Is Medicare’s “No Pay for Errors” Plan a Good Idea?

By  |  February 11, 2008 | 

In this month’s issue of the Joint Commission Journal of Quality and Patient Safety, I (with UCSF’s Adams Dudley and the American Hospital Association’s Nancy Foster) tackle this provocative question. The answer may surprise you: yes (probably).

The devil will be in the details.

I hope you’ll have a chance to read the full article (the Joint Commission Journal has made it freely available to readers of AHRQ Patient Safety Network, so you can get it here). But the bottom line is this: in our judgment, a policy of withholding payment for adverse events is reasonable when the following criteria are satisfied:

  • Evidence demonstrates that the adverse events in question can largely be prevented by widespread adoption of achievable practices.
  • The events can be measured accurately, in a way that is auditable.
  • The events resulted in clinically significant patient harm.
  • It is possible, through chart review, to differentiate adverse events that began in the hospital from those that were “present on admission” (POA).

Are the Adverse Events Preventable?
Well, how preventable is preventable? Complete preventability is too high a bar (virtually nothing is completely preventable); a reasonable threshold might be that the majority of the adverse events can be prevented with strict adherence to a set of safety practices. For some of the events on the Medicare list, particularly the infections (such as catheter-related bloodstream infections), there is good evidence that the vast majority of events can be prevented. For others, such as pressure ulcers and falls, although some commonsensical practices have been widely promoted (particularly through IHI’s 5 Million Lives campaign), the evidence linking adherence to “prevention practices” and reductions in adverse events is tenuous. These adverse events should stay off the list until the evidence is stronger.

The Events Can be Measured Accurately
This too is tricky stuff. For example, a recent article on ventilator-associated pneumonia concluded that the measurement challenges were so severe that VAP rates should not be used as quality or safety measures. Partly because of the absence of standard definitions, the opportunity for shenanigans is rising, and – once we link payments to error reports – it may soon be Halloween every day. As but one example, I received a call a few months ago from an Indianapolis newspaper reporter. Indiana has become one of 27 states that now requires hospitals to report any of the National Quality Forum “Never Events” to state authorities. What did I think, asked the reporter, of the fact that the two biggest hospital systems in the state had wildly disparate numbers of major errors: one had 15, the other none. “I wouldn’t be caught dead in the one with zero,” I said. “Either the hospital is lying or front line workers don’t report their errors to management.” Until standard definitions are coupled with the threat of audit, gaming is inevitable.

The Events Resulted in Significant Harm
One might argue that this is not a big deal when it comes to the new Medicare policy – since the “stick” is withholding the extra payment usually associated with a “Complicating Condition.” In other words, a fall that resulted in only a skinned knee shouldn’t have been coded as a complicating condition in the first place; a threat to withhold an extra payment should be moot. But this will be an important principle as the “No Pay Errors” list becomes the subject of public reporting, malpractice litigation, and more. All adverse events are not created equal.

Can We Accurately Determine Whether the Adverse Event Was Present on Admission (POA)
Just like the Hertz guy sniffs around your car before your drive off the lot, we’ll be doing a lot of “checking the fenders for dings” at the time of admission. This may be the most problematic aspect of the new policy – the one most subject to gaming and likely to yield inappropriate care. Take these two examples. First, is there any doubt that “early decubitus ulcer” will be come the nation’s fastest growing new diagnosis by 2009? And, how many nursing home patients will get a urinalysis on admission, be diagnosed with “UTI” based on some white cells, and receive unnecessary antibiotics (for their perennially colonized urine) in part to justify the diagnosis of UTI POA.


So, with all these caveats and cautionary notes, how did we come to the conclusion that the new Medicare policy might well be a good idea? Because – since the policy was announced last year – we’ve already seen hospitals putting far more resources into trying to prevent line infections, falls, and decubs than they were before. And remember that the dollars at stake are relatively small: the extra payments for “Complicating Conditions” (CC) are not enormous, and many patients who have one CC have more than one; in which case, the hospital will still receive the extra payment even if the adverse event-related payment is denied. So, in essence the policy is creating an unusual amount of patient safety momentum for a relatively small displacement of dollars – a pretty clever trick.

