Federal Register / Vol. 76, No. 33 / Thursday, February 17, 2011 / Proposed Rules 9283 

3 Ibid. 

103,615) 3, so its CO concentrations can 

be expected to be slightly higher due to 

greater motor vehicle emissions. CO 

concentrations in Lowell and Worcester 

have tracked very closely for many 

years. (The TSD provides a comparison 

of the data collected at the Lowell and 

Worcester CO monitors over the last 

twenty-five years.) Both cities were 

designated nonattainment in 1990 for 

CO ‘‘by operation of law,’’ though both 

had design values below the standard at 

that time. In both cases, only the city 

itself was designated nonattainment 

since data did not support an expansion 

of the nonattainment area. Both cities 

were redesignated to attainment in 

2000, and both have measured CO 

concentrations well below the standard 

since that time. 

In order to conserve resources, the 

State is seeking to discontinue 

monitoring in Lowell since current air 

quality levels do not warrant the 

additional expense of running a CO 

monitor in this area. The State has 

committed to continue CO monitoring 

in Worcester, and will reestablish CO 

monitoring in Lowell if air quality in 

Worcester degrades significantly. In 

Massachusetts (as in many other places), 

CO is primarily emitted by on and offroad mobile sources. Starting in the 

early 1970s, EPA has set national 

standards that have considerably 

reduced emissions of CO and other 

pollutants from motor vehicles, 

including tailpipe emissions, new 

vehicle technologies, and clean fuels 

programs. Moreover, the Massachusetts 

SIP requires that new or modified large 

stationary sources demonstrate that 

their emissions will not cause an 

exceedance of any NAAQS. Finally, 

growth is not likely to result in 

increased CO levels because the CO 

reductions described above have 

occurred even as vehicle miles traveled 

(VMT) have increased. (See VMT data in 

TSD.) For this reason, EPA believes that 

it is unlikely that the Lowell or 

Worcester maintenance area will exceed 

the CO NAAQS again. Thus, we believe 

that the revisions that Massachusetts 

has made to the Lowell maintenance 

plan will continue to protect the 

citizens of Massachusetts from high CO 

concentrations, and also conserve 

resources. 

EPA is proposing to approve the 

Massachusetts SIP revision for the 

Carbon Monoxide Maintenance Plan for 

Lowell, which was submitted on April 

14, 2010. EPA is soliciting public 

comments on the issues discussed in 

this notice or on other relevant matters. 

These comments will be considered 

before taking final action. Interested 

parties may participate in the Federal 

rulemaking procedure by submitting 

written comments to the EPA New 

England Regional Office listed in the 

ADDRESSES section of this Federal 

Register. 

V. Proposed Action 

EPA is proposing to approve the 

revisions to the Lowell CO maintenance 

plan submitted by the State of 

Massachusetts on April 14, 2010. 

Specifically, EPA is proposing approval 

of the State’s request to modify the 

portion of the maintenance plan used to 

determine when contingency measures 

need to be implemented in Lowell. As 

described in more detail above, if this 

proposal is finalized, the State will shut 

down the Lowell CO monitor and rely 

on data from the CO monitor in 

Worcester to determine when and if 

monitoring will be reestablished in the 

Lowell maintenance area, and, in some 

circumstances, when contingency 

measures will be triggered in the Lowell 

maintenance area. 

VI. Statutory and Executive Order 

Reviews 

Under the Clean Air Act, the 

Administrator is required to approve a 

SIP submission that complies with the 

provisions of the Act and applicable 

Federal regulations. 42 U.S.C. 7410(k); 

40 CFR 52.02(a). Thus, in reviewing SIP 

submissions, EPA’s role is to approve 

State choices, provided that they meet 

the criteria of the Clean Air Act. 

Accordingly, this proposed action 

merely approves State law as meeting 

Federal requirements and does not 

impose additional requirements beyond 

those imposed by State law. For that 

reason, this proposed action: 

• Is not a ‘‘significant regulatory 

action’’ subject to review by the Office 

of Management and Budget under 

Executive Order 12866 (58 FR 51735, 

October 4, 1993); 

• Does not impose an information 

collection burden under the provisions 

of the Paperwork Reduction Act (44 

U.S.C. 3501 et seq.); 

• Is certified as not having a 

significant economic impact on a 

substantial number of small entities 

under the Regulatory Flexibility Act 

(5 U.S.C. 601 et seq.); 

• Does not contain any unfunded 

mandate or significantly or uniquely 

affect small governments, as described 

in the Unfunded Mandates Reform Act 

of 1995 (Pub. L. 104–4); 

• Does not have Federalism 

implications as specified in Executive 

Order 13132 (64 FR 43255, August 10, 

1999); 

• Is not an economically significant 

regulatory action based on health or 

safety risks subject to Executive Order 

13045 (62 FR 19885, April 23, 1997); 

• Is not a significant regulatory action 

subject to Executive Order 13211 (66 FR 

28355, May 22, 2001); 

• Is not subject to requirements of 

Section 12(d) of the National 

Technology Transfer and Advancement 

Act of 1995 (15 U.S.C. 272 note) because 

application of those requirements would 

be inconsistent with the Clean Air Act; 

and 

• Does not provide EPA with the 

discretionary authority to address, as 

appropriate, disproportionate human 

health or environmental effects, using 

practicable and legally permissible 

methods, under Executive Order 12898 

(59 FR 7629, February 16, 1994). 

In addition, this rule does not have 

Tribal implications as specified by 

Executive Order 13175 (65 FR 67249, 

November 9, 2000), because the SIP is 

not approved to apply in Indian country 

located in the State, and EPA notes that 

it will not impose substantial direct 

costs on Tribal governments or preempt 

Tribal law. 

List of Subjects in 40 CFR Part 52 

Environmental protection, Air 

pollution control, Carbon monoxide, 

Intergovernmental relations, Reporting 

and recordkeeping requirements. 

Authority: 42 U.S.C. 7401 et seq. 

Dated: February 8, 2011. 

H. Curtis Spalding, 

Regional Administrator, EPA New England. 

[FR Doc. 2011–3613 Filed 2–16–11; 8:45 am] 

BILLING CODE 6560–50–P 

DEPARTMENT OF HEALTH AND 

HUMAN SERVICES 

Centers for Medicare & Medicaid 

Services 

42 CFR Parts 434, 438, and 447 

[CMS–2400–P] 

RIN 0938–AQ34 

Medicaid Program; Payment 

Adjustment for Provider-Preventable 

Conditions Including Health CareAcquired Conditions 

AGENCY: Centers for Medicare & 

Medicaid Services (CMS), HHS. 

ACTION: Proposed rule. 

SUMMARY: This proposed rule would 

implement section 2702 of the Patient 

Protection and Affordable Care Act of 

2010 which directs the Secretary of 


jlentini on DSKJ8SOYB1PROD with PROPOSALS
9284 Federal Register / Vol. 76, No. 33 / Thursday, February 17, 2011 / Proposed Rules 

Health and Human Services to issue 

Medicaid regulations effective as of July 

1, 2011 prohibiting Federal payments to 

States under section 1903 of the Social 

Security Act for any amounts expended 

for providing medical assistance for 

health care-acquired conditions. It 

would also authorize States to identify 

other provider-preventable conditions 

for which Medicaid payment would be 

prohibited. 

DATES: To be assured consideration, 

comments must be received at one of 

the addresses provided below, no later 

than 5 p.m. on March 18, 2011. 

ADDRESSES: In commenting, please refer 

to file code CMS–2400–P. Because of 

staff and resource limitations, we cannot 

accept comments by facsimile (FAX) 

transmission. 

You may submit comments in one of 

four ways (please choose only one of the 

ways listed): 

1. Electronically. You may submit 

electronic comments on this regulation 

to http://www.regulations.gov. Follow 

the instructions under the ‘‘More Search 

Options’’ tab. 

2. By regular mail. You may mail 

written comments to the following 

address ONLY: Centers for Medicare & 

Medicaid Services, Department of 

Health and Human Services, Attention: 

CMS–2400–P, P.O. Box 8016, Baltimore, 

MD 21244–1850. 

Please allow sufficient time for mailed 

comments to be received before the 

close of the comment period. 

3. By express or overnight mail. You 

may send written comments to the 

following address ONLY: Centers for 

Medicare & Medicaid Services, 

Department of Health and Human 

Services, Attention: CMS–2400–P, Mail 

Stop C4–26–05, 7500 Security 

Boulevard, Baltimore, MD 21244–1850. 

4. By hand or courier. If you prefer, 

you may deliver (by hand or courier) 

your written comments before the close 

of the comment period to either of the 

following addresses: 

a. For delivery in Washington, DC— 

Centers for Medicare & Medicaid 

Services, Department of Health and 

Human Services, Room 445–G, Hubert 

H. Humphrey Building, 200 

Independence Avenue, SW., 

Washington, DC 20201. 

(Because access to the interior of the 

Hubert H. Humphrey Building is not 

readily available to persons without 

Federal Government identification, 

commenters are encouraged to leave 

their comments in the CMS drop slots 

located in the main lobby of the 

building. A stamp-in clock is available 

for persons wishing to retain a proof of 

filing by stamping in and retaining an 

extra copy of the comments being filed.) 

b. For delivery in Baltimore, MD— 

Centers for Medicare & Medicaid 

Services, Department of Health and 

Human Services, 7500 Security 

Boulevard, Baltimore, MD 21244–1850. 

If you intend to deliver your 

comments to the Baltimore address, 

please call telephone number (410) 786– 

7195 in advance to schedule your 

arrival with one of our staff members. 

Comments mailed to the addresses 

indicated as appropriate for hand or 

courier delivery may be delayed and 

received after the comment period. 

For information on viewing public 

comments, see the beginning of the 

SUPPLEMENTARY INFORMATION section. 

FOR FURTHER INFORMATION CONTACT: 

Venesa Day, (410) 786–8281, or Gary 

Jackson, (410) 786–1218. 

