defined in the Medicare Pub. 100-02,
Benefit Policy Manual (BPM), chapter 1, sections 10 and 120 and chapter
16, section 180. We propose to adopt these 3 for purposes of this
In addition to these Federally-identified OPPCs, we propose to
authorize States to identify other OPPCs and apply payment prohibitions
the same as those applied to HCACs. The criteria that we are proposing
for such other OPPCs would be similar to the criteria for HCACs. We
propose the following criteria for States to use in identifying
A condition or event identified by a State for inclusion
under this provision must be a discrete, auditable, quantifiable, and
clearly defined occurrence.
A condition or event must be clearly adverse, resulting in
a negative consequence of care that results in unintended injury or
A condition or event identified must be reasonably
preventable, meaning an event that could have been anticipated and
prepared for, but that occurs because of an error or other system
In designating additional OPPCs, we recommend that States consider
the 2002 NQF report entitled ``Serious Reportable Events in Healthcare:
A Consensus Report.'' In that report, NQF listed 27 events that were
``serious, largely preventable and of concern to both the public and
health care providers.'' NQF's ``Consensus Standards Maintenance
Committee on Serious Reportable Events'' maintains and updates the list
which currently contains 28 items.
In order to implement the requirements of this new payment
prohibition, we recognize that States may need additional information
to properly process claims and determine the availability of FFP. We
propose requiring States to establish provider self-reporting
procedures for PPCs related to claims for Medicaid payment or courses
of treatment that otherwise would be payable under Medicaid. We solicit
comments on this issue.
We will continue to gather information from States to further
inform our policies and facilitate information sharing across States.
We note that the Secretary may update this regulation over time to
require additional nonpayment by States as we learn more from State
B. Access to Care
Section 2702(a) of the Affordable Care Act requires that the
Secretary ensure that adjustments to payment rates under this section
do not result in a loss of access to care for beneficiaries. To this
end, we propose that any reduction in payment would be limited to the
amounts directly identifiable as related to the PPC and the resulting
treatment. We are proposing this method of protecting access because it
limits States' ability to unduly reduce provider rates. For instance,
if a patient develops mediastinitis after a CABG, the State would be
allowed to deny payment for the treatment of the mediastinitis, but not
Additionally, we do not believe that beneficiaries would be best
served by this policy if the focus was shifted from quality to system
cost containment. We note further that nothing in this rule prevents a
State from reinvesting any savings it may achieve from nonpayment of
PPCs into rate improvements aimed at achieving improved access to care,
as appropriate. We solicit comments on this issue.
C. Effective Date of the Proposed Provisions
Consistent with the provisions of section 2702(a) of the Affordable
Care Act, we would make these requirements effective July 1, 2011. We
will be requesting that States submit conforming SPAs to implement
these provisions prior to that date. To be in compliance with the July
1, 2011 proposed effective date, under 42 CFR 430.20, the last date an
SPA may be submitted would be September 30, 2011, which is the last day
of the quarter in which the amendment would be effective.
D. Specific Revisions to Regulations Text
The provisions of this rule would deny FFP for Medicaid
expenditures made for PPCs, including HCACs and OPPCs identified in the
State plan; and ensure that related payment adjustments do not limit
beneficiary access to care. These provisions would apply to payments as
specified under States' approved Medicaid State plans, effective no
later than July 1, 2011. We are proposing to modify the regulations at
42 CFR parts 434, 438, and 447 following general provider payment rules
and preceding other provisions concerning reductions in provider
payments. In addition, to ensure that these provisions apply to
States use to provide Medicaid benefits using a managed care delivery
system, we are also proposing to modify the regulations at 42 CFR part
438. Because the basic rule is set forth in part 447, we discuss that
proposed modification first.
Currently the general rules regarding Medicaid State plan payments
for Medicaid are provided at part 447 subpart A. We propose to add a
new Sec. 447.26 to indicate that FFP will not be available for
expenditures made for PPCs. We have included in Sec. 447.26(a) a
statement of the basis and purpose for the regulation, and in Sec.
