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Health Law Alert: Health Care Providers Take Heed - You Soon Are Prohibited From Knowingly Seeking Payment for Preventable Serious Adverse Events and Related Services

By:  Megan R. Browne
Related Practice Area: Health Law

As of August 9, 2009, health care providers (including hospitals, doctors, nurse midwives, CRNPs, and others) in Pennsylvania are prohibited from “knowingly” seeking payment for certain “preventable serious adverse events” or for any services needed to correct or treat the condition created by the preventable serious adverse event when the event occurred under the provider’s control. Likewise, private insurers and patients do not have to pay providers for such events.

Governor Rendell signed the Preventable Serious Adverse Events Act into law on June 10, 2009 (Act 1 of 2009). It is the first Pennsylvania law that addresses payment for preventable serious adverse events, but it is not the first law of its kind that applies to Pennsylvania health care providers. On January 14, 2008, the Department of Public Welfare (DPW) issued a Medical Assistance (MA) Bulletin announcing that hospitals would no longer be paid for certain “preventable serious adverse events,” the rationale being that they were not “medically necessary services” to patients who receive MA benefits. (In fact, Act 1 of 2009 tracks key definitions used in the MA Bulletin.) The MA Bulletin followed federal regulation providing that the Centers for Medicare and Medicaid Services would no longer pay for eight “never events” suffered by Medicare recipients.

An event is non-reimbursable under Act 1 of 2009 if (1) it occurred in a health care facility; (2) it was within the provider’s control so that the provider could have avoided it; (3) an error or other system failure caused the event to occur anyway; (4) and the event caused the patient to die, lose a body part, become disfigured, become disabled, lose a bodily function for more than seven days, or lose a bodily function where such loss was still present when the patient was discharged from a health care facility.

What kinds of events does the Act cover? They are events included on a list created by the National Quality Forum (NQF), a nonprofit organization established in 1999 that aims to improve the quality of health care, or, for nursing facilities, in a bulletin to be published pursuant to the Act. The NQF’s list also is used as the initial point of analysis under the MA Program (as described in the Bulletin mentioned above). They include, for example, operating on the wrong body part or on the wrong patient, leaving a surgical sponge in the patient after surgery, discharging an infant to the wrong person, and death or serious disability associated with intravascular air embolism that occurred while receiving care at a health care facility.

If a provider discovers that payment was unknowingly sought for a covered event or subsequent treatment, the provider must immediately notify the payor or patient (whoever paid the bill) and refund the payment. The notification deadline is the later of (a) receipt of payment, or (b) thirty days after the discovery was made. Similarly, a payor who discovers that payment was sought in violation of the Act must immediately notify the provider that payment may not be sought and will not be made.

The Department of Health is responsible for investigating patient or payor complaints about a health care facility (e.g. hospital) seeking improper payments. The Department of State is responsible for investigating patient or payor complaints about a health care provider other than a facility (e.g. doctor) seeking improper payments.

As health care providers know, Medicare has a similar policy on non-payment for similar events. Act 1 of 2009 specifies that the Medicare policy still applies to Medicare patients.

Health care providers and payors can contract policies relating to serious preventable adverse events as needed to implement the mandates of Act 1 of 2009. We have seen some private insurers incorporating provisions into their contracts providing for the non-payment of costs directly related to specified events.

Act 1 of 2009 raises many practical and legal implications, including:

• Prevention is important. Providers can use the list to take another look at their internal policies and procedures to ensure that appropriate checks and balances are in place for avoiding certain events.
• Sometimes problems occur despite having the best policies and despite compliance with those policies, so reporting becomes the issue. It is important for a provider to know that a potential preventable serious adverse event has occurred. Policies need to address how the appropriate report will be made to a designated individual or group within the organization and who will undertake an investigation to determine if a covered event occurred. In the meantime, payment must not be sought from payors or the patient. (Doing so could have False Claims Act implications, which will be addressed in a forthcoming Alert.)
• If a covered event is determined to have occurred, who was “in control” of the situation such that that person or entity could have prevented the event and should not be paid for related costs? Was the injury serious enough to be covered?
• Similarly, what are the costs that were attributable to the event and not to other aspects of care?
• If there is a subsequent medical professional liability action relating to the preventable serious adverse event, how does the non-payment (and prior investigation) impact the lawsuit? Although Act 1 of 2009 states that information provided to a payor or provider as to notification of improper payment or as to refund of an improper payment received is not discoverable or admissible in such actions, the arguments will likely be made that the occurrence of an event on the NSF list and covered under the Act establishes negligence, and that any related investigation and the fact that payment was not sought or received is discoverable and admissible.

Now is the time for health care providers to put into place policies and procedures to comply with Act 1 of 2009 and to prepare for its implications. For more information about Act 1 of 2009 issues, please contact Megan Browne or any member of our Health Law Group.