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It Doesn't Pay to Not Pay Hospitals

How hospitals get away with billing Medicare for preventable complications

The idea seems so simple:

(A) When hospitals leave catheters in people’s bladders for too long, people get urinary infections.

(B)  Third party payers like Medicare and insurance companies are then billed for the cost of treating these infections.

(C)  If Medicare refuses to pay for these treatments, and force hospitals to bear the cost of their substandard care, then either:

  1. Hospitals will improve the quality of their care or
  2. Medicare spending will go down, because it won’t be forced to pay for hospitals’ mistakes.

This simple idea has been out there in one form or another for a little while now. And I’m sorry to say that, at least so far, it seems to have failed miserably. But in this failure are some important lessons for just how difficult it is to design health care reimbursement systems that incentivize hospitals to provide high quality care.

Let’s start with failure number one: according to a recent study in the New England Journal of Medicine, Medicare’s decision to stop paying for treatment of preventable infections did not lead to any reduction in infections. That’s according to data from almost 400 hospitals, studied over a five year period (spanning a couple years before and after Medicare changed its reimbursement policy).

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Remember, according to the idea I laid out above, this kind of reimbursement system ought to encourage hospitals to improve the quality of their care. Hospitals knows they are going to lose money treating infections that they cause, so they ought to pay more attention to taking measures that keep them from causing these kinds of infections in the first place. But according to this New England Journal study, that hasn’t happened.

If there’s been no change in infection rates, then that must mean Medicare saved a bundle of money by not having to pay for all those hospital-acquired illnesses. Right?

Wrong. Because hospitals, according to a study in the Annals of Internal Medicine, almost never report patients’ urinary tract infections as being related to prolonged catheterization. They simply report that their patients have urinary tract infections. And so they continue to be paid to treat these infections.

I don’t think hospitals are purposely lying to get money. Instead, even before Medicare put its new rules in place, hospitals rarely checked off the right administrative boxes (upon discharging patients from the hospital) to make it easy to identify which patients had suffered hospital-acquired infections. To do that, you see, they would have to signal that the patient had a urinary tract infection AND that the patient had a catheter-associated infection or inflammation AND both codes would need to be labeled as being not-present on admission.

Careful studies estimate that the majority of urinary tract infections that patients develop during hospital stays are catheter associated. But according to the discharge codes checked off by hospital billing clerks, less than 1% of urinary tract infections qualify as non-reimbursable.

Figuring out which discharge codes to claim for which patients are unavoidably complex judgments, often quite subjective ones too. Admittedly, when hospitals stand to gain money by identifying certain codes, they are usually quite good at training coders to take note of such conditions. But in this case, when Medicare is threatening not to pay them? The coders are just as sloppy as ever. And as a result, a well-intentioned change in Medicare reimbursement rules has yet to improve the quality of hospital care, or reduce Medicare’s expenses in reimbursing for low-quality care.

 

**Previously posted on Forbes**

 

Peter Ubel, M.D., author of Critical Decisions and Free Market Madness, is a physician, behavioral scientist, and Professor of Business and Public Policy at Duke University.

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