447.26(b), the definitions for the umbrella term PPCs, and the included
terms HCACs, and other PPCs. These proposed provisions will establish
Medicare as the floor that all States must adopt, but allow flexibility
for States to move beyond the Medicare definitions and settings. As
States' programs evolve and they make additional requirements, we would
require that necessary SPAs be submitted for implementation purposes.
In Sec. 447.26(c), we are proposing to set forth the general rule
that State plans must preclude payment to providers for PPCs, and that
FFP is not available for State expenditures for PPCs. To ensure
beneficiary access to care, we specify that any reductions may be
limited to the added cost resulting from the PPC.
In Sec. 447.26(d), we have included a provision that would require
States to require provider reporting of PPCs associated with Medicaid
claims, or with courses of treatment for Medicaid beneficiaries that
would otherwise be payable under Medicaid.
In addition to these changes in part 447, we are proposing to
include a requirement in Sec. 434.6(a)(12) for contracts for medical
or administrative services that contractors do not make payment for
PPCs, and require that providers comply with the reporting requirements
in Sec. 447.26(d) as a condition of receiving payment. Likewise, to
ensure that these provisions are included as required elements in
Medicaid managed care contracts, we are proposing to include a
requirement in Sec. 438.6(f)(2) that contracts must comply with both
Sec. 434.6(a)(12) and Sec. 447.26.
We have proposed these particular provisions because the
information gathered in preparation for issuing these proposed rules
indicate the need for a consistent authority under which States can
implement PPC nonpayment policies; a consistent approach to identifying
conditions for nonpayment; a streamlined terminology to indicate
Medicaid HCAC payment policies; State flexibility to implement
provisions suitable to their own systems; and a consistent provider
III. Collection of Information Requirements
Under the Paperwork Reduction Act of 1995, we are required to
provide 60-day notice in the Federal Register and solicit public
comment before a collection of information requirement is submitted to
the Office of Management and Budget (OMB) for review and approval. In
order to fairly evaluate whether an information collection should be
approved by OMB, section 3506(c)(2)(A) of the Paperwork Reduction Act
of 1995 requires that we solicit comment on the following issues:
The need for the information collection and its usefulness
in carrying out the proper functions of our agency.
The accuracy of our estimate of the information collection
The quality, utility, and clarity of the information to be
Recommendations to minimize the information collection
burden on the affected public, including automated collection
We are soliciting public comment on each of these issues for the
following sections of this document that contain information collection
Effective July 1, 2011, proposed Sec. 447.26 would require States
to submit SPAs for CMS approval that would reduce payments to providers
by amounts related to PPCs. The burden associated with this proposed
requirement would be the time and effort necessary for a State to
submit its SPA and the associated pre-print. We estimate that 50 States
would be required to comply with this requirement. We further estimate
that it will take each State 7 hours to submit the aforementioned
documentation to CMS. The total estimated burden associated with this
requirement would be 350 hours at a cost of $20.67 per hour per State.
We estimate that it will take each State 7 hours because we intend
to issue a template to States to simplify the process of making the
related amendment to the Medicaid State plan.
Proposed Sec. 447.26 would also require States to implement
provider reporting requirements to ensure that PPCs are identified in
claims for Medicaid payment. The burden associated with this
requirement is the time and effort necessary to develop and implement
provider reporting requirements that are effective with the provisions
of this regulation. We estimate that 50 States would be required to
comply with this requirement. Similarly, we estimate that it will take
24 hours for each State to develop and implement the provider reporting
requirements as specified above. The total estimated burden associated
with this requirement would be 1,200 hours at a cost of $20.67 per hour
per State. We believe that this estimate is reasonable because we are
requiring that States have providers use their existing claims
processes to report identified events.
