It has been widely publicized that Medicare intends to stop reimbursing hospitals for the added cost of care for certain conditions that CMS has determined are preventable in the course of a hospital stay. These preventable conditions or circumstances, commonly referred to as never events, will soon be the trigger for CMS's refusal to pay for the subsequent care that was provided to correct or treat those conditions, unless they were present on admission. Examples of such never events include an object left in an individual's body during surgery, pressure ulcers, operating on the wrong body part, and hospital acquired injuries such as fractures, dislocations and burns. CMS characterizes this initiative as part of its ongoing efforts to pay for better care.

Recently, several insurers and hospital associations have taken the step of following CMS in announcing their plans to discontinue paying or billing for never events. Vermont hospitals, through their trade group, The Vermont Association of Hospital and Health Systems, followed the lead of Minnesota and Massachusetts hospitals in announcing that their members will not bill patients or their patients' insurance companies for defined never events. Though the exact list of never events that the association identified may not match precisely CMS's list, it is a significant step toward addressing the payment effects of care provided as a result of adverse events.

Two of the country's bigger insurers have taken similar steps. Blue Cross and Blue Shield plans and Aetna have announced plans to include provisions in their contracts with hospitals that would exclude never events from payment. These insurers have indicated their plans are to implement these new contract provisions incrementally over the next several years, affirmatively indicating their intention to begin phasing out payments for never events.

Ober|Kaler's Comments:
While the current status of payment for never events will be a payer-by-payer determination for most hospitals, hospitals must pay particular attention to reporting never events. While a particular insurer may not have implemented its refusal to pay for defined adverse events, it nevertheless may have implemented requirements for reporting of never events in order to obtain information to make decisions on payment going forward. Depending on the current contracts that hospitals have with insurers, if a hospital fails to report a never event as required by a payer, such failure to report may trigger financial or payment consequences that could be as significant as the failure to pay for the never event itself.