SUPPLEMENTARY INFORMATION: 

Inspection of Public Comments: All 

comments received before the close of 

the comment period are available for 

viewing by the public, including any 

personally identifiable or confidential 

business information that is included in 

a comment. We post all comments 

received before the close of the 

comment period on the following Web 

site as soon as possible after they have 

been received: http:// 

www.regulations.gov. Follow the search 

instructions on that Web site to view 

public comments. 

Comments received timely will also 

be available for public inspection as 

they are received, generally beginning 

approximately 3 weeks after publication 

of a document, at the headquarters of 

the Centers for Medicare & Medicaid 

Services, 7500 Security Boulevard, 

Baltimore, Maryland 21244, Monday 

through Friday of each week from 8:30 

a.m. to 4 p.m. To schedule an 

appointment to view public comments, 

phone 1–800–743–3951. 

Acronyms 

To assist the reader, the following is 

list of the acronyms used in this 

proposed rule: 

AHRQ Agency for Healthcare Research and 

Quality 

BPM Benefit Policy Manual 

CABG Coronary artery bypass graft 

CBO Congressional Budget Office 

CDC Centers for Disease Control and 

Prevention 

DVT Deep vein thrombosis 

ESRD End-stage renal disease 

DRA Deficit Reduction Act of 2005 (Pub. L. 

109–171, enacted on February 8, 2006) 

FFP Federal financial participation 

FY Fiscal year 

HAC Hospital-acquired condition 

HCAC Health care-acquired condition 

ICR Information collection requirement 

IPPS Inpatient prospective payment system 

MS–DRG Diagnosis-related group 

NCA National coverage analysis 

NDC National coverage determination 

NQF National Quality Forum 

OACT [CMS] Office of the Actuary 

OIG Office of Inspector General 

OMB Office of Management and Budget 

OPPC Other provider-preventable condition 

PE Pulmonary embolism 

POA Present on admission 

PPC Provider-preventable condition 

PRA Paperwork Reduction Act 

RFA Regulatory Flexibility Act (September 

19, 1980, Pub. L. 96–354) 

RIA Regulatory impact analysis 

SMDL State Medicaid Director Letter 

SPA State plan amendment 

UMRA Unfunded Mandates Reform Act of 

1995 (Pub. L. 104–04, enacted on March 

22, 1995) 

UTI Urinary tract infection 

I. Background 

Title XIX of the Social Security Act 

(the Act) authorizes Federal grants to 

the States for Medicaid programs to 

provide medical assistance to persons 

with limited income and resources. 

While Medicaid programs are 

administered by the States, they are 

jointly financed by the Federal and State 

governments. Each State establishes its 

own eligibility standards, benefits 

packages, payment rates, and program 

administration for Medicaid in 

accordance with Federal statutory and 

regulatory requirements. Operating 

within broad Federal parameters, States 

select eligibility groups, types, and 

range of services, payment levels for 

services, and administrative and 

operating procedures. Each State 

Medicaid program must be described 

and administered in accordance with a 

Federally-approved ‘‘State plan.’’ This 

comprehensive document describes the 

nature and scope of the State’s Medicaid 

program, and provides assurances that it 

will be administered in conformity with 

all Federal requirements. 

The Federal government pays its 

share of medical assistance 

expenditures to the State on a quarterly 

basis according to a formula described 

in sections 1903 and 1905(b) of the Act. 

Specifically, section 1903 of the Act 

requires that the Secretary (except as 

otherwise provided) pay to each State 

which has a plan approved under this 

title, for each quarter, an amount equal 

to the Federal medical assistance 

percentage of the total amount 

expended during such quarter as 

medical assistance under the State plan. 

Among the statutory requirements for 

Medicaid State plans, section 1902(a)(4) 

of the Act requires that State plans 

provide for methods of administration 

as are found to be necessary by the 

Secretary for the proper and efficient 

operation of the plan. Section 1902(a)(6) 

of the Act requires that a State plan for 


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medical assistance provide that the 

State agency will make such reports, in 

such form and containing such 

information, as the Secretary may from 

time-to-time require, and comply with 

such provisions as the Secretary may 

from time-to-time find necessary to 

assure the correctness and verification 

of such reports. In addition, section 

1902(a)(19) of the Act requires that a 

State plan for medical assistance 

provide such safeguards as may be 

necessary to assure that eligibility for 

care and services under the plan will be 

determined, and such care and services 

will be provided, in a manner consistent 

with simplicity of administration and 

the best interests of the recipients. 

A. The Medicare Program and Quality 

Improvements Made in the Deficit 

Reduction Act of 2005 (DRA) (Pub. L. 

109–171) 

Title XVIII of the Act provides 

authority for the Secretary to operate the 

Medicare program, which provides 

payment for certain medical expenses 

for persons 65 years of age or older, 

certain disabled individuals, and 

persons with end-stage renal disease 

(ESRD). Medicare benefits include 

inpatient care, a wide range of medical 

services, and outpatient prescription 

drugs. 

The Medicare statute authorizes the 

Secretary, in the course of operating the 

Medicare program, to develop, 

implement, and monitor quality 

measures, as well as take other actions, 

to ensure the quality of the care and 

services received by Medicare 

beneficiaries. 

Payment under the Medicare program 

for inpatient hospital benefits is 

generally based on the ‘‘inpatient 

prospective payment system’’ (IPPS) 

described in section 1886(d) of the Act. 

Hospitals receive a payment for each 

inpatient discharge based on diagnosis 

codes that identify a ‘‘diagnosis-related 

group’’ (MS–DRG). Assignment of an 

MS–DRG can take into account the 

presence of secondary diagnoses, and 

payment levels are also adjusted to 

account for a number of hospitalspecific factors. 

Section 5001(a) of the Deficit 

Reduction Act of 2005 (Pub. L. 109–171, 

enacted on February 8, 2006) (DRA) 

amended section 1886(b)(3)(B) of the 

Act to expand the set of hospital quality 

measures collected by Medicare. In 

particular, this provision directed the 

Secretary to start collecting baseline 

measures set forth by the Institute of 

Medicine in its November 2005 report 

in fiscal year (FY) 2007. These measures 

include 22 Hospital Quality Alliance 

measures and 3 process measures. In FY 

2008 and subsequent years, the 

Secretary was required to add other 

measures that reflect consensus among 

affected parties. The provision also 

allowed the Secretary to replace and 

update existing quality measures. The 

statute mandates that the Secretary 

establish a process for hospitals to 

review data that will be made public 

and, after that process is complete, 

requires the Secretary to post measures 

on the Hospital Compare Internet Web 

site. The quality measures required 

under section 5001(a) of the DRA were 

integral to the direction under section 

5001(b) of the DRA for the Secretary to 

develop a plan to implement valuebased purchasing commencing FY 2009 

for most Medicare hospital services. We 

are currently developing a hospital 

value-based purchasing system as 

required by the Patient Protection and 

Affordable Care Act (Pub. L. 111–148, 

enacted on March 23, 2010) (Affordable 

Care Act). 

Section 5001(c) of the DRA amended 

section 1886(d)(4) of the Act to prohibit 

payment to hospitals for certain 

preventable hospital-acquired 

conditions (HACs) identified by the 

Secretary. Specifically, under section 

1886(d)(4)(D)(iv) of the Act, the 

Secretary is required to identify HACs 

for which no payment for hospital 

services would be made. These 

conditions are required to have the 

following characteristics: (a) High cost 

or high volume or both; (b) result in the 

assignment of a case to a MS–DRG that 

has a higher payment when present as 

a secondary diagnosis; and (c) could 

reasonably have been prevented through 

the application of evidence-based 

guidelines. Section 5001(c) of the DRA 

provides for revision of the list of 

conditions from time to time, as long as 

it contains at least two conditions. 

B. Previously Specified Medicare HACs 

As amended by section 5001(c) of the 

DRA, section 1886(d)(4) of the Act 

provides that the Secretary must ensure 

that additional payment under the IPPS 

is not made to hospitals for identified 

HACs including infections. By October 

1, 2007, the Secretary was required 

under section 1886(d)(4)(D) of the Act to 

select, in consultation with the Centers 

for Disease Control and Prevention 

(CDC), diagnosis codes associated with 

at least two HACs that: (a) Are high cost, 

high volume, or both; (b) are assigned to 

a higher paying MS–DRG when present 

as a secondary diagnosis (that is, 

conditions under the MS–DRG system 

that are complications or co-morbidities 

or major complications or comorbidities); and (c) could reasonably 

have been prevented through the 

application of evidence based 

guidelines. The list of conditions can be 

revised from time-to-time as long as the 

list contains at least two conditions. 

Under the provisions of section 

1886(d)(4)(D)(ii) of the Act, when an 

HAC is not present on admission (POA), 

but is reported as a secondary diagnosis 

associated with the hospitalization, the 

Medicare payment under IPPS to the 

hospital may be reduced to reflect that 

the condition was hospital-acquired. 

More specifically, the hospital discharge 

cannot be assigned to a higher paying 

MS–DRG if the secondary diagnosis 

associated with the HAC would 

otherwise have caused this assignment. 

If an HAC were POA, then the Medicare 

payment under IPPS to the hospital 

would not be reduced. Since October 1, 

2007, hospitals subject to the IPPS have 

been required to submit information on 

Medicare claims specifying whether 

diagnoses were POA. The POA indicator 

reporting requirement and the HAC 

payment provision apply to IPPS 

hospitals only. This requirement does 

not apply to hospitals exempt from the 

IPPS. 

The following is a list of the current 

Medicare HACs (75 FR 50084 through 

50085): 

• Foreign Object Retained After 

Surgery. 

• Air Embolism. 

• Blood Incompatibility. 

• Stage III and IV Pressure Ulcers. 

• Falls and Trauma. 

+ Fractures. 

+ Dislocations. 

+ Intracranial Injuries. 

+ Crushing Injuries. 

+ Burns. 

+ Electric Shock. 

• Manifestations of Poor Glycemic 

Control. 

+ Diabetic Ketoacidosis. 

+ Nonketotic Hyperosmolar Coma. 