Proposed Sec. 438.6(f)(2) would also require States which provide
medical assistance using a managed care delivery system to modify their
managed care contracts to reflect the PPCs payment adjustment policies
as applied through these regulations. The burden associated with this
requirement is the time and effort necessary for a State to amend its
managed care contracts to reflect these policies. We estimate that 48
States would be required to comply with this requirement. We also
estimate that it would take 8 hours for each State to revise its
contracts to comply with this requirement and submit the amended
contract to CMS for review and approval. The total estimated annual
burden associated with this requirement is 384 hours at a cost of
$20.67 per hour per State.
The total estimated burden associated with this requirement is
1,934 hours at a cost of $806.13 per State.
If you comment on these information collection and recordkeeping
requirements, please do either of the following:
1. Submit your comments electronically as specified in the
ADDRESSES section of this proposed rule; or
2. Submit your comments to the Office of Information and Regulatory
Affairs, Office of Management and Budget, Attention: CMS Desk Officer,
[CMS-2400-P]; Fax: (202) 395-6974; or E-mail: OIRA_submission@omb.eop.gov.
IV. Response to Comments
Because of the large number of public comments we normally receive
on Federal Register documents, we are not able to acknowledge or
respond to them individually. We will consider all comments we receive
by the date and time specified in the DATES section of this preamble,
and, when we proceed with a subsequent document, we will respond to the
comments in the preamble to that document.
V. Regulatory Impact Statement
A. Statement of Need
This proposed rule implements section 2702 of the Affordable Care
of 2010 which directs the Secretary to issue Medicaid regulations
effective as of July 2011, prohibiting Federal payments to States
(under section 1903 of the Act) for any amounts expended for providing
medical assistance for HCACs. It would also authorize States to
identify other PPCs for which Medicaid payment would be prohibited. We
view this regulation as one step of a larger approach to address the
problem of HCACs.
B. Overall Impact
We have examined the impacts of this rule as required by Executive
Order 12866 on Regulatory Planning and Review (September 30, 1993),
Executive Order 13563 on Improving Regulation and Regulatory Review
(February 2, 2011), the Regulatory Flexibility Act (RFA) (September 19,
1980, Pub. L. 96-354), section 1102(b) of the Social Security Act,
section 202 of the Unfunded Mandates Reform Act of 1995 (Pub. L. 104-
4), Executive Order 13132 on Federalism (August 4, 1999), and the
Congressional Review Act (5 U.S.C. 804(2)).
Executive Order 12866 directs agencies to assess all costs and
benefits of available regulatory alternatives and, if regulation is
necessary, to select regulatory approaches that maximize net benefits
(including potential economic, environmental, public health and safety
effects, distributive impacts, and equity). A regulatory impact
analysis (RIA) must be prepared for major rules with economically
significant effects ($100 million or more in any 1 year). This rule
does not reach the economic threshold and thus is not considered a
major rule under the Congressional Review Act. We request comments on
our economic analysis.
It is difficult to estimate the amount which will be withheld from
providers under this regulation, as not all of these events will be
billed. However, it is instructive to note that the total dollar amount
of Medicare claims denied under its HAC policy is approximately $20
million per year (see 75 FR 23895, May 4, 2010). The original
regulation creating the Medicare HACs was published in the August 19,
2008 Federal Register (73 FR 48433). In addition, estimates were
conducted by the Congressional Budget Office (CBO) and the CMS Office
of the Actuary (OACT) on the impact of section 2702 of the Affordable
Care Act. The CBO estimate concluded there would be no impact
associated with section 2702 of the Act (CBO and JCT, 2010 Estimate).
The CMS OACT estimate (Estimated Financial Effects of the ``Patient
Protection and Affordable Care Act,'' as Amended, 2010) projected an
impact from section 2702 on the Medicaid program of cost savings of $2
million for FY 2011 ($1 million for the Federal share and $1 million
for the State share), with an aggregate cost savings of $35 million
($20 million for the Federal share and $15 million for the State share)
for FYs 2011 through 2015. The Federal and State share cost savings, as
result of denied payments, are represented by the reduction in
transfers from Medicaid to hospitals.
