In 2005 when “Never Events” were proposed for hospitals through the Deficit Reduction Act, no one knew what the overall effect would be on hospitals or patient care. CMS later developed these and implemented these Never Events under the authority of the DRA to prevent Medicare payment to hospitals for certain “never events” or hospital acquired conditions (HACs) which were conditions that were high volume, involved higher payment, and which could be easily preventable. Now, hospitals and other health care providers have to worry about Never Events in the Medicaid space.

Years ago when I began speaking on CMS Never Events to hospitals, I always cautioned that Medicaid would be next, and that nursing homes would be next. Well, it's happening, and it’s shocking that there has not been more press or discussion by providers about this new development in health care reimbursement.

In response to the Patient Protection and Affordable Care Act (PPACA), on February 11, 2011, CMS published a proposed rule (“Proposed Rule”) that requires states to adopt the same Medicare hospital never events for Medicaid, known as Health Care Acquired Conditions (HCAC), effective July 1, 2011. That means each state has to amend its State Plan by then to account for these HCACs and start refusing these Medicaid payments for hospitals.

But wait, the Proposed Rule does not stop there. Under the Proposed Rule, states may also adopt what each state considers to be a HCAC under the criteria of the DRA. That means that each state can adopt its own Medicaid “never events” for hospitals, even if it is broader than CMS has set forth previously.

But wait there’s more! States can also adopt what CMS refers to as other provider-preventable conditions (OPPCs) which apply to other health care providers outside of the inpatient hospital setting. In CMS’ own words, these never event conditions “can occur in outpatient hospital, nursing facility, and ambulatory care settings, and other healthcare settings.” That means that State Plan amendments can include not only broader HCACs for hospitals, but even broader OPPCs for hospitals and other any other Medicaid providers like nursing facilities, group homes, and even physicians, etc. This could expand the list of never events in each state considerably.

The utter expansion of Never Events is particularly problematic for states that have not truly considered the problems/controversy with CMS’ never events in the first place. For example, many disagree with whether Never Events like urinary tract infections or falls can always be prevented in facilities, yet they are listed as never events by CMS.

One thing is sure, this new CMS proposed rule has received little press, but is bound to cause significant headaches and financial woes for hospitals, physicians, and nursing homes alike. We'll have to wait and see how each state develops their HCACs and OPPCs to see the effect of denied reimbursement on healthcare providers, and whether or not such denials actually improve patient care.