On June 6, 2011, the Centers for Medicare and Medicaid Services (CMS) published a final rule implementing Section 2702 of the Patient Protection and Affordable Care Act (PPACA) that requires the Department of Health and Human Services to adopt Medicaid payment adjustments for health care-acquired conditions.  The new rule requires state Medicaid agencies to stop reimbursing providers for provider-preventable conditions, which are defined to include health care-acquired conditions, in an effort to address and reduce the occurrence of preventable conditions.  Although the Deficit Reduction Act of 2005 required CMS to adjust payments to hospitals for certain hospital-acquired conditions, it did not address adjustments to Medicaid payments.  Thus, until PPACA, states relied on guidance from CMS in State Medicaid Director Letter #08-004 dated July 31, 2008, that permitted - but did not require - states to amend their state plans if they desired to implement hospital-acquired condition nonpayment policies.                         In the final rule, provider-preventable conditions are comprised of health care-acquired conditions and other provider-preventable conditions.  Health care-acquired conditions apply to Medicaid inpatient hospital settings and include the full list of Medicare's hospital-acquired conditions with the exception of deep vein thrombosis following total hip or knee replacements for certain patients.  Other provider-preventable conditions apply broadly to Medicaid inpatient and outpatient health care settings and include, at a minimum:  surgery on the wrong patient, the wrong surgery, and wrong site surgery.  States are permitted to expand other provider-preventable conditions to settings other than inpatient hospitals with CMS approval if states identify events that occur in other settings for which payment should not be made.  States are also permitted to expand other provider-preventable conditions based on specified criteria and subject to CMS approval.

Therefore, the final rule establishes the minimum standards for nonpayment that states are required to adopt, but grants states the option to expand the nonpayment ban to additional other provider-preventable conditions, with CMS approval.  According to CMS, twenty-one states already have adopted health care-acquired conditions-related nonpayment policies, most of which identify at least Medicare’s hospital-acquired conditions for inpatient hospitals.  The new federal rule expands the nonpayment ban nationwide, however, and mandates nonpayment of federal matching funds for health care-acquired conditions.  Those states currently without nonpayment policies for preventable conditions are required to submit amendments to their state Medicaid plans.  States with such policies in place should review the policies to ensure that they comply with the new rule.  All states must also implement provider self-reporting through existing claims systems.

Although the final rule is effective July 1, 2011, CMS states in the final rule that it intends to delay compliance action until July 1, 2012 to give states time to implement the final rule. 

To view the final rule, click here.