How much do hospital-acquired conditions (HACs) cost the industry? How much will CMS save with its no-pay policy for HACs?

A recent study from the Agency for Healthcare Research and Quality estimates that preventable medical errors that occur during or after surgery cost employers and health plans $1.5 billion annually. Of course, this figure takes into account many more conditions or "mistakes" than CMS' 11 no-pay conditions.
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A recent MSNBC.com article reports that hospitals in 23 states have adopted CMS’ no-pay policy for hospital-acquired conditions (HACs). That number has increased significantly since February, when hospital associations in only 11 states had adopted the policy.

The no-pay policies for the hospitals in these 23 states apply to specific conditions. Meanwhile, hospitals in an additional eight states have agreed to general guidelines that advise eliminating bills on a case-by-case basis for errors proven to be both serious and preventable, according to the article.
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The hospital industry is expected to lose at least $91 million annually as a result of Medicare's no-pay policy for hospital-acquired conditions (HACs), according to a recent study.

If this number sounds surprisingly small, it might be, admits the study's authors. The initial study focused on only seven of the HACs in Medicare’s no-pay policy. In its IPPS Final Rule, CMS expanded the number of no-pay HACs 11—the new rule will take effect October 1, 2008. In addition, the $91 million figure only accounts for Medicare's non-payment of HACs. Several commercial payers have also adopted no-pay policies for HACs, which will contribute to the losses that the hospital industry will encounter.
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CMS announced July 31 that it will add three hospital acquired conditions (HACs) to its no-pay list. The three new HACs are:

1. Surgical site infections following certain elective procedures, including certain orthopedic surgeries, and bariatric surgery for obesity
2. Certain manifestations of poor control of blood sugar levels
3. Deep vein thrombosis or pulmonary embolism following total knee replacement and hip replacement procedures

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Thirty-two South Carolina hospitals and hospital systems filed a lawsuit against CMS in early July, claiming that the recovery audit contractor (RAC) program illegally collected alleged overpayments. According to an AHANews.com article, "the suit claims that the 2003 Medicare Modernization Act prevents the agency from recouping alleged overpayments prior to 'reconsideration,' the second level of appeal available to providers in the case of an alleged overpayment."

“Our hospitals are not afraid of being audited—that’s not the issue here. But CMS needs to play by the rules that Congress set up and the RACs need to audit using the right standards," said Thornton Kirby, president and CEO of the South Carolina Hospital Association.
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