Medicaid Payment Perspectives

Medicaid Payment Perspectives helps Medicaid programs and other payers improve the methods used to purchase care and services for their beneficiaries. It’s published by the Payment Method Development team at Conduent.

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Reducing Complications in Medicaid Programs for Healthcare

One key goal for many Medicaid programs is improving patient outcomes. Preventable errors, such as readmissions or complications, place added strain on providers and payers – not to mention the members who suffer.

The Institute of Medicine, in To Err Is Human, famously estimated that 44,000 to 98,000 hospital patients die annually from preventable errors nationwide. While other studies have sought to provide a more recent estimate since this 1999 study, it remains the most widely accepted analysis of patient deaths due to medical errors. In terms of cost, researchers published in JAMA that the estimated national cost of five common hospital-acquired infections is $9.8 billion for adults, of which $5.0 to $5.5 billion could be saved with current evidence-based strategies. Other types of complications and readmissions add even more costs.

Over the past decade, CMS has implemented Medicare policies to incentivize hospitals to reduce complication and readmission rates. Various state Medicaid programs have implemented similar policies.

Maryland, which has a unique system that pays hospitals the same rates regardless of the payer, uses risk-adjusted financial incentives to encourage hospitals to reduce incidence of Potentially Presentable Complications (PPCs), a classification system developed by 3M. Since implementation in 2011, PPCs across all payers have been reduced by 48 percent, exceeding the five-year goal of 30 percent. Texas, similarly, has used 3Ms PPCs and Potentially Preventable Readmissions (PPRs) to incentivize providers to reduce adverse outcomes.

In 2015 and 2016, 37 states were either adopting or expanding initiatives to control costs, reward quality and encourage integrated care. The AHRQ quality measures clearinghouse currently lists more than 2,000 different clinical quality measures in use. However, improvements in these outcomes can’t be clearly linked to reducing healthcare system costs, especially in the short term.

In “Thinking About Clinical Outcomes in Medicaid,” published in the Journal of Ambulatory Care Management, Conduent experts seek to bring clarity to the confusing environment of quality measurement. “Should Medicaid even be in the business of measuring, judging, and incentivizing quality of care?” the article asks. “Payment methods, however, cannot be neutral on quality. By encouraging or discouraging the provision of care overall and in specific situations, every payment method affects quality of care. Paying hospitals for preventable readmissions undercuts efforts to reduce readmissions, for example.”

The table below describes the main approaches for Medicaid programs to measure complications of inpatient hospital care. The approaches vary in their success and measurable impact on the healthcare system.

This table describes five approaches to identifying and measuring complications of inpatient care. It includes details for two Medicare Hospital-Acquired Condition programs, Healthcare Acquired Conditions used by Medicaid programs, never events (which are extremely rare and should never occur) and Potentially Preventable Complications (developed by 3M).

  • Medicare Hospital-Acquired Condition (HAC) and Present on Admission (POA). This program started in 2007 and continues today. Medicare has a short list of diagnosis codes that indicate hospital-acquired conditions that are always or almost always preventable. If those conditions were not present on admission, then it is determined that a HAC occurred. Payment is adjusted as if the HAC had not occurred. The list of HACs was so narrowly drawn that very few stays – well under 1 percent – qualified as HACs. Despite considerable publicity, the program has had minimal effect.
  • Medicare HAC Reduction Program. This program was enacted under the Affordable Care Act in 2010 and is much more ambitious. It ranks hospitals based on casemix-adjusted measures that include various infection rates and Patient Safety Indicators (PSI), such as pressure ulcer rates. Hospitals in the worst-performing quadrant of hospitals have payments reduced by 1 percent. Results are posted at medicare.gov/hospitalcompare.
  • Healthcare Acquired Conditions. HCACs are the Medicaid analogue to the Medicare HAC/POA program. The two lists are essentially identical. Since 2011, states have been required to implement non-payment policies for the HCAC list, which is essentially identical to the Medicare HAC/PA list. States have the flexibility to determine how they adjust payment and may also expand the list to include other conditions.
  • Never Events. These are particularly egregious and rare errors that CMS has singled out for non-payment across the board in Medicare and Medicaid. These include surgical objects left inside a patient, operating on the wrong body part and similar errors. While a necessary part of any healthcare payment system, these events fall short of being a useful quality measure because they only consider the worst of the worst complications and do not address the wide range of healthcare errors.
  • Potentially Preventable Complications. PPCs are the most comprehensive of the leading measures, encompassing not only hospital-acquired infections and frank medical errors such as transfusion mistakes but also complications such as kidney failure, respiratory failure and shock. PPCs were developed by 3M Health Information Systems and have been used by numerous Medicaid programs.

The Payment Method Development team at Conduent has helped several Medicaid programs implement quality measures. For more information on these solutions, visit us online or contact Andrew Townsend at andrew.townsend@conduent.com.

You can read more Conduent insights about Medicaid payment in previous editions of Medicaid Payment Perspectives.