+ Hypoglycemic Coma. 

+ Secondary Diabetes with 

Ketoacidosis. 

+ Secondary Diabetes with 

Hyperosmolarity. 

• Catheter-Associated Urinary Tract 

Infection (UTI). 

• Vascular Catheter-Associated 

Infection. 

• Surgical Site Infection Following: 

+ Coronary Artery Bypass Graft 

(CABG)—Mediastinitis. 

+ Bariatric Surgery. 

- Laparoscopic Gastric Bypass. 

- Gastroenterostomy. 

- Laparoscopic Gastric Restrictive 

Surgery. 

+ Orthopedic Procedures. 

- Spine. 

- Neck. 

- Shoulder. 


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- Elbow. 

• Deep Vein Thrombosis (DVT)/ 

Pulmonary Embolism (PE). 

+ Total Knee Replacement. 

+ Hip Replacement. 

The Secretary may revise this list 

upon review. 

C. Previously Specified Medicare 

National Coverage Determinations 

(NCD) 

In 2002, the National Quality Forum 

(NQF) published ‘‘Serious Reportable 

Events in Healthcare: A Consensus 

Report’’, which listed 27 adverse events 

that were ‘‘serious, largely preventable 

and of concern to both the public and 

health care providers.’’ These events and 

subsequent revisions to the list became 

known as ‘‘never events.’’ This concept 

and need for the proposed reporting led 

to NQF’s ‘‘Consensus Standards 

Maintenance Committee on Serious 

Reportable Events,’’ which maintains 

and updates the list which currently 

contains 28 items. 

The Medicare program has addressed 

certain ‘‘never events’’ through national 

coverage determinations (NCDs). 

Similar to any other patient population, 

Medicare beneficiaries may experience 

serious injury and/or death if they 

undergo erroneous surgical or other 

invasive procedures and may require 

additional healthcare in order to correct 

adverse outcomes that may result from 

such errors. In order to address and 

reduce the occurrence of these surgeries, 

Medicare issued three NCDs. Under 

these NCDs, Medicare does not cover a 

particular surgical or other invasive 

procedure to treat a particular medical 

condition when the practitioner 

erroneously performs: (1) A different 

procedure altogether; (2) the correct 

procedure but on the wrong body part; 

or (3) the correct procedure but on the 

wrong patient. Medicare will also not 

cover hospitalizations and other 

services related to these non-covered 

procedures. 

D. Prior Guidance on Medicaid HACs 

and NCDs in Response to Medicare’s 

Policy 

Section 5001(c) of the DRA addressed 

only the Medicare program and did not 

require that Medicaid implement 

nonpayment policies for HACs. 

However, in light of the Medicare 

requirements, we encouraged States to 

adopt payment prohibitions on provider 

claims for HACs to coordinate with the 

Medicare prohibitions under section 

1886(d)(4)(D) of the Act. To accomplish 

this task, we issued State Medicaid 

Director Letter (SMDL) #08–004 on July 

31, 2008. In the July 31, 2008 SMDL, we 

noted that there was variation in how 

State Medicaid programs had addressed 

such claims in the past. The letter noted 

that nearly 20 States already had, or 

were considering, eliminating payment 

for some or all of the 28 conditions on 

the NQF’s list of Serious Reported 

Events. Other States had more limited 

efforts to deny payment for services 

related to such conditions because the 

services were ‘‘medically unnecessary’’ 

in light of the primary diagnosis. 

Recognizing this variation and 

addressing the immediate concern of the 

States over Federal cost-shifting that 

could result from the Medicare HAC 

policy as applied to those who are 

dually-eligible for Medicare and 

Medicaid, we took a flexible position in 

the July 31, 2008 SMDL guidance on 

State Medicaid handling of the issue. 

The SMDL indicated that States seeking 

to implement HAC nonpayment policies 

could do so by amending their Medicaid 

State plans to specify the extent to 

which they would deny payment for an 

HAC. Those interested only in avoiding 

secondary liability for Federal Medicare 

denials of HACs and NCDs in the case 

of dual-eligibles could do so by 

amending their State Plan to indicate 

that payment would not be available for 

HACs and the procedures described in 

the 3 NCDs that are not paid by 

Medicare. States that wanted broader 

payment prohibitions could indicate 

that payment would not be available for 

conditions specified in the State plan 

amendment (SPA), or that meet criteria 

identified in the SPA. 

E. Section 2702 of the Affordable Care 

Act 

Section 2702 of the Affordable Care 

Act requires that the Secretary 

implement Medicaid payment 

adjustments for health care-acquired 

conditions (HCACs). Section 2702 of the 

Affordable Care Act did not grant the 

Secretary new authorities, indicating 

that existing statutory authorities are 

sufficient to fulfill the obligation. 

Section 2702(a) of the Affordable Care 

Act sets out a general framework for 

application of Medicare prohibitions on 

payment for HCACs to the Medicaid 

program. Section 2702(a) of the 

Affordable Care Act first directs the 

Secretary to identify current State 

practices that prohibit payment for 

HCACs and to incorporate the practices 

identified, or elements of such practices, 

which the Secretary determines 

appropriate for application to the 

Medicaid program in regulations. 

Section 2702(a) of the Affordable Care 

Act then requires that, effective as of 

July 1, 2011, the Secretary prohibit 

payments to States under section 1903 

of the Act for any amounts expended for 

providing medical assistance for HCACs 

specified in regulations. Such 

regulations must ensure that the 

prohibition on payment for HCACs shall 

not result in a loss of access to care or 

services for Medicaid beneficiaries. 

Section 2702(b) of the Affordable Care 

Act defines the term ’’health careacquired condition’’ as ‘‘a medical 

condition for which an individual was 

diagnosed that could be identified by a 

secondary diagnostic code described in 

section 1886(d)(4)(D)(iv) of the Act.’’ 

Section 2702(c) of the Affordable Care 

Act specifically requires that the 

Secretary, in carrying out section 2702 

of the Affordable Care Act, apply the 

regulations issued under section 

1886(d)(4)(D) of the Act relating to the 

prohibition of payments based on the 

presence of a secondary diagnosis code 

specified by the Secretary in such 

regulations, as appropriate for the 

Medicaid program. The Secretary may 

exclude certain conditions identified 

under title XVIII of the Act for 

nonpayment under title XIX of the Act 

when the Secretary finds the inclusion 

of such conditions to be inapplicable to 

beneficiaries under title XIX. 

F. Requirement To Review Existing State 

Practices Prohibiting Nonpayment 

Policies for HCACs 

Section 2702 of the Affordable Care 

Act requires that the Secretary identify 

current State practices that prohibit 

payment for HCACs and incorporate 

those practices, as appropriate, into 

Medicaid regulations. 

To fulfill the statutory direction, we 

reviewed existing SPAs originally 

submitted in response to the July 31, 

2008 SMDL (#08–004). We also 

researched State HCAC-related 

nonpayment policies that had been 

implemented outside of Medicaid State 

plans. We reviewed State quality 

assurance programs, pay-forperformance programs, reporting 

requirements and procedures, and 

payment systems. 

We reviewed various articles, reports, 

summaries, and data bases pertaining to 

States’ existing practices concerning 

hospital and HCACs and infections 

including, but not limited to: 

• Nonpayment for Preventable Events 

and Conditions: Aligning State and 

Federal Policies to Drive Health System 

Improvement, Jill Rosenthal and Carrie 

Hanlon, December 2009. 

• ‘‘Estimating the Costs of Potentially 

Preventable Hospital Acquired 

Complications,’’ Richard L. Fuller M.S., 

et al, Health Care Financing Review, 

Summer 2009, Volume 30, Number 4. 

• ‘‘Identifying Potential Preventable 

Complications Using a Present on 


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Admission Indicator,’’ John S. Hughes, 

M.D., et al, Health Care Financing 

Review, Spring 2006, Volume 27, 

Number 3. 

• State Government Tracking of 

Hospital-Acquired Conditions, Nathan 

West, MPA et al, April 2010. 

• ‘‘The Triple Aim: Care, Health, and 

Cost,’’ Donald Berwick, et al., Health 

Affairs, Volume 27, Number 3 (2008). 

• ‘‘Lessons from the Pioneers: 

Reporting Healthcare-Associated 

Infections,’’ Anna Spencer, et al. 

National Conference of State 

Legislatures, July 2010. 

• ‘‘OIG Report: Adverse Events in 

Hospitals: National Incidence Among 

Medicare Beneficiaries,’’ OEI–06–09– 

00090, November 2010. 

• ‘‘OIG Report: Adverse Events in 

Hospitals: Public Disclosure of 

Information About Events,’’ OEI–06–09– 

00360, January 2010. 

• ‘‘OIG Report: Adverse Events in 

Hospitals: State Reporting Systems,’’ 

OEI–06–07–00471, December 2008. 

• To Err is Human: Building a Safer 

Health System, A report of the 

Committee on Quality of Health Care in 

America, Institute of Medicine, National 

Academy Press, 2000, L.T. Kohn, J.M. 

Corrigan, and M.S. Donaldson, eds. 

We discussed internally within CMS, 

as well as with interagency partners at 

the Agency for Healthcare Research and 

Quality (AHRQ) and the CDC to ensure 

that the proposed regulations are 

consistent with other regulations, 

policies, and procedures currently in 

existence surrounding this issue. We 

also met with them to gain information 

on areas where we could mirror existing 

processes to eliminate undue burdens 

on States or providers. 

We issued a State survey to capture 

data from all related payment policies 

regardless of whether they were 

implemented as a result of the July 31, 

2008 SMDL or whether such practices 

are currently detailed in the State plan. 

The survey is still undergoing the 

Paperwork Reduction Act (PRA) process 

and has not been made mandatory. 

However, we have received information 

from a few States through the survey 

and have reviewed other information 

that has been helpful in explaining 

current State processes for making 

payment adjustments for HCACs. 

Subsequent to the publication of the 

survey, we held all-State calls where we 

answered questions in response to the 

survey, had States with existing policies 

talk about their experiences, and 

listened to discussion regarding the 

implementation of the HCAC policy. 

