Dear Administrator: Updated Medicaid Serious Adverse Event Reimbursement Policy

August 10, 2009

Dear Administrator:

This letter is to update you regarding implementation of the Medicaid fee-for-service payment policy for thirteen serious adverse (never) events. A listing of these events is attached for your reference (Attachment A) along with codes and definitions which may be useful to facilities in identifying these events (Attachment B). Be aware that the Department has removed one event - failure to identify and treat hyperbilirubinemia - from the list of serious events. A few policy and procedure questions have been identified during the development of this process. A list of these questions with our response to each (Attachment C) is also enclosed.

In October 2008, the Department activated changes in the inpatient claims processing system to reduce payment for three events (items 11-13 on the attachment): foreign object inadvertently left in patient after surgery; air embolism; and blood incompatibility. This policy is unchanged by implementation of this new claiming methodology.

At the time we indicated that implementation of payment adjustments for the remaining events would be deferred until the Department established a specific methodology to apply to these situations. There are now ten (10) events for which this process is applicable.

The Department has completed development of three new rate codes to be used when one of the ten adverse events occurs. The rate codes and procedures for claims submission are outlined below.

For discharges on or after November 1, 2009, hospitals will be required to bill all claims associated with one of the ten adverse events using the following procedures.

  1. For those cases where a serious adverse event occurs and the hospital elects to receive no payment for the admission (i.e., it is expected that Medicaid will deny the entire payment based on the type of event), the hospital will notify Medicaid of this case by submitting a claim using a new rate code 2590 (non-reimbursable with serious adverse events), along with the requisite billing information submitted with a claim.

    Department of Health will identify claims billed with rate code 2590 and instruct the Island Peer Review Organization (IPRO), the NYS Medicaid review agent, to request the medical record for the admission and conduct a case review.
  2. For those cases where a serious adverse event occurs and the hospital anticipates at least partial payment for the admission, the hospital will follow a two-step process for billing the admission.
    1. The hospital will first submit their claim for the entire stay in the usual manner, using the appropriate rate code (i.e., rate code 2946 for DRG claims or the appropriate exempt unit per diem rate code such as 2852 for psychiatric care, etc.). That claim will be processed in the normal manner and the provider will receive full payment for the case.
    2. Once remittance for the initial claim is received, it will be necessary for the hospital to then submit an adjustment transaction to the original paid claim using one of the following two new rate codes associated with identification of claims with serious adverse events:
      • 2591 (DRG with serious adverse events), or
      • 2592 (Per Diem with serious adverse events)
      The adjusted claim will then pend to the Department and will be forwarded to IPRO for further review. IPRO will review the medical record for the case to determine appropriate payment. Once IPRO has completed its review of the medical record, a preliminary notification indicating their findings will be issued. Hospitals will be required to respond to this preliminary finding within thirty days indicating whether it agrees or disagrees with the finding. If the provider disagrees with this preliminary finding, they may appeal by submitting additional rationale and supporting documentation to IPRO. IPRO will then re-review the case taking into account the provider's rationale and supporting documentation. A final determination will be made at the conclusion of this process.

Medicaid health plans are required to initiate their own processes to deny or reduce payment for these same events when applicable to their members. They will be required to begin implementation of their programs by January 1, 2010.

Please contact Mr. Philip Mossman at (518) 474-1673 if there are policy related questions regarding implementation of this system. Questions related to billing for serious adverse events should be directed to the CSC eMedNY call center at 1-800-343-9000

Sincerely yours,

Deborah Bachrach
Medicaid Director
Deputy Commissioner
Office of Health Insurance Programs

Attachment A - Hospital Acquired Events for New York State Medicaid

  1. Surgery performed on wrong body part
  2. Surgery performed on wrong patient
  3. Wrong surgical procedure performed on a patient
  4. Patient disability associated with a medication error
  5. Patient disability associated with use of contaminated drugs, devices, biologics provided by healthcare facility
  6. Patient disability associated with the use or function of a device in patient care in which the device is used or functions other than as intended
  7. Patient disability associated with an electric shock while being cared for in a health care facility
  8. Any incident in which a line designated for oxygen or other gas to be delivered to a patient contains the wrong gas or is contaminated by a toxic substance
  9. Patient disability associated with a burn incurred from any source while being cared for in a healthcare facility
  10. Patient disability associated with the use of restraints or bedrails while being cared for in a healthcare facility
  11. Retention of a foreign object in a patient after surgery or other procedure
  12. Patient disability associated with a reaction to administration of ABO-incompatible blood or blood products
  13. Patient disability associated with intravascular air embolism that occurs while being cared for in a healthcare facility

Attachment B - Medicaid ´Hospital Acquired Conditions´ Definitions

The following is intended to provide reference, where appropriate and available, to either E codes, ICD9 codes, or modified NYPORTS definitions to assist hospitals in identifying events during a hospitalization that may meet the intention of Medicaid's 'hospital acquired conditions'. It is NOT intended to provide coding instructions for inpatient claims. In most cases, these codes are neither specific nor precise enough to be the sole determinant of whether a qualifying event took place.