Table 1--Medicaid Impacts for FYs 2011 Through 2015
FY impact ($ millions)
Medicaid impacts -----------------------------------------------------------------------------
2011 2012 2013 2014 2015 Total
Federal Share..................... -1 -4 -5 -5 -5 -20
State Share....................... -1 -3 -3 -4 -4 -15
Total......................... -2 -7 -8 -9 -9 -35
There are administrative cost impacts on States to modify their
systems to meet reporting requirements, but we believe these are not
significant. As noted above, the reporting system in this proposed
regulation relies on an existing billing system currently in place.
Both States and providers already have billing, claiming, and payment
systems in place to act upon the information obtained. The costs
reported in section III. of this proposed rule, Collection of
Information Requirements, amount to an additional $39,976 dollars
aggregate across all States.
Hospitals may incur additional costs to reduce HCACs. Such costs
include hiring additional nurses to ensure enforcement of the infection
prevention policies. In turn, preventing or reducing HCACs will lead to
a reduction in direct health spending, which is a benefit realized by
Medicaid, hospitals and other payers.
The Joint Commission requires hospitals to have established
programs for Quality Improvement, Risk Management, Safety, and
Infection Control. As a result, a majority of hospitals already have in
place programs to avert Medicare HACs and thus would not incur new
costs to implement parallel programs to avert Medicaid HACs.
Furthermore, we anticipate a public benefit to all providers and payers
since programs that hospitals develop to avoid Medicaid HCACs will
likely benefit all patients and reduce health care costs. Patient
benefits resulting from a reduction in HCAC may include an increase in
healthy years of life. However, this public benefit will derive from
possible responses by hospitals and not from this regulation itself.
We realize that the overall problem of HCACs cannot be completely
addressed in this regulation, as this proposed regulation is one step
of an overall approach. Consequently, the estimated economic impacts
from all HHS initiatives to address HCACs may result in much higher
savings impact than presented in this analysis. However, such economic
savings, for example, will not derive from this regulation alone, but
will in part come from the knowledge that State and Federal governments
gain from the reporting requirements created by this regulation. That
knowledge will in turn inform future HHS initiatives to reduce excess
morbidity and mortality attributable to HCACs.
The RFA requires agencies to analyze options for regulatory relief
for small entities, if a rule has a significant impact on a substantial
number of small entities. Most hospitals, other providers, and
suppliers are small entities, either by nonprofit status or by having
revenues of $7.0 million to $34.5 million in any 1 year. Individuals
and States are not included in the definition of a small entity.
Guidance issued by the Department of Health and Human Services
interpreting the RFA considers effects to be economically significant
if they reach a threshold of 3 to 5 percent or more of total revenue or
total costs. As illustrated in Table 1, any decrease in payments, as a
result of this regulation, to small entities should be significantly
less than this threshold.
Therefore, we are not preparing an analysis for the RFA because the
Secretary has determined that this proposed rule will not have a
significant economic impact on a substantial number of small entities.
In addition, section 1102(b) of the Act requires us to prepare a
RIA if a rule may have a significant impact on the operations of a
substantial number of small rural hospitals. This analysis must conform
to the provisions of section 603 of the RFA. For purposes of section
1102(b) of the Act, we define a small rural hospital as a hospital that
is located outside of a Metropolitan Statistical Area for Medicare
payment regulations and has fewer than 100 beds. We are not preparing
an analysis for section 1102(b) of the Act because the Secretary has
determined that this proposed rule will not have a significant impact
on the operations of a substantial number of small rural hospitals.
Section 202 of the Unfunded Mandates Reform Act of 1995 (UMRA) also
requires that agencies assess anticipated costs and benefits before
issuing any rule whose mandates require spending in any 1 year of $100
million in 1995 dollars, updated annually for inflation. In 2011, that
threshold is approximately $136 million. This rule will have no
consequential effect on State, local, or tribal governments in the
aggregate or on the private sector.