We met with nongovernmental 

partners including the NQF, the 

National Academy for State Health 

Policy, the National Association of 

Children’s Hospitals, the Joint 

Commission, and State Medicaid 

Medical Directors. Most of these 

organizations are primarily focused on 

State program development and/or 

quality issues. We reached out to them 

to ensure that the proposed policies 

would be consistent with current 

industry understanding of both State 

payment and quality improvement 

goals. In our discussions with these 

organizations, we were able to discuss 

State experiences on a broad, national 

level that had been gained from working 

with States. During these meetings, we 

discussed a number of issues related to 

the proposed rule and State concerns in 

implementing this provision. For 

instance, it was clear from many of our 

discussions that States hoped to be able 

to look to this provision to provide 

additional definition regarding the types 

of conditions to identify for 

nonpayment, as well as to provide some 

support in working with provider 

communities to which these policies 

would be applied. 

G. Current State Practices Prohibiting 

Payment for HACs, HCACs, and Other 

Similar Events 

We found that 29 States do not have 

existing HCAC-related nonpayment 

policies. Most of the 21 States that 

currently have HCAC-related 

nonpayment policies identify at least 

Medicare’s HACs for nonpayment in 

hospitals. However, it is important to 

note that at least half of the existing 

policies we reviewed exceeded 

Medicare’s current HAC requirements 

and policies, either in the conditions 

identified, the systems used to indicate 

the conditions, or the settings to which 

the nonpayment policies applied. These 

policies vary tremendously from State to 

State in the authority used to enact the 

policies, the terminology used, the 

conditions identified, State’s utilization 

of the current Medicare HAC list, the 

service settings to which nonpayment 

policies are applied, reporting 

requirements, and the claims processing 

of the nonpayment policies. 

All of the States with HCAC-related 

nonpayment policies have implemented 

provisions that would protect the State 

from dual-eligible liability either by 

directly prohibiting payment for 

Medicare crossover claims or by relying 

on existing State plan authority to deny 

payment for claims previously denied 

by Medicare. 

We found that 17 of the States 

implemented Medicaid specific policies 

that reduce payment for services 

provided to Medicaid beneficiaries. 

Most of the States implementing 

Medicaid specific policies identify at 

least Medicare’s current list of HAC, and 

nearly half of those States defined a list 

that was different from Medicare’s 

current list of HACs for nonpayment. 

Similar variation exists in States’ plan 

language identifying Medicare’s NCD for 

nonpayment ranging from mirroring 

Medicare to completely breaking from 

Medicare. We do note, however, that the 

nature of the NQF serious reportable 

events, like surgery on the wrong body 

part, proper surgery wrong patient, and 

wrong surgery, is so severe that States 

were likely to have relied on State 

coverage provisions and appropriate 

care requirements to deny payment for 

these events. 

We also found that States use 

different general terminology for HCACrelated nonpayment policies even 

though many of the conditions 

identified overlap, are from the same 

sources, and do not generally vary in 

medical definition from one list to the 

other. For example, 3 States identify ‘‘air 

embolism’’ as a condition for 

nonpayment under its plans with the 

condition understood to be consistently 

defined for medical purposes. However, 

one State includes air embolisms on its 

list of ‘‘HACs’’; another includes the 

same condition as a ‘‘Serious Adverse 

Event’’; and the third includes it on a list 

of ‘‘Medical Errors.’’ 

We also found that at least 7 of the 

States with HCAC-related nonpayment 

policies apply those policies to settings 

other than the inpatient hospital setting 

required by Medicare, including both 

physicians and ambulatory surgical 

centers. 

Variation across States is not 

surprising given the States have been 

permitted broad flexibility in defining 

their HCAC policies and programs. 

However, we attribute some of the 

variety on this issue to the wealth of 

information and evidence-based 

guidelines available to States, either 

through their own experiences and 

resources or through industry 

researched and developed resources 

related to health system quality. Data 

gathered on the conditions identified, 

reporting strategies, and implementation 

guidelines indicate that States have 

relied heavily on existing health system 

quality improvement research to define 

requirements while tailoring policies 

appropriate to their own systems. In 

addition, our research indicates that 

States’ HCAC-related nonpayment 

policies are mainly intended to drive 

broader health system agendas to 

promote quality outcomes. We believe 

the use of evidence-based measures and 

the push for health system quality are 

an appropriate foundation for the 


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proposed regulation. We propose to 

implement Medicaid HCAC regulations 

that would provide some consistency 

across health care payers (Medicare and 

Medicaid). At the same time, we also 

propose to accommodate State 

flexibility to design individual HCAC 

policies for nonpayment, quality-related 

programs suitable for their own 

Medicaid program and health 

marketplace to the extent such policies 

go beyond Federally-established 

minimum standards. We request 

comment on this issue. 

The July 31, 2008 SMDL (#08–004) 

instructed States to submit SPAs to 

enact nonpayment provisions. Thirteen 

States complied with this requirement. 

Other States that implemented these 

policies through some other authority 

like State law or administrative 

procedures will be required to submit 

new SPAs for review and work with 

CMS to ensure their policies, effective 

July 1, 2011, are in line with the final 

provisions of this rule. 

H. Provider Preventable Conditions 

We are proposing to exercise our 

authority under sections 1902(a)(4), 

1902(a)(19), and 1902(a)(30)(A) of the 

Act to provide for identification of 

Provider Preventable Conditions (PPCs) 

as an umbrella term for hospital and 

nonhospital conditions identified by the 

State for nonpayment to ensure the high 

quality of Medicaid services. These 

statutory provisions authorize 

requirements that States use methods 

and procedures determined by the 

Secretary to be necessary for the proper 

and efficient administration of the State 

plan, to provide care and services in the 

best interests of beneficiaries, and to 

provide for payment that is consistent 

with efficiency, economy, and quality of 

care. 

With the introduction of this term, we 

propose to include two categories of 

PPCs—HCACs and OPPCs. HCACs 

would apply as required under the 

statute. OPPCs would be applicable to 

other conditions that States identify and 

have approved through their Medicaid 

State plans. 

The inclusion of the new terms, PPCs 

and OPPCs, is consistent with the 

implementation of a broader application 

of this policy which allows us to 

appropriately incorporate existing State 

practices. The adoption of a new term 

is necessary because the term, ‘‘health 

care-acquired condition’’ is very 

narrowly defined in the Statute and 

does not provide for the inclusion of 

conditions other than those identified as 

HACs for Medicare, even excluding the 

3 Medicare NCDs. Additionally, the 

statutory definition of HCACs only 

applies to the inpatient hospital service 

setting. 

We considered a broader definition of 

the term, ‘‘health care-acquired 

conditions,’’ attempting to isolate the 

idea of the actual condition from the 

setting in which it occurred, however 

after conferring with Medicare to clearly 

understand the statute at section 

1886(d)(4)(D)(iv) of the Act, we came to 

understand that it applies specifically to 

conditions applicable to inpatient 

hospitals as defined in that section and 

reimbursed by diagnosis related groups. 

For example, section 1886 of the Act is 

titled, ‘‘Payment to Hospitals for 

Inpatient Hospital Services.’’ Section 

1886(d) of the Act applies specifically to 

‘‘the amount of the payment with 

respect to the operating costs of 

inpatient hospital services.’’ Section 

1886(d)(4) of the Act requires that, ‘‘The 

Secretary shall establish a classification 

of inpatient hospital discharges* * *’’ 

Section 1886(d)(4)(D) of the Act is 

specific to the assignment of diagnosisrelated groups which apply solely to 

Medicare payment for inpatient hospital 

services. 

We did look to the Affordable Care 

Act in creating these terms. Section 

3008(b) of the Affordable Care Act, 

‘‘Study And Report On Expansion Of 

Healthcare Acquired Conditions Policy 

To Other Providers,’’ requires that 

Medicare study the effects of expanding 

its existing policy to other providers. 

We adopted the ‘‘Other Providers’’ term 

to remain consistent with Medicare in 

the expansion of its policy. 

In looking to expand the overall 

policy, we considered a number of other 

terms but determined that many of them 

like ‘‘adverse events’’ or ‘‘serious 

reportable events’’ would generate 

confusion because they had existing 

industry definitions that did not 

necessarily overlap with our policy 

aims. We adopted the term ‘‘Provider 

Preventable Condition’’ after discussion 

with Medicare because it appropriately 

identified the scope of the conditions 

and could act as a ‘‘catch-all.’’ Also, the 

term had not been narrowly defined by 

use in Medicare, Medicaid, or in the 

industry at-large. 

I. Reporting of Results 

After researching State, industry, and 

Federal information related to the 

importance of reporting of quality data 

in driving improved health outcomes, 

we propose that a simplified level of 

reporting is essential to creating a 

successful nonpayment policy both 

from the payment and quality 

perspectives. We believe that any 

requirements for provider reporting 

should provide a consistent format for 

States to report State-specific measures; 

require that providers report conditions 

identified for nonpayment when they 

occur regardless of a provider’s 

intention to bill; and not cause undue 

burden on States or providers. 

Quality reporting across States is 

inconsistent. There are 27 States that 

require reporting of either hospitalacquired infections, conditions, or some 

combination of both. Some of those 

States require quality reporting but have 

not implemented associated HCACrelated nonpayment policies. Others 

have HCAC-related nonpayment 

policies, but have not implemented 

quality reporting requirements. 

Existing national quality reporting 

formats do not support the collection of 

data on HCACs and OPPCs for Medicaid 

beneficiaries. Providers, mainly 

hospitals, are subject to reporting 

requirements in addition to those 

imposed by States. For instance, most 

hospitals report some quality measures 

to CMS, the Joint Commission, or the 

CDC. We considered requiring reporting 

to Hospital Compare and the National 

Health Safety Network, but decided 

against these formats because: We do 

not believe they currently have the 

capacity to allow State specific 

reporting of varied measures; their 

existing collections may not be 

consistent with what most States are 

currently requiring providers report; 

and the reporting formats may impose 

undue significant burden for 

providers—particularly those that do 

not have full-time quality staffs or 

resources. 

