Why CMS's no-pay policies make no sense


You know, readers, at first I supported CMS's plans to withhold payment for care related to hospital errors. After all, in theory it makes sense not to pay for work that was done improperly, particularly if someone got hurt in the process. But then I saw a number that changed my mind.

In announcing that it's adding three new conditions to the no-pay list, CMS said that it expects to save only $20 million per year through this initiative. When you consider that Medicare's annual expenses are expected to be in the range of $450 billion this year, we're talking about savings of roughly one twenty-two thousandth. The agency could easily spend more than that every year just figuring out which hospitals are the wrong-doers. 

After all, monitoring compliance with new rules is expensive. At minimum CMS will have to beef up its IT infrastructure, as no amount of employees could accurately analyze that many claims on their own. And then there are human time and effort in interpreting the results, appeals, dealing with lawsuits from hospitals who feel they've been treated unfairly, employee training costs and so on. We're not talking chump change here.

So, what if it isn't about savings as such, but rather, improving the quality of hospital care? I could potentially buy that--but CMS has done little to support this notion. If Weems and crew want to promote this primarily as a quality improvement initiative, why haven't they done thorough research on how withholding pay for errors affects provider behavior? (Or more troublingly, if it has done such research, why isn't it widely reported? Is it because the results didn't support this initiative?)

Hey, if I thought that these policies were likely to reduce medical errors in hospitals, I might have a different perspective. After all, it would be worth the hassle to save people from horrors like wrong-side surgery, sepsis and death. But I don't believe that either. My best guess, in fact, is that non-payment for errors may actually lead to greater patient harm.

Why? Well, if I knew that a mistake would not only expose me and my colleagues to malpractice liability, but also create a big fat bill for my hospital, I'd be very reluctant to cop to my error. The fact that the error would also expose my hospital to unfavorable attention from CMS--which, after all, could ultimately pull its Medicare certification completely--would raise the stakes higher and lead to more avoidance. Ultimately, people respond much better to help and encouragement than blame.

All told, I hope the august heads of CMS take a good look at the ugly baby they're birthing and move in another direction. But unfortunately, it doesn't seem likely. - Anne

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