Executive Order 13132 establishes certain requirements that an
agency must meet when it promulgates a proposed rule (and subsequent
final rule) that imposes substantial direct requirement costs on State
and local governments, preempts State law, or otherwise has Federalism
implications. While this regulation does not impose substantial costs
on State or local governments, it does preempt some State laws. The
requirements of Executive Order 13132 are applicable.
Executive Order 13132 sets forth a process to be followed by the
Federal government whenever Federal regulatory processes may affect or
preempt State regulations or laws. We are aware that many States do
have regulations for Medicaid nonpayment in the event that specified
adverse events occur during provider care. This proposed rule is
intended to create a Federal legal minimum for such State regulations.
States could continue to enact more stringent laws or regulations upon
approval of a Medicaid SPA by CMS to assure that there is no adverse
impact on Medicaid beneficiary access to care.
This proposed rule derives from section 2702 of the Affordable Care
Act and other CMS regulatory authority. Like the Affordable Care Act,
it is derived from Federal authority under the Commerce Clause of the
U.S. Constitution. Under the requirements of Executive Order 13132 and
the requirements of section 2702 of the Affordable Care Act, we have
consulted with the States before issuing this proposed rule. Major
portions of the regulation are, in fact, derived from comparable State
regulations. Significant regulatory authority in this area would remain
with the States should the proposed regulation become final. As stated,
the proposed rule does not completely preempt State law, but merely
sets a Federal minimum standard.
Moreover, we solicit comments from States as part of this proposed
rule and will consider such State comments in drafting the final rule.
While there will be some additional administrative costs to States to
administer this regulation, it is expected that State Medicaid savings
will largely offset such costs.
The requirements of Executive Order 13132 will be met in the final
rule to be issued 30 days prior to the effective date of July 1, 2011,
set forth in the Affordable Care Act.
C. Anticipated Effects
1. Effects on State Medicaid Programs
The effects on State Medicaid programs as a result of this
provision will depend on various factors. For instance, as we state in
the preamble, there are 21 States that have already implemented similar
policies. While we have reviewed existing State policies and
incorporated those policies that we believe would best apply on a
national level, these States will have to make changes to comply with
the minimums set in this proposed rule. In addition, States will have
to work through the SPA review process to ensure that their existing
policies do not serve to limit beneficiaries' access to health care.
The States that have used State plan authority to implement their
nonpayment policies will need to review their policies and ensure that
they comply with any finally implemented provisions of these rules.
These States will likely have to submit revisions to their State plans.
In addition, the States that implemented these policies through some
other authority like State law or administrative procedures will have
to submit new SPAs for review and work with CMS to ensure that their
policies effective July 1, 2011, are in line with the final provisions
of these rules. States that have elected not to implement Medicaid
specific policies or that do not have related policies at all will need
to submit new SPAs. Further, States which use a managed care delivery
system to provide Medicaid benefits to beneficiaries will have to amend
and submit for CMS review and approval managed care contracts that
reflect these new requirements. While this regulation is effective on
July 1, 2011, most States will already have their managed care
contracts for the fiscal year in place by that time and there may be
some delay in incorporating new language in their managed care
contracts. We will issue subregulatory guidance to States requiring
that appropriate changes be made to managed care contracts to comply
with the regulation.
All States will need to incorporate the reporting requirements into
their claims systems. In addition, States will need to evaluate the
best ways in which to identify and reduce payment for PPCs under their
respective Medicaid plans.
We anticipate that this provision will prompt programmatic changes
for States regarding quality improvement considerations within health
care systems. This provision, while it is a payment provision, is
primarily targeted at preventing medical errors.
2. Effects on Other Providers
We anticipate that these provisions will prompt health care
providers to adopt quality programs that would limit the risk of
providing services or using resources, in error, that will not be
We anticipate that the reporting requirements will ultimately be a
catalyst for providers in developing quality practices to reduce the
risks associated with receiving care at their facilities and promote
overall quality improvements.