Without direct reporting 

requirements, providers have no 

incentive to report conditions or adverse 

events for nonpayment or otherwise. 

HACs, HCACs, and related policies 

represent liabilities for providers 

beyond nonpayment provisions. In fact, 

Medicare and the industry-at-large, have 

experienced nonclaiming or nonbilling 

on the part of providers seeking to 

escape the liability that could come 

with any type of notification of a 

particular event or avoid negative health 

outcome indicators. 

In consideration of our research, we 

propose a requirement that existing 

claims systems be used as a platform for 

provider self-reporting. We also propose 

to include reporting provisions that 

would require provider reporting in 

instances when there is no associated 

bill. For instance, States could employ 

the widely used POA system in 

combination with including edits in 

their Medicaid claims systems that 

would indicate an associated claim and 

flag it for medical review. 


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J. States’ Use of Payment Systems other 

than MS–DRG 

We also found that States’ payment 

systems will dictate the manner in 

which States are able to operationalize 

PPCs related nonpayment policies. For 

instance, some States reimburse using 

MS–DRG or some other type of grouper 

software to price claims. As with 

Medicare, these States may use the POA 

indicator system to identify claims and 

reduce payments by programming the 

grouper to reduce payment through the 

grouper. We note that a considerable 

number of States do not use grouper 

systems to reimburse providers. These 

States may identify and reduce payment 

for HCACs using methods appropriate to 

the specific reimbursement system used 

within that State. For instance, at least 

one State has elected to carve out a 

portion of the total system 

reimbursements for redistribution based 

on its own historical quality measures. 

We believe that the proposed provision 

allows States this type of flexibility in 

designing methodologies that would 

isolate amounts for nonpayment and 

allow provider payment to be reduced 

based on a CMS-approved State plan 

methodology that is prospective in 

nature. We would welcome comment on 

this issue. 

II. Provisions of the Proposed 

Regulations 

A. General Discussion 

We propose to codify provisions that 

would allow States flexibility in 

identifying PPCs that include, at a 

minimum, the HAC identified by 

Medicare, but may also include other 

State-identified conditions. This 

flexibility would extend to applying 

nonpayment provisions to service 

settings beyond the inpatient hospital 

setting. We believe that establishing 

Medicare as the minimum for the 

application of this policy is appropriate 

at this point. Many States that have 

implemented HCAC-related policies 

have adhered to Medicare because the 

conditions have been researched and are 

generally accepted by the provider 

community. In addition, provider 

familiarity with Medicare’s HACs and 

identification processes limits the 

States’ implementation burden. 

We also recognize that Medicare’s 

own policy is evolving. The Affordable 

Care Act requires that Medicare attach 

new payment incentives to its HAC 

provisions, as well as to study the 

implications of applying HCACs policy 

to providers other than inpatient 

hospital providers. We encourage States 

to consider the benefits and quality 

implications of expanding HCAC 

quality and nonpayment policies as 

more information becomes available 

from Medicare and State Medicaid 

programs. We invite comment on the 

topic of expanding HCAC-related 

policies in State Medicaid programs. 

We propose that PPCs are defined 

under two categories: HCACs; and 

OPPCs. We are proposing to define the 

category of PPCs that would be referred 

to using the term ‘‘health care-acquired 

conditions’’ (HCACs) based on the 

definition of that term in section 2702(b) 

of the Affordable Care Act. That 

definition provides that an HCAC must 

be a condition that ‘‘could’’ be identified 

in the Medicare program by a secondary 

ICD–9–CM OR ICD–10–CM code as an 

HAC under section 1886(d)(4)(D)(iv) of 

the Act for Medicare purposes. Section 

2702(c) of the Affordable Care Act 

specifically requires that the Secretary 

shall apply to State plans (or waivers) 

under title XIX of the Act the 

regulations issued under section 

1886(d)(4)(D) of the Act relating to the 

prohibition of payments based on the 

presence of a secondary diagnosis code 

specified by the Secretary in such 

regulations, as appropriate for the 

Medicaid program. This means States 

must, at a minimum, identify conditions 

as HACs in accordance with section 

1886(d)(4)(D) of the Act. Consistent with 

this identification, we propose that 

every State must, at a minimum, 

identify as an HCAC, those secondary 

diagnosis codes that have been 

identified as Medicare HACs when not 

present on hospital admission. We note 

that the Secretary has authority to 

update the Medicare HAC list as 

appropriate. As such, States are required 

to comply with subsequent updates or 

revisions in accordance with section 

1886(d)(4)(D) of the Act. 

States will be responsible for ensuring 

that the conditions identified under 

their Medicaid State plans are, at a 

minimum, consistent with those 

identified in Medicare’s final annual 

hospital IPPS rule. Medicare is required 

to display its final IPPS rule 60 days 

prior to the beginning of the Federal 

fiscal year to which the update applies. 

If Medicare revises its HAC list, we 

believe States will have sufficient time 

to update their corresponding policies. 

Therefore, we propose that States’ 

policies will be effective consistent with 

Medicare’s revisions to its list of HACs. 

We are soliciting comments on this 

issue. 

Because the definition does not 

require that HCACs must be limited to 

Medicare HAC, we propose a definition 

for an HCAC that would not be limited 

to those specifically identified for the 

Medicare program, but can include 

conditions identified by States for 

nonpayment under their State plans, as 

approved by CMS through the State 

plan review process, that the State has 

determined meet the statutory criteria 

outlined at section 1886(d)(4)(D)(iv) of 

the Act. We believe this is appropriate 

at this point in time, considering where 

many States are in development of their 

programs but we are seeking comment 

on this proposed policy. This proposed 

definition would establish Medicare as 

the floor, but allow further State 

innovation as determined by each State. 

However, even if a State chooses to go 

beyond Medicare, it will still have to be 

implemented through SPAs, and we 

will publish such policies on the CMS 

Web site on an annual basis to 

encourage States to learn from each 

other. With respect to those statutory 

criteria for identification of an HCAC, 

section 1886(d)(4)(D)(iv) of the Act sets 

forth the following criteria: 

• Cases described by such code have 

a high cost or high volume, or both, 

under this title. 

• The code results in the assignment 

of a case to a MS–DRG that has a higher 

payment when the code is present as a 

secondary diagnosis. 

• The code describes such conditions 

that could reasonably have been 

prevented through the application of 

evidence-based guidelines. 

In applying these criteria to identify 

HCACs, we propose that the term ‘‘code’’ 

would refer to ICD–9–CM OR ICD–10– 

CM codes assigned in the International 

Classification of Diseases coding system, 

9th (or 10th) Revision, Clinical 

Modification or a State-specified 

alternative method of identifying 

conditions for purposes of payment. 

In addition, we propose that when 

analyzing the payment impact of an 

inpatient hospital HCAC, the State may 

consider the nature of its particular 

payment methodology. For instance, 

when a State reimburses hospitals on a 

per diem basis and determines that 

there was an HCAC that was not POA, 

the State may need to isolate the 

increased cost of the services (possibly 

through a utilization review) and reduce 

the per diem reimbursement 

accordingly. 

While we believe that the broad use 

of ICD–9–CM OR ICD–10–CM codes in 

inpatient hospital payment, as well as 

the POA indicator system currently 

used by Medicare to indicate conditions 

for nonpayment is the most consistent 

methodology for States in identifying 

HCACs, we are interested in hearing 

about other methods of identifying 

HCACs. We recognize that there is 

considerable variation among State 

hospital payment methodologies. In 


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addition, we recognize that there is 

considerable variation among States in 

the availability of data necessary to 

identify HCACs and related quality 

issues. We are proposing to require that 

States implement requirements for 

provider self-reporting of HCACs in the 

Medicaid claims payment process. 

The rule proposes that States would 

identify an HCAC similar to the way 

Medicare identifies an HAC. However, 

as the OIG points out in its report 

evaluating the usefulness of selected 

methods for identifying events that 

harm hospitalized Medicare 

beneficiaries, Adverse Events in 

Hospitals: Methods for Identifying 

Events (OEI–06–08–00221), tools like the 

Institute for Healthcare Improvement’s 

Global Trigger Tool that require 

standardized medical record reviews are 

considered much more effective in 

detection than the POA system. This is 

significant because one cannot prevent 

what one cannot detect. Accurate 

measurement is the necessary 

antecedent of quality improvement. We 

are soliciting comments on the 

efficiency of POA indicators for 

purposes of this provision. 

We are also proposing to provide that 

States may identify similar OPPCs 

related to services furnished in settings 

other than inpatient hospitals, which 

would also be subject to a payment 

prohibition. 

Preventable conditions that are 

caused or related to the provision of 

health care are not limited to inpatient 

hospital settings. These conditions can 

occur in outpatient hospital, nursing 

facility, and ambulatory care settings, 

and other healthcare settings. 

We are proposing that the treatment of 

these OPPCs will be similar to the 

treatment of HCACs. State plans must 

provide for nonpayment for care and 

services related to these OPPCs, and 

Federal financial participation (FFP) 

will not be available in State 

expenditures for such care and services 

related to OPPCs. 

To establish a base of an OPPC, we 

propose to define OPPC to include, at a 

minimum, wrong surgical or other 

invasive procedure performed on a 

patient; a surgical or other invasive 

procedure performed on the wrong body 

part; and a surgical or other invasive 

procedure performed on the wrong 

patient. 

These three conditions were 

addressed by Medicare in three national 

coverage analyses (NCAs) to establish 

NCDs. 

Effective January 15, 2009, Medicare 

does not cover a particular surgical or 

other invasive procedure to treat a 

particular medical condition when the 

practitioner erroneously performs: (1) A 

different procedure altogether; (2) the 

correct procedure but on the wrong 

body part; or (3) the correct procedure 

but on the wrong patient. Medicare will 

also not cover hospitalizations and other 

services related to these non-covered 

procedures as defined in the Medicare 

Pub. 100–02, Benefit Policy Manual 

(BPM), chapter 1, sections 10 and 120 

and chapter 16, section 180. We propose 

to adopt these 3 for purposes of this 

regulation. 

