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relatively easy to implement, helps to focus attention on a program’s health care priorities, and is associated with improving accuracy in data reporting.  It is worth noting that in the Congressional Budget Office’s comprehensive analysis of how to improve quality and reduce Medicaid costs, the idea most discussed is the pharmacy rebate for Medicaid.

Medicaid P4P in Long-term Care.  As the largest purchaser of nursing home services, Medicaid programs have begun implementing P4P initiatives designed to improve quality and the safety of care in their state’s skilled nursing facilities.  Georgia, Iowa, Minnesota, Ohio, and Oklahoma are examples of states that have implemented a nursing home quality improvement initiative with financial incentives; others are actively designing one.  CMS plans to launch a Medicare P4P demonstration with nursing homes that builds on these states’ efforts.

Current Status of California

California has begun setting the stage for addressing medical errors.  Hospitals are now required to report never events – the same types of events Medicare is targeting – to the state, which must begin making the information available over the internet by 2015.33  The state legislature considered a bill, AB 2146 (Feuer) to prevent Medi-Cal from reimbursing hospitals for the Medicare list of never events, but the legislation did not make it out of committee.

Change Options

There are a number of ways Medi-Cal could consider expanding efforts to improve the quality of care beneficiaries receive, including:

Stopping payment for never events.  While research on how other states are implementing these types of payment restrictions is needed, this seems appropriate for a waiver.

Addressing and reducing unnecessary hospital readmissions. There is no analysis of Medi-Cal hospital readmissions to parallel the Medicare analysis.  A waiver could fund such an analysis and develop a payment reform system to reduce unnecessary readmissions.  

Reimburse more for use of nationally accepted treatment criteria.  Medi-Cal could set a higher reimbursement rate for physicians that document adherence to national treatment criteria.  The criteria chosen should result in reduced overall spending.

Reduce payment for hospital acquired infections. Like never events, hospital acquired infections could be targeted for reduced or eliminated cost sharing.  More research is needed to see how other states or health systems have approached this issue.

33 Rau, Jordan, “About 100 Californians a Month Harmed in Adverse Events,” Los Angeles Times, June 30, 2008.

Health Management Associates/Harbage ConsultingPage 36

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