3. Effects on the Medicaid Program
Medicare's and States' experience has demonstrated that related
policies often do not produce substantial short-term financial savings
within health care systems. Medicare estimated that the policy will
reduce its spending by an aggregate amount of about $80,000,000 from FY
2009 through FY 2013, or by less than 0.01 percent of total annual
spending on inpatient hospital services (75 FR 50661). States report
similar short-term savings. However, there are more significant gains
to be realized when considering the broader impact of increased quality
on the health system overall, or more exactly the savings created when
preventable conditions and related treatment are measured.
The anticipated public benefit to all providers and payers from
that hospitals develop to avoid Medicaid HCACs will likely benefit all
patients and reduce health care costs. This includes, for example,
Medicaid beneficiaries realizing an increase in healthy years of life
as a result of the reduction in HCACs. However, this public benefit
will derive from possible responses by hospitals and not from this
D. Alternatives Considered: Conditions Identified as Provider-
The Statute requires that Medicaid, at a minimum, recognize
Medicare's current list of HACs. We considered proposing regulatory
action that included only the conditions listed as Medicare HACs.
However, when considering current State practices our research
concluded that many States' policies included conditions not identified
by Medicare as HACs. We concluded that such limited action would not
serve the program purposes of ensuring high quality care and would
potentially limit State flexibility to protect beneficiaries and
program integrity. Similarly, we considered proposing regulatory action
that included only the inpatient hospital setting. Again, after
assessing current State practices, as well as industry-based research,
there is clear indication that data is available to States that will
allow them to employ evidence based policy practices beyond the
inpatient hospital setting. In order to provide States full flexibility
to protect beneficiaries and the program, we elected the more
comprehensive approach proposed. We are seeking comment on both issues.
We considered defining OPPC as, ``a condition occurring in any
health care setting that could have reasonably been prevented through
the ordinary provision of high quality care during the course of
treatment * * *'' We believed that this terminology would limit
additional requirements on States to produce evidence of
preventability. However, after discussing the terminology and
scientific parameters that exist in relation to this issue, we propose
that the term be defined as, ``a condition that could have reasonably
been prevented through the application of evidence based guidelines.''
We are seeking comment on the use of both definitions.
For the reasons outlined in the RIA, we are not preparing an
analysis for either the RFA or section 1102(b) of the Act because we
have determined that this proposed rule would not have a direct
significant economic impact on a substantial number of small entities
or a direct significant impact on the operations of a substantial
number of small rural hospitals.
In accordance with the provisions of Executive Order 12866, this
regulation was reviewed by the Office of Management and Budget.
List of Subjects
42 CFR Part 434
Grant programs--health, Health maintenance organizations (HMO),
Medicaid, Reporting and recordkeeping requirements.
42 CFR Part 438
Grant programs--health, Medicaid, Reporting and recordkeeping
42 CFR Part 447
Grant programs--health, Medicaid.
For the reasons set forth in the preamble, the Centers for Medicare
& Medicaid Services proposes to amend 42 CFR parts 434, 438, and 447,
as set forth below:
1. The authority citation for part 434 continues to read as
Authority: Sec. 1102 of the Social Security Act (42 U.S.C.
Subpart A--General Provisions
2. Section 434.6 is amended by--
A. Revising the introductory text of paragraph (a).
B. Removing the semicolons from the end of paragraphs (a)(1)
through (a)(9), and the semicolon and the word ``and'' from the end of
paragraph (a)(10), and adding in their place a period.
C. Adding a new paragraph (a)(12).
The revision and addition read as follows:
Sec. 434.6 General requirements for all contracts and subcontracts.
(a) Contracts. All contracts under this part must include all of
* * * * *
(12) Specify the following:
(i) No payment will be made by the contractor to a provider for
provider-preventable conditions, as identified in the State plan.
(ii) The contractor will require that all providers agree to comply
with the reporting requirements in Sec. 447.26(d) of this subchapter
as a condition of payment from the contractor.
(iii) The contractor will comply with such reporting requirements
to the extent the contractor directly furnishes services.
* * * * *
PART 438--MANAGED CARE
3. The authority citation for part 438 continues to read as
Authority: Sec. 1102 of the Social Security Act (42 U.S.C.