Moreover, there are certain aspects of the patient safety movement that just make sense to patients, politicians, and the press. Computers seem like an awfully good idea, particularly if you’ve seen doctors’ handwriting. Residents shouldn’t work 48 hours straight, to the point that they become human zombies. And paying hospitals more for their mistakes is just plain dumb. Unless fixing these “no brainers” is completely wrongheaded, we should save our bullets and accept the idea that the system will need to address these areas. That’s not to say that we should endorse silliness or substantial negative consequences – we do need to be sure that the details make sense and that the cure isn’t worse than the disease. But for this particular Medicare policy, I predict that the overall impact will be surprisingly positive.


  1. menoalittle February 11, 2008 at 4:31 pm - Reply


    Thank you for another insightful presentation. Since CMS will not be paying for complications due to falls and pressure ulcers, it would behoove astute hospital administrators and their trustees planning on investing millions of dollars in CPOE devices, to know the impact that these care altering CPOE devices have on the incidence of both entities as well as on the other “never events”. This is especially poignant considering the absence of robust (or non-robust) outcomes study of how CPOE devices alter care and the reports trickling in of patient adversity associated with CPOE devices. Would the hospital with a CPOE device whose staff incorrectly administered Norcuron to a non-ventilated patient be paid for that patient’s resuscitation? You and your readers may be interested to know that the eighth annual “MedMarx Data Report” of voluntary reporting recently posted that errors made through CPOE systems ranked fourth in the top 10 additional causes of prescription errors and there were seven medication errors that may have caused or contributed to patient deaths.

    Has there been any data published on how the fall or pressure ulcer incidence in patients whose care is governed by CPOE device compares to that in patients being cared for pre or without CPOE device? Will a hospital (or CPOE device manufacturer) heavily invested in CPOE contrivances publish (or announce) its results if the fall rate has increased? I have become familiar with one hospital’s approach to falls since CPOE devices were installed and patient care was altered. It requires a family member to be with the patient 24/7 if it is deemed that their hospitalized relation has a propensity to fall…who will be responsible if the patient (or babysitting relative) falls and breaks a hip?

    Best regards and keep pushing for patient safety,


  2. Jan Krouwer February 12, 2008 at 11:55 am - Reply

    Regarding  “The Events Resulted in Significant Harm”

    It is stated that the outcome of a patient fall is required to assess withholding payment. Consider the case of two hospitals. In hospital A, a procedure is violated, the patient falls but sustains only minor injury. In hospital B, procedure is followed, but the patient nevertheless falls and sustains major injury. The policy of considering outcomes will not improve hospital A’s practices.

  3. […] burner by beginning to tweak the payment system – by penalizing hospitals for serious mistakes (“No Pay for Errors”) and readmissions, and experimenting with new payment and delivery models to encourage value […]

  4. CatherinaLucy February 28, 2013 at 7:44 am - Reply

    Medicare’s plan to “not pay for errors” is a bold experiment that follows a series of
    steps designed to create a business case for safety.

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About the Author:

Robert M. Wachter, MD is Professor and Interim Chairman of the Department of Medicine at the University of California, San Francisco, where he holds the Lynne and Marc Benioff Endowed Chair in Hospital Medicine. He is also Chief of the Division of Hospital Medicine. He has published 250 articles and 6 books in the fields of quality, safety, and health policy. He coined the term hospitalist” in a 1996 New England Journal of Medicine article and is past-president of the Society of Hospital Medicine. He is generally considered the academic leader of the hospitalist movement, the fastest growing specialty in the history of modern medicine. He is also a national leader in the fields of patient safety and healthcare quality. He is editor of AHRQ WebM&M, a case-based patient safety journal on the Web, and AHRQ Patient Safety Network, the leading federal patient safety portal. Together, the sites receive nearly one million unique visits each year. He received one of the 2004 John M. Eisenberg Awards, the nation’s top honor in patient safety and quality. He has been selected as one of the 50 most influential physician-executives in the U.S. by Modern Healthcare magazine for the past eight years, the only academic physician to achieve this distinction; in 2015 he was #1 on the list. He is a former chair of the American Board of Internal Medicine, and has served on the healthcare advisory boards of several companies, including Google. His 2015 book, The Digital Doctor: Hope, Hype, and Harm at the Dawn of Medicine’s Computer Age, was a New York Times science bestseller.


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