May 12, 2016
Employers: Don’t Pay for ‘Never Events’
by Al Lewis
A key way to save on healthcare costs (while helping employees): Use hospitals that take responsibility for the costs of "never events."
The initial installment in this series expressed concern that too narrow a focus on wellness diverts companies’ attention from more compelling opportunities to save money and improve employee health outcomes. This installment starts with a related shocker: By far the most costly inpatient diagnosis code, septicemia, is not addressed by any wellness program in the country.
Here is the government’s official ranking:
Septicemia due to contamination, which is just one of many avoidable hospital errors, shows that there is a major opportunity to save money by directing employees to hospitals that are most likely to avoid errors. To back their commitment to avoiding errors, such hospitals also usually offer a “never-events” policy, meaning they agree not to be paid for events that are their fault and that should never happen. So your employees will be more likely to have a safer experience—and, if they don’t, you don’t pay. (To be fair to hospitals, not all septicemia is contracted there. At the same time, many blood infections contracted in hospitals are not primary-coded as septicemia.)
The opportunity for you would be to highlight hospitals within your network that agree to a list of specific items that make up a never-events policy. “Highlighting” might include waived deductibles or co-pays for employees who choose highlighted hospitals over others, thus noodging more employees to safer hospitals.
What is included in a “never-events” policy?
The Leapfrog Group, which is the nation’s leading arbiter of hospital quality, has a policy that requires hospitals to undertake five steps following a never-event:
- apologize to the patient;
- report the event;
- perform a root-cause analysis;
- waive costs directly related to the event;
- provide a copy of the hospital’s policy on never-events to patients and payers upon request.
Examples of never-events culled from this complete list are:
- Certain hospital-acquired infections/septicemia
- Wrong-site/wrong surgery/wrong patient
- Objects left in body
- Wrong blood type administered
- Serious medication errors
- Air embolisms
- Contaminated or misused drugs/devices
Any given never-event is rare, but in total 5% to 10% of inpatients suffer a significant adverse event during their stays. The consequences – in cost, suffering and lost productivity – could be substantial.
No need to take my word for the cost: The Leapfrog Group provides a Hidden Surcharge Calculator that can be used to estimate the financial impact of hospital errors.
Do hospitals in your network have a never-events policy?
At the very minimum, by default they have such a policy for Medicare, which doesn’t pay extra for certain never-events. Medicare still pays the standard diagnosis-related group (DRG) case rate but doesn’t reimburse “outliers” separately if the added hospital time was caused by a never-event. Obviously, the DRG rates are set a little higher to begin with. So hospitals that do a good job – typically Leapfrog-rated “A” and “B” in the Hospital Safety Score report – embrace this payment scheme, while others would have been better off getting paid the old-fashioned way.
Some hospital systems extend this policy to employers – or will, if you or your carrier ask and you are a large enough customer, and their quality is high enough that the economics work out for them.
Leapfrog A-rated hospitals are therefore the most likely to be willing to negotiate a never-events policy for your employees. These hospitals aren’t necessarily the name brands in your marketplace. In Washington, for example, Virginia Mason Medical Center (VMMC) is the hospital consistently earning the highest Leapfrog scores. Not surprisingly, it was among the first hospitals in the country to offer a never-events policy to employers. The hospital was highlighted in Cracking Health Costs for its many best practices. VMMC is one of the few hospitals that Walmart, Lowes and other jumbo employers will actually fly employees into, to ensure the best care. And yet you’ve never heard of VMMC, have you?
So what should you do?
You still need to offer a wide local hospital network to employees. It simply isn’t worth the inevitable pushback to require a narrow hospital network.
Instead, just ask existing network hospitals to offer you a never-events policy, or let you become part of a policy they already offer to employers. There is plenty of precedent of this. For years, the state of Maine has tied hospital payments for its own employees to quality and safety standards, including Leapfrog standards. And Maine, despite being among the poorest states, consistently ranks #1 or #2 in Leapfrog quality ratings. Coincidence? I think not. Particularly if you can contract in conjunction with your local business coalition, you have the chance to influence hospital safety, just like Maine did.
Additionally, you can follow the lead of those other jumbo employers named above and contract with the country’s safest hospitals for any employees who wish to make the trip. Yes, I know, you aren’t a “jumbo employer.” But a firm named Edison Health helps small employers with the contracting and logistics of such arrangements. It also offers a tool, validated by the Validation Institute, to help you figure out if medical travel would be a worthwhile endeavor for you.
This type of contracting requires a little work on your end, but if all you want is discounts and coverage and don’t want to put in the work, you could punt to an exchange. On the other hand, you self-administer your health benefit for one good reason: to influence employee health, and this is a clear opportunity to do so. By contrast, wellness is a LOT of work…and likely increases your costs in the short run. Wellness will take years to pay dividends, if any, whereas you can start influencing employee hospital choice immediately.