In addition to these Federallyidentified OPPCs, we propose to 

authorize States to identify other OPPCs 

and apply payment prohibitions the 

same as those applied to HCACs. The 

criteria that we are proposing for such 

other OPPCs would be similar to the 

criteria for HCACs. We propose the 

following criteria for States to use in 

identifying additional OPPCs: 

• A condition or event identified by 

a State for inclusion under this 

provision must be a discrete, auditable, 

quantifiable, and clearly defined 

occurrence. 

• A condition or event must be 

clearly adverse, resulting in a negative 

consequence of care that results in 

unintended injury or illness. 

• A condition or event identified 

must be reasonably preventable, 

meaning an event that could have been 

anticipated and prepared for, but that 

occurs because of an error or other 

system failure. 

In designating additional OPPCs, we 

recommend that States consider the 

2002 NQF report entitled ‘‘Serious 

Reportable Events in Healthcare: A 

Consensus Report.’’ In that report, NQF 

listed 27 events that were ‘‘serious, 

largely preventable and of concern to 

both the public and health care 

providers.’’ NQF’s ‘‘Consensus 

Standards Maintenance Committee on 

Serious Reportable Events’’ maintains 

and updates the list which currently 

contains 28 items. 

In order to implement the 

requirements of this new payment 

prohibition, we recognize that States 

may need additional information to 

properly process claims and determine 

the availability of FFP. We propose 

requiring States to establish provider 

self-reporting procedures for PPCs 

related to claims for Medicaid payment 

or courses of treatment that otherwise 

would be payable under Medicaid. We 

solicit comments on this issue. 

We will continue to gather 

information from States to further 

inform our policies and facilitate 

information sharing across States. We 

note that the Secretary may update this 

regulation over time to require 

additional nonpayment by States as we 

learn more from State practices. 

B. Access to Care 

Section 2702(a) of the Affordable Care 

Act requires that the Secretary ensure 

that adjustments to payment rates under 

this section do not result in a loss of 

access to care for beneficiaries. To this 

end, we propose that any reduction in 

payment would be limited to the 

amounts directly identifiable as related 

to the PPC and the resulting treatment. 

We are proposing this method of 

protecting access because it limits 

States’ ability to unduly reduce provider 

rates. For instance, if a patient develops 

mediastinitis after a CABG, the State 

would be allowed to deny payment for 

the treatment of the mediastinitis, but 

not the CABG. 

Additionally, we do not believe that 

beneficiaries would be best served by 

this policy if the focus was shifted from 

quality to system cost containment. We 

note further that nothing in this rule 

prevents a State from reinvesting any 

savings it may achieve from 

nonpayment of PPCs into rate 

improvements aimed at achieving 

improved access to care, as appropriate. 

We solicit comments on this issue. 

C. Effective Date of the Proposed 

Provisions 

Consistent with the provisions of 

section 2702(a) of the Affordable Care 

Act, we would make these requirements 

effective July 1, 2011. We will be 

requesting that States submit 

conforming SPAs to implement these 

provisions prior to that date. To be in 

compliance with the July 1, 2011 

proposed effective date, under 42 CFR 

430.20, the last date an SPA may be 

submitted would be September 30, 

2011, which is the last day of the 

quarter in which the amendment would 

be effective. 

D. Specific Revisions to Regulations 

Text 

The provisions of this rule would 

deny FFP for Medicaid expenditures 

made for PPCs, including HCACs and 

OPPCs identified in the State plan; and 

ensure that related payment adjustments 

do not limit beneficiary access to care. 

These provisions would apply to 

payments as specified under States’ 

approved Medicaid State plans, 

effective no later than July 1, 2011. We 

are proposing to modify the regulations 

at 42 CFR parts 434, 438, and 447 

following general provider payment 

rules and preceding other provisions 

concerning reductions in provider 

payments. In addition, to ensure that 

these provisions apply to contracts that 


jlentini on DSKJ8SOYB1PROD with PROPOSALS
Federal Register / Vol. 76, No. 33 / Thursday, February 17, 2011 / Proposed Rules 9291 

States use to provide Medicaid benefits 

using a managed care delivery system, 

we are also proposing to modify the 

regulations at 42 CFR part 438. Because 

the basic rule is set forth in part 447, we 

discuss that proposed modification first. 

Currently the general rules regarding 

Medicaid State plan payments for 

Medicaid are provided at part 447 

subpart A. We propose to add a new 

§ 447.26 to indicate that FFP will not be 

available for expenditures made for 

PPCs. We have included in § 447.26(a) 

a statement of the basis and purpose for 

the regulation, and in § 447.26(b), the 

definitions for the umbrella term PPCs, 

and the included terms HCACs, and 

other PPCs. These proposed provisions 

will establish Medicare as the floor that 

all States must adopt, but allow 

flexibility for States to move beyond the 

Medicare definitions and settings. As 

States’ programs evolve and they make 

additional requirements, we would 

require that necessary SPAs be 

submitted for implementation purposes. 

In § 447.26(c), we are proposing to set 

forth the general rule that State plans 

must preclude payment to providers for 

PPCs, and that FFP is not available for 

State expenditures for PPCs. To ensure 

beneficiary access to care, we specify 

that any reductions may be limited to 

the added cost resulting from the PPC. 

In § 447.26(d), we have included a 

provision that would require States to 

require provider reporting of PPCs 

associated with Medicaid claims, or 

with courses of treatment for Medicaid 

beneficiaries that would otherwise be 

payable under Medicaid. 

In addition to these changes in part 

447, we are proposing to include a 

requirement in § 434.6(a)(12) for 

contracts for medical or administrative 

services that contractors do not make 

payment for PPCs, and require that 

providers comply with the reporting 

requirements in § 447.26(d) as a 

condition of receiving payment. 

Likewise, to ensure that these 

provisions are included as required 

elements in Medicaid managed care 

contracts, we are proposing to include a 

requirement in § 438.6(f)(2) that 

contracts must comply with both 

§ 434.6(a)(12) and § 447.26. 

We have proposed these particular 

provisions because the information 

gathered in preparation for issuing these 

proposed rules indicate the need for a 

consistent authority under which States 

can implement PPC nonpayment 

policies; a consistent approach to 

identifying conditions for nonpayment; 

a streamlined terminology to indicate 

Medicaid HCAC payment policies; State 

flexibility to implement provisions 

suitable to their own systems; and a 

consistent provider reporting platform. 

III. Collection of Information 

Requirements 

Under the Paperwork Reduction Act 

of 1995, we are required to provide 60- 

day notice in the Federal Register and 

solicit public comment before a 

collection of information requirement is 

submitted to the Office of Management 

and Budget (OMB) for review and 

approval. In order to fairly evaluate 

whether an information collection 

should be approved by OMB, section 

3506(c)(2)(A) of the Paperwork 

Reduction Act of 1995 requires that we 

solicit comment on the following issues: 

• The need for the information 

collection and its usefulness in carrying 

out the proper functions of our agency. 

• The accuracy of our estimate of the 

information collection burden. 

• The quality, utility, and clarity of 

the information to be collected. 

• Recommendations to minimize the 

information collection burden on the 

affected public, including automated 

collection techniques. 

We are soliciting public comment on 

each of these issues for the following 

sections of this document that contain 

information collection requirements 

(ICRs): 

Effective July 1, 2011, proposed 

§ 447.26 would require States to submit 

SPAs for CMS approval that would 

reduce payments to providers by 

amounts related to PPCs. The burden 

associated with this proposed 

requirement would be the time and 

effort necessary for a State to submit its 

SPA and the associated pre-print. We 

estimate that 50 States would be 

required to comply with this 

requirement. We further estimate that it 

will take each State 7 hours to submit 

the aforementioned documentation to 

CMS. The total estimated burden 

associated with this requirement would 

be 350 hours at a cost of $20.67 per hour 

per State. 

We estimate that it will take each 

State 7 hours because we intend to issue 

a template to States to simplify the 

process of making the related 

amendment to the Medicaid State plan. 

Proposed § 447.26 would also require 

States to implement provider reporting 

requirements to ensure that PPCs are 

identified in claims for Medicaid 

payment. The burden associated with 

this requirement is the time and effort 

necessary to develop and implement 

provider reporting requirements that are 

effective with the provisions of this 

regulation. We estimate that 50 States 

would be required to comply with this 

requirement. Similarly, we estimate that 

it will take 24 hours for each State to 

develop and implement the provider 

reporting requirements as specified 

above. The total estimated burden 

associated with this requirement would 

be 1,200 hours at a cost of $20.67 per 

hour per State. We believe that this 

estimate is reasonable because we are 

requiring that States have providers use 

their existing claims processes to report 

identified events. 

Proposed § 438.6(f)(2) would also 

require States which provide medical 

assistance using a managed care 

delivery system to modify their 

managed care contracts to reflect the 

PPCs payment adjustment policies as 

applied through these regulations. The 

burden associated with this requirement 

is the time and effort necessary for a 

State to amend its managed care 

contracts to reflect these policies. We 

estimate that 48 States would be 

required to comply with this 

requirement. We also estimate that it 

would take 8 hours for each State to 

revise its contracts to comply with this 

requirement and submit the amended 

contract to CMS for review and 

approval. The total estimated annual 

burden associated with this requirement 

is 384 hours at a cost of $20.67 per hour 

per State. 

The total estimated burden associated 

with this requirement is 1,934 hours at 

a cost of $806.13 per State. 

If you comment on these information 

collection and recordkeeping 

requirements, please do either of the 

following: 

1. Submit your comments 

electronically as specified in the 

ADDRESSES section of this proposed rule; 

or 

2. Submit your comments to the 

Office of Information and Regulatory 

Affairs, Office of Management and 

Budget, Attention: CMS Desk Officer, 

[CMS–2400–P]; Fax: (202) 395–6974; or 

E-mail: OIRA_submission@omb.eop.gov. 