Subpart A--General Provisions
4. Section 438.6 is amended by revising paragraph (f) to read as
Sec. 438.6 Contract requirements.
* * * * *
(f) Compliance with contracting rules. All contracts must meet the
(1) Comply with all applicable Federal and State laws and
regulations including title VI of the Civil Rights Act of 1964; title
IX of the Education Amendments of 1972 (regarding education programs
and activities); the Age Discrimination Act of 1975; the Rehabilitation
Act of 1973; and the Americans with Disabilities Act of 1990 as
(2) Provide for compliance with the requirements prohibiting
payment for provider-preventable conditions as set forth in Sec.
434.6(a)(12) and Sec. 447.26 of this subchapter.
(3) Meet all the requirements of this section.
* * * * *
PART 447--PAYMENTS FOR SERVICES
5. The authority citation for part 447 continues to read as
Authority: Sec. 1102 of the Social Security Act (42 U.S.C.
Subpart A--Payments: General Provisions
6. Section 447.26 is added to read as follows:
Sec. 447.26 Prohibition on payment for provider-preventable
(a) Basis and purpose. The purpose of this section is to protect
Medicaid beneficiaries and the Medicaid program by prohibiting payments
by States for services related to provider-preventable conditions.
(1) Section 2702 of the Patient Protection Act and Affordable Care
Act of 2010, Public Law 111-148 requires that the Secretary exercise
authority to prohibit Federal payment for certain provider preventable
conditions (PPCs) and health care-acquired conditions (HCACs).
(2) Section 1902(a)(19) of the Act requires that States provide
care and services consistent with the best interests of the recipients.
(3) Section 1902(a)(30) of the Social Security Act requires that
State payment methods must be consistent with efficiency, economy, and
quality of care.
(b) Definitions. As used in this section--
Health care-acquired condition means a condition identified as a
HAC by the Secretary under section 1886(d)(4)(D)(iv) of the Act for
purposes of the Medicare program and other HACs identified in the State
plan that the State determines meet the requirements described in
section 1886(d)(4)(D)(ii) and (iv) of the Act.
Other provider-preventable condition means a condition occurring in
any health care setting that meets the following criteria:
(i) Could have reasonably been prevented through the application of
evidence based guidelines.
(ii) Has a negative consequence for the beneficiary.
(iii) Is identified in the State plan.
(iv) Is auditable.
(v) Includes, at a minimum, wrong surgical or other invasive
procedure performed on a patient; surgical or other invasive procedure
performed on the wrong body part; surgical or other invasive procedure
performed on the wrong patient.
Provider-preventable condition means a condition that meets the
definition of a ``health care-acquired condition'' or an ``other
provider-preventable condition'' as defined in this section.
(c) General rules.
(1) A State plan must provide that no medical assistance will be
paid for ``provider-preventable conditions'' as defined in this
(2) Reductions in provider payment may be limited to the extent
that the following apply:
(i) The identified provider-preventable conditions would otherwise
result in an increase in payment.
(ii) The State can reasonably isolate for nonpayment the portion of
the payment directly related to treatment for, and related to, the
(3) FFP will not be available for any State expenditure for
(4) A State plan must ensure that payment for services is
sufficient to assure access to services for Medicaid beneficiaries in
accordance with section 1902(a)(30)(A) of the Act.
(d) Reporting. State plans must require that providers identify
provider-preventable conditions that are associated with claims for
Medicaid payment or with courses of treatment furnished to Medicaid
patients for which Medicaid payment would otherwise be available.
Authority: Catalog of Federal Domestic Assistance Program No.
93.778, Medical Assistance Program.
Dated: November 17, 2010.
Donald M. Berwick,
Administrator, Centers for Medicare & Medicaid Services.
Approved: December 13, 2011.
Secretary, Department of Health and Human Services.
[FR Doc. 2011-3548 Filed 2-16-11; 8:45 am]
BILLING CODE 4120-01-P