Surgery Performed on Wrong Body Part/Surgery Performed on Wrong Patient

  • E Codes
    • 876.6
    • 876.7
    • 876.8
    • 876.9
    • Code 911
      • Include procedures outside operating room (OR) or anesthesia administered without surgery (anesthesia only)

Wrong Surgical Procedure on a Patient

  • E Codes
    • 876.5
    • 876.8
    • 876.9
    • Code 912
      • Include outside operating room and diagnostic tests
      • Exclude: venipuncture for phlebotomy or transfusion related

Patient Disability Associated With Medication Error

  • E Codes
    • 873.8
    • 873.9
    • 876.8
    • 876.9
    • 850.x-858.x
  • ICD9
    • 960.x-979.x
    • Codes 108-111
      • Includes errors resulting in need for treatment, intervention, initial or prolonged hospitalization, patient harm resulting in transfer to a higher level of care, any cardiac/respiratory arrest, death (including those not the 'direct' result of medication error), and known drug-drug interaction
      • Excludes adverse drug reaction not the result of a medication error

Patient Disability Associated With Use of Contaminated Drugs, Devices, Biologics Provided by Healthcare Facility

  • E Codes
    • 875.x
  • Exclude: evidence of manufacturer device/drug recall

Patient Disability Associated with the Use or Function of a Device in Patient Care in Which the Device is Used or Functions Other Than as Intended

  • E Codes
    • 874.x
    • Code 938
      • Excludes planned treatments of electric countershock/cardioversion or device defect as evidenced by a manufacturer device recall

Any Incident in Which a Line Designed for Oxygen or Other Gas to be Delivered to a Patient Contains the Wrong Gas or is Contaminated by a Toxic Substance

There are no codes for this condition

Patient Disability Associated With a Burn Incurred From Any Source

  • E Codes
    • 924.x
    • 873.5
    • Code 701
      • Excludes first degree burns or device defect as evidenced by manufacturer device recall

Patient Disability Associated With Use of Restraints or Bedrails

There are no codes for this condition

Retention of Foreign Object in a Patient After Surgery or Other Procedure

Use codes and identification as previously described by the Department and as used by CMS for Medicare

Patient Disability Associated With a Reaction to Administration of ABO-incompatible Blood

Use codes and identification as previously described by the Department and as used by CMS for Medicare

Patient Disability Associated With Intravascular Air Embolism That Occurs While Being Cared for in a Healthcare Facility

Use codes and identification as previously described by the Department and as used by CMS for Medicare

Attachment C - Serious Adverse Event Payment Policy

Frequently Asked Questions

What should a provider do if a Serious Adverse Event (SAE) is discovered several weeks or months after the claim for the admission has been submitted and paid?

Hospitals can submit adjusted claims up to six years after the initial submission so if a serious event is uncovered within that time period, an adjusted claim with the appropriate SAE rate code should be submitted as soon as possible after the event is discovered.

How will reimbursement be addressed for inpatient or outpatient services needed as a result of a serious adverse event?

Outpatient services provided as a result of a SAE will continue to be billable by the provider. The State does not intend to pay for follow-up care provided on an inpatient basis by the provider at which the SAE initially occurred. In this case, the provider would submit a claim using rate code 2590 (non-reimbursable claim). Inpatient services provided by a different provider can be billed by that provider.

What are the reporting time frames once a serious adverse event is identified and the adjusted claim with appropriate SAE rate code is submitted to the Department?

After the provider alerts the State of an SAE through the new rate code, the Island Peer Review Organization (IPRO) will contact the provider and request chart information. The provider will have thirty 30 days to get this information into IPRO for their review and initial adjudication. A list containing the ten serious events will be sent by the IPRO so that the provider can check off the SAE that applies to this claim and the date on which the event is believed to have occurred.

Can the provider respond to the initial findings made by the IPRO?

The provider will have thirty days from receipt of the initial findings to submit additional documentation and or justification to the IPRO. If nothing is received within that time period, the IPRO will finalize its findings.

Is there an appeal process?

The provider will have one opportunity to appeal determinations made by the IPRO.