IV. Response to Comments 

Because of the large number of public 

comments we normally receive on 

Federal Register documents, we are not 

able to acknowledge or respond to them 

individually. We will consider all 

comments we receive by the date and 

time specified in the DATES section of 

this preamble, and, when we proceed 

with a subsequent document, we will 

respond to the comments in the 

preamble to that document. 

V. Regulatory Impact Statement 

A. Statement of Need 

This proposed rule implements 

section 2702 of the Affordable Care Act 


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of 2010 which directs the Secretary to 

issue Medicaid regulations effective as 

of July 2011, prohibiting Federal 

payments to States (under section 1903 

of the Act) for any amounts expended 

for providing medical assistance for 

HCACs. It would also authorize States to 

identify other PPCs for which Medicaid 

payment would be prohibited. We view 

this regulation as one step of a larger 

approach to address the problem of 

HCACs. 

B. Overall Impact 

We have examined the impacts of this 

rule as required by Executive Order 

12866 on Regulatory Planning and 

Review (September 30, 1993), Executive 

Order 13563 on Improving Regulation 

and Regulatory Review (February 2, 

2011), the Regulatory Flexibility Act 

(RFA) (September 19, 1980, Pub. L. 96– 

354), section 1102(b) of the Social 

Security Act, section 202 of the 

Unfunded Mandates Reform Act of 1995 

(Pub. L. 104–4), Executive Order 13132 

on Federalism (August 4, 1999), and the 

Congressional Review Act (5 U.S.C. 

804(2)). 

Executive Order 12866 directs 

agencies to assess all costs and benefits 

of available regulatory alternatives and, 

if regulation is necessary, to select 

regulatory approaches that maximize 

net benefits (including potential 

economic, environmental, public health 

and safety effects, distributive impacts, 

and equity). A regulatory impact 

analysis (RIA) must be prepared for 

major rules with economically 

significant effects ($100 million or more 

in any 1 year). This rule does not reach 

the economic threshold and thus is not 

considered a major rule under the 

Congressional Review Act. We request 

comments on our economic analysis. 

It is difficult to estimate the amount 

which will be withheld from providers 

under this regulation, as not all of these 

events will be billed. However, it is 

instructive to note that the total dollar 

amount of Medicare claims denied 

under its HAC policy is approximately 

$20 million per year (see 75 FR 23895, 

May 4, 2010). The original regulation 

creating the Medicare HACs was 

published in the August 19, 2008 

Federal Register (73 FR 48433). In 

addition, estimates were conducted by 

the Congressional Budget Office (CBO) 

and the CMS Office of the Actuary 

(OACT) on the impact of section 2702 

of the Affordable Care Act. The CBO 

estimate concluded there would be no 

impact associated with section 2702 of 

the Act (CBO and JCT, 2010 Estimate). 

The CMS OACT estimate (Estimated 

Financial Effects of the ‘‘Patient 

Protection and Affordable Care Act,’’ as 

Amended, 2010) projected an impact 

from section 2702 on the Medicaid 

program of cost savings of $2 million for 

FY 2011 ($1 million for the Federal 

share and $1 million for the State share), 

with an aggregate cost savings of $35 

million ($20 million for the Federal 

share and $15 million for the State 

share) for FYs 2011 through 2015. The 

Federal and State share cost savings, as 

result of denied payments, are 

represented by the reduction in transfers 

from Medicaid to hospitals. 

TABLE 1—MEDICAID IMPACTS FOR FYS 2011 THROUGH 2015 

Medicaid impacts 

FY impact ($ millions) 

2011 2012 2013 2014 2015 Total 

Federal Share .................................................................. ¥1 ¥4 ¥5 ¥5 ¥5 ¥20 

State Share ...................................................................... ¥1 ¥3 ¥3 ¥4 ¥4 ¥15 

Total .......................................................................... ¥2 ¥7 ¥8 ¥9 ¥9 ¥35 

There are administrative cost impacts 

on States to modify their systems to 

meet reporting requirements, but we 

believe these are not significant. As 

noted above, the reporting system in 

this proposed regulation relies on an 

existing billing system currently in 

place. Both States and providers already 

have billing, claiming, and payment 

systems in place to act upon the 

information obtained. The costs 

reported in section III. of this proposed 

rule, Collection of Information 

Requirements, amount to an additional 

$39,976 dollars aggregate across all 

States. 

Hospitals may incur additional costs 

to reduce HCACs. Such costs include 

hiring additional nurses to ensure 

enforcement of the infection prevention 

policies. In turn, preventing or reducing 

HCACs will lead to a reduction in direct 

health spending, which is a benefit 

realized by Medicaid, hospitals and 

other payers. 

The Joint Commission requires 

hospitals to have established programs 

for Quality Improvement, Risk 

Management, Safety, and Infection 

Control. As a result, a majority of 

hospitals already have in place 

programs to avert Medicare HACs and 

thus would not incur new costs to 

implement parallel programs to avert 

Medicaid HACs. Furthermore, we 

anticipate a public benefit to all 

providers and payers since programs 

that hospitals develop to avoid 

Medicaid HCACs will likely benefit all 

patients and reduce health care costs. 

Patient benefits resulting from a 

reduction in HCAC may include an 

increase in healthy years of life. 

However, this public benefit will derive 

from possible responses by hospitals 

and not from this regulation itself. 

We realize that the overall problem of 

HCACs cannot be completely addressed 

in this regulation, as this proposed 

regulation is one step of an overall 

approach. Consequently, the estimated 

economic impacts from all HHS 

initiatives to address HCACs may result 

in much higher savings impact than 

presented in this analysis. However, 

such economic savings, for example, 

will not derive from this regulation 

alone, but will in part come from the 

knowledge that State and Federal 

governments gain from the reporting 

requirements created by this regulation. 

That knowledge will in turn inform 

future HHS initiatives to reduce excess 

morbidity and mortality attributable to 

HCACs. 

The RFA requires agencies to analyze 

options for regulatory relief for small 

entities, if a rule has a significant impact 

on a substantial number of small 

entities. Most hospitals, other providers, 

and suppliers are small entities, either 

by nonprofit status or by having 

revenues of $7.0 million to $34.5 

million in any 1 year. Individuals and 

States are not included in the definition 

of a small entity. Guidance issued by the 

Department of Health and Human 

Services interpreting the RFA considers 

effects to be economically significant if 

they reach a threshold of 3 to 5 percent 

or more of total revenue or total costs. 

As illustrated in Table 1, any decrease 

in payments, as a result of this 

regulation, to small entities should be 

significantly less than this threshold. 


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Therefore, we are not preparing an 

analysis for the RFA because the 

Secretary has determined that this 

proposed rule will not have a significant 

economic impact on a substantial 

number of small entities. 

In addition, section 1102(b) of the Act 

requires us to prepare a RIA if a rule 

may have a significant impact on the 

operations of a substantial number of 

small rural hospitals. This analysis must 

conform to the provisions of section 603 

of the RFA. For purposes of section 

1102(b) of the Act, we define a small 

rural hospital as a hospital that is 

located outside of a Metropolitan 

Statistical Area for Medicare payment 

regulations and has fewer than 100 

beds. We are not preparing an analysis 

for section 1102(b) of the Act because 

the Secretary has determined that this 

proposed rule will not have a significant 

impact on the operations of a substantial 

number of small rural hospitals. 

Section 202 of the Unfunded 

Mandates Reform Act of 1995 (UMRA) 

also requires that agencies assess 

anticipated costs and benefits before 

issuing any rule whose mandates 

require spending in any 1 year of $100 

million in 1995 dollars, updated 

annually for inflation. In 2011, that 

threshold is approximately $136 

million. This rule will have no 

consequential effect on State, local, or 

tribal governments in the aggregate or 

on the private sector. 

Executive Order 13132 establishes 

certain requirements that an agency 

must meet when it promulgates a 

proposed rule (and subsequent final 

rule) that imposes substantial direct 

requirement costs on State and local 

governments, preempts State law, or 

otherwise has Federalism implications. 

While this regulation does not impose 

substantial costs on State or local 

governments, it does preempt some 

State laws. The requirements of 

Executive Order 13132 are applicable. 

Executive Order 13132 sets forth a 

process to be followed by the Federal 

government whenever Federal 

regulatory processes may affect or 

preempt State regulations or laws. We 

are aware that many States do have 

regulations for Medicaid nonpayment in 

the event that specified adverse events 

occur during provider care. This 

proposed rule is intended to create a 

Federal legal minimum for such State 

regulations. States could continue to 

enact more stringent laws or regulations 

upon approval of a Medicaid SPA by 

CMS to assure that there is no adverse 

impact on Medicaid beneficiary access 

to care. 

This proposed rule derives from 

section 2702 of the Affordable Care Act 

and other CMS regulatory authority. 

Like the Affordable Care Act, it is 

derived from Federal authority under 

the Commerce Clause of the U.S. 

Constitution. Under the requirements of 

Executive Order 13132 and the 

requirements of section 2702 of the 

Affordable Care Act, we have consulted 

with the States before issuing this 

proposed rule. Major portions of the 

regulation are, in fact, derived from 

comparable State regulations. 

Significant regulatory authority in this 

area would remain with the States 

should the proposed regulation become 

final. As stated, the proposed rule does 

not completely preempt State law, but 

merely sets a Federal minimum 

standard. 

Moreover, we solicit comments from 

States as part of this proposed rule and 

will consider such State comments in 

drafting the final rule. While there will 

be some additional administrative costs 

to States to administer this regulation, it 

is expected that State Medicaid savings 

will largely offset such costs. 

The requirements of Executive Order 

13132 will be met in the final rule to be 

issued 30 days prior to the effective date 

of July 1, 2011, set forth in the 

Affordable Care Act. 

C. Anticipated Effects 

1. Effects on State Medicaid Programs 

The effects on State Medicaid 

programs as a result of this provision 

will depend on various factors. For 

instance, as we state in the preamble, 

there are 21 States that have already 

implemented similar policies. While we 

have reviewed existing State policies 

and incorporated those policies that we 

believe would best apply on a national 

level, these States will have to make 

changes to comply with the minimums 

set in this proposed rule. In addition, 

States will have to work through the 

SPA review process to ensure that their 

existing policies do not serve to limit 

beneficiaries’ access to health care. 

