A new Medicaid policy will take effect that relates closely (but not identically) to the Medicare program’s inpatient prospective payment system policy for hospital-acquired conditions (HAC).

The new policy is scheduled to be effective July 1, 2011. In a February 17, 2011, proposed rule, the Centers for Medicare & Medicaid Services (CMS) provide the details of a proposal related to provider-preventable conditions (PPCs) including health care-acquired conditions (HCACs). (For the proposed rule, go to http://edocket.access.gpo.gov/2011/pdf/2011-3548.pdf.)

In Section 2702 of the Patient Protection and Affordable Care Act (ACA) of 2010, Congress required that the Secretary of the Department of Health & Human Services implement Medicaid payment adjustments for HCACs. The ACA requires HHS, or, in reality, CMS, to identify current state practices that prohibit payment for HCACs and to incorporate the practices identified, or elements of such practices, into Medicaid program regulations.

There are two areas that must be addressed first. Since the Medicaid program’s HHAC will mirror Medicare’s HAC policy, it’s important to understand the latter to understand the former. Second, as with all federal government policies, there are several key terms and their acronyms that form the foundation of the new Medicaid policy.

Connection to Medicare HACs

Going back a few years and a few policies ago, Section 5001(c) of Deficit Reduction Act of 2005 required the HHS Secretary to identify the following types of conditions for the Medicare program:

• High cost, high volume or both;
• Those that result in the assignment of a case to a MS-DRG that has a higher payment when present as a secondary diagnosis; and
• Could reasonably have been prevented through the application of evidence-based guidelines.

To comply with the above, CMS identified 10 categories of conditions or HACs.

When CMS adopted these for the Medicare program, it encouraged states to adopt similar payment prohibitions for Medicaid claims submitted by health-care providers. As part of its research for the proposed rule, CMS discovered that 29 states do not have HCAC programs, but 21 states do have some HCAC-related nonpayment policies in hospitals.

Several have already adopted some or all of the Medicare HACs, and others have added their own to the list. After identifying this variation, CMS realized it had to set a “level of consistency” for nonpayment of certain diagnoses across both the Medicare and Medicaid programs.

Another element of the Medicare program helps to understand the new plan for Medicaid.  Specifically, when a HAC is not present on admission (POA), it is reported as a secondary diagnosis associated with the hospitalization.

The Medicare payment under the inpatient prospective payment system to the hospital may be reduced to reflect that the condition was hospital-acquired. More specifically, the hospital discharge cannot be assigned to a higher-paying MS-DRG if the secondary diagnosis associated with the HAC would otherwise have caused this assignment. When a HAC is POA, the Medicare IPPS payment to the hospital is not reduced.

Since October 1, 2008, hospitals subject to the IPPS have been required to submit information on Medicare claims specifying whether diagnoses were POA. The POA indicator reporting requirement and the HAC payment provision currently apply to IPPS hospitals only.

New Acronyms Form Proposal’s Foundation

Before providing these, it’s important to reveal that, as the American Health Information Management System (AHIMA) accurately pointed out in its March 17, 2011, comment letter to CMS on the proposed rule that the “distinctions among these terms…are confusing.” Also, says AHIMA, “the terms are not used consistently even within the regulation itself.” The point is that if you read the rule and feel a little confused, you are not alone.

Nonetheless, here are the key terms, abbreviations and information provided by CMS:

• Provider-preventable conditions (PPCs): This umbrella or catch-all term includes the scope of hospital and nonhospital conditions identified by the state for nonpayment. Preventable conditions that are caused or related to the provision of health-care are not limited to inpatient hospital settings, says CMS. They can occur in outpatient hospital, nursing facility, ambulatory care settings, and other health-care settings. A PPC must meet the definition of either a HCAC or an OPPC as defined below.
• Health care-acquired conditions (HCACs): A medical condition for which an individual received a secondary diagnosis that resulted in the case being assigned to a MS-DRG with a higher payment.
• Other PPCs (OPPCs): States may identify and approve other conditions (beyond the HCACs) to include in the list for which Medicaid payment would be prohibited.