Insurers Say They Won’t Pay for Preventable Medical Errors

Employers could begin to see cost savings and improvements in the quality of health care in the next year as more private insurers plan to follow the federal government’s lead in refusing to pay hospitals for medical errors.

In recent months, Blue Cross and Blue Shield, Aetna and WellPoint have said they will look for ways to stop paying for certain preventable errors called “never events” or “serious reportable events” by the National Quality Forum, a coalition of employers, doctors and policy-makers that has identified 28 adverse medical events. The group describes these errors in a 2006 report as “serious, largely preventable” medical mistakes.

Spokesmen for Cigna and UnitedHealthcare say the companies are looking into developing a policy to stop paying for these medical errors. Cigna plans to have a national policy in place by October, by which time the Centers for Medicare & Medicaid Services (CMS) says it will stop reimbursing hospitals for the added cost of care to treat eight conditions that are considered among the most common and most preventable errors.

Those conditions include: leaving objects in the body during surgery; using the wrong blood type; air embolisms; catheter-associated urinary tract infections; vascular catheter-associated infections; bed ulcers; certain surgical site infections; and hospital-acquired injuries like burns and broken bones sustained from falls.

Though medical errors account for only a fraction of the $2.1 trillion national health care bill, not paying for them has long been seen by employers as the best way to exert financial pressure on hospitals to improve the quality of the care they deliver. But it was not until CMS said in October that it would no longer pay for medical errors that other insurers followed suit.

“CMS is the 2,000-pound gorilla,” says Helen Darling, president of the National Business Group on Health, which last year began asking its members, mainly Fortune 500 companies, to stop paying for never events. “Once CMS made its announcement, we knew the hard stuff was over.”

The business group has created a tool kit to help employers include language in contracts with hospitals that would waive fees associated with medical care that harms patients or is necessary because of a previous medical error. Hospital associations in Massachusetts, Minnesota and Indiana have said they will not bill for certain medical errors.

A spokesman for the health insurance trade group America’s Health Insurance Plans said the change among insurers came in part because of pressure from employers who did not want to pay for poor care.

“In the long run, with a view toward providing not only the safest [but] highest-quality care, you can ensure that employers and employees will not pick up the tab for mistakes in a hospital setting,” says the association’s spokesman, Mohit Ghose.

The next challenge facing this movement is to design billing codes that trigger fee waivers. As consensus over not paying for medical errors builds among payers and providers of health care, employers will find it easier to put these standards into contracts with hospitals, says Jim Conway, senior vice president for the Institute for Healthcare Improvement.

“You will see hospitals that are not surprised that employers want to put that language into a contact, because it is being routinely discussed now,” he says.