The States that have used State plan 

authority to implement their 

nonpayment policies will need to 

review their policies and ensure that 

they comply with any finally 

implemented provisions of these rules. 

These States will likely have to submit 

revisions to their State plans. In 

addition, the States that implemented 

these policies through some other 

authority like State law or 

administrative procedures will have to 

submit new SPAs for review and work 

with CMS to ensure that their policies 

effective July 1, 2011, are in line with 

the final provisions of these rules. States 

that have elected not to implement 

Medicaid specific policies or that do not 

have related policies at all will need to 

submit new SPAs. Further, States which 

use a managed care delivery system to 

provide Medicaid benefits to 

beneficiaries will have to amend and 

submit for CMS review and approval 

managed care contracts that reflect these 

new requirements. While this regulation 

is effective on July 1, 2011, most States 

will already have their managed care 

contracts for the fiscal year in place by 

that time and there may be some delay 

in incorporating new language in their 

managed care contracts. We will issue 

subregulatory guidance to States 

requiring that appropriate changes be 

made to managed care contracts to 

comply with the regulation. 

All States will need to incorporate the 

reporting requirements into their claims 

systems. In addition, States will need to 

evaluate the best ways in which to 

identify and reduce payment for PPCs 

under their respective Medicaid plans. 

We anticipate that this provision will 

prompt programmatic changes for States 

regarding quality improvement 

considerations within health care 

systems. This provision, while it is a 

payment provision, is primarily targeted 

at preventing medical errors. 

2. Effects on Other Providers 

We anticipate that these provisions 

will prompt health care providers to 

adopt quality programs that would limit 

the risk of providing services or using 

resources, in error, that will not be 

reimbursed. 

We anticipate that the reporting 

requirements will ultimately be a 

catalyst for providers in developing 

quality practices to reduce the risks 

associated with receiving care at their 

facilities and promote overall quality 

improvements. 

3. Effects on the Medicaid Program 

Medicare’s and States’ experience has 

demonstrated that related policies often 

do not produce substantial short-term 

financial savings within health care 

systems. Medicare estimated that the 

policy will reduce its spending by an 

aggregate amount of about $80,000,000 

from FY 2009 through FY 2013, or by 

less than 0.01 percent of total annual 

spending on inpatient hospital services 

(75 FR 50661). States report similar 

short-term savings. However, there are 

more significant gains to be realized 

when considering the broader impact of 

increased quality on the health system 

overall, or more exactly the savings 

created when preventable conditions 

and related treatment are measured. 

The anticipated public benefit to all 

providers and payers from programs 


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that hospitals develop to avoid 

Medicaid HCACs will likely benefit all 

patients and reduce health care costs. 

This includes, for example, Medicaid 

beneficiaries realizing an increase in 

healthy years of life as a result of the 

reduction in HCACs. However, this 

public benefit will derive from possible 

responses by hospitals and not from this 

regulation itself. 

D. Alternatives Considered: Conditions 

Identified as Provider-Preventable 

Conditions 

The Statute requires that Medicaid, at 

a minimum, recognize Medicare’s 

current list of HACs. We considered 

proposing regulatory action that 

included only the conditions listed as 

Medicare HACs. However, when 

considering current State practices our 

research concluded that many States’ 

policies included conditions not 

identified by Medicare as HACs. We 

concluded that such limited action 

would not serve the program purposes 

of ensuring high quality care and would 

potentially limit State flexibility to 

protect beneficiaries and program 

integrity. Similarly, we considered 

proposing regulatory action that 

included only the inpatient hospital 

setting. Again, after assessing current 

State practices, as well as industrybased research, there is clear indication 

that data is available to States that will 

allow them to employ evidence based 

policy practices beyond the inpatient 

hospital setting. In order to provide 

States full flexibility to protect 

beneficiaries and the program, we 

elected the more comprehensive 

approach proposed. We are seeking 

comment on both issues. 

We considered defining OPPC as, ‘‘a 

condition occurring in any health care 

setting that could have reasonably been 

prevented through the ordinary 

provision of high quality care during the 

course of treatment * * *’’ We believed 

that this terminology would limit 

additional requirements on States to 

produce evidence of preventability. 

However, after discussing the 

terminology and scientific parameters 

that exist in relation to this issue, we 

propose that the term be defined as, ‘‘a 

condition that could have reasonably 

been prevented through the application 

of evidence based guidelines.’’ We are 

seeking comment on the use of both 

definitions. 

E. Conclusion 

For the reasons outlined in the RIA, 

we are not preparing an analysis for 

either the RFA or section 1102(b) of the 

Act because we have determined that 

this proposed rule would not have a 

direct significant economic impact on a 

substantial number of small entities or 

a direct significant impact on the 

operations of a substantial number of 

small rural hospitals. 

In accordance with the provisions of 

Executive Order 12866, this regulation 

was reviewed by the Office of 

Management and Budget. 

List of Subjects 

42 CFR Part 434 

Grant programs—health, Health 

maintenance organizations (HMO), 

Medicaid, Reporting and recordkeeping 

requirements. 

42 CFR Part 438 

Grant programs—health, Medicaid, 

Reporting and recordkeeping 

requirements. 

42 CFR Part 447 

Grant programs—health, Medicaid. 

For the reasons set forth in the 

preamble, the Centers for Medicare & 

Medicaid Services proposes to amend 

42 CFR parts 434, 438, and 447, as set 

forth below: 

PART 434—CONTRACTS 

1. The authority citation for part 434 

continues to read as follows: 

Authority: Sec. 1102 of the Social Security 

Act (42 U.S.C. 1302). 

Subpart A—General Provisions 

2. Section 434.6 is amended by— 

A. Revising the introductory text of 

paragraph (a). 

B. Removing the semicolons from the 

end of paragraphs (a)(1) through (a)(9), 

and the semicolon and the word ‘‘and’’ 

from the end of paragraph (a)(10), and 

adding in their place a period. 

C. Adding a new paragraph (a)(12). 

The revision and addition read as 

follows: 

§ 434.6 General requirements for all 

contracts and subcontracts. 

(a) Contracts. All contracts under this 

part must include all of the following: 

* * * * * 

(12) Specify the following: 

(i) No payment will be made by the 

contractor to a provider for providerpreventable conditions, as identified in 

the State plan. 

(ii) The contractor will require that all 

providers agree to comply with the 

reporting requirements in § 447.26(d) of 

this subchapter as a condition of 

payment from the contractor. 

(iii) The contractor will comply with 

such reporting requirements to the 

extent the contractor directly furnishes 

services. 

* * * * * 

PART 438—MANAGED CARE 

3. The authority citation for part 438 

continues to read as follows: 

Authority: Sec. 1102 of the Social Security 

Act (42 U.S.C. 1302). 

Subpart A—General Provisions 

4. Section 438.6 is amended by 

revising paragraph (f) to read as follows: 

§ 438.6 Contract requirements. 

* * * * * 

(f) Compliance with contracting rules. 

All contracts must meet the following 

provisions: 

(1) Comply with all applicable 

Federal and State laws and regulations 

including title VI of the Civil Rights Act 

of 1964; title IX of the Education 

Amendments of 1972 (regarding 

education programs and activities); the 

Age Discrimination Act of 1975; the 

Rehabilitation Act of 1973; and the 

Americans with Disabilities Act of 1990 

as amended. 

(2) Provide for compliance with the 

requirements prohibiting payment for 

provider-preventable conditions as set 

forth in § 434.6(a)(12) and § 447.26 of 

this subchapter. 

(3) Meet all the requirements of this 

section. 

* * * * * 

PART 447—PAYMENTS FOR 

SERVICES 

5. The authority citation for part 447 

continues to read as follows: 

Authority: Sec. 1102 of the Social Security 

Act (42 U.S.C. 1302). 

Subpart A—Payments: General 

Provisions 

6. Section 447.26 is added to read as 

follows: 

§ 447.26 Prohibition on payment for 

provider-preventable conditions. 

(a) Basis and purpose. The purpose of 

this section is to protect Medicaid 

beneficiaries and the Medicaid program 

by prohibiting payments by States for 

services related to provider-preventable 

conditions. 

(1) Section 2702 of the Patient 

Protection Act and Affordable Care Act 

of 2010, Public Law 111–148 requires 

that the Secretary exercise authority to 

prohibit Federal payment for certain 

provider preventable conditions (PPCs) 

and health care-acquired conditions 

(HCACs). 


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(2) Section 1902(a)(19) of the Act 

requires that States provide care and 

services consistent with the best 

interests of the recipients. 

(3) Section 1902(a)(30) of the Social 

Security Act requires that State payment 

methods must be consistent with 

efficiency, economy, and quality of care. 

(b) Definitions. As used in this 

section— 

Health care-acquired condition means 

a condition identified as a HAC by the 

Secretary under section 

1886(d)(4)(D)(iv) of the Act for purposes 

of the Medicare program and other 

HACs identified in the State plan that 

the State determines meet the 

requirements described in section 

1886(d)(4)(D)(ii) and (iv) of the Act. 

Other provider-preventable condition 

means a condition occurring in any 

health care setting that meets the 

following criteria: 

(i) Could have reasonably been 

prevented through the application of 

evidence based guidelines. 

(ii) Has a negative consequence for the 

beneficiary. 

(iii) Is identified in the State plan. 

(iv) Is auditable. 

(v) Includes, at a minimum, wrong 

surgical or other invasive procedure 

performed on a patient; surgical or other 

invasive procedure performed on the 

wrong body part; surgical or other 

invasive procedure performed on the 

wrong patient. 

Provider-preventable condition means 

a condition that meets the definition of 

a ‘‘health care-acquired condition’’ or an 

‘‘other provider-preventable condition’’ 

as defined in this section. 

(c) General rules. 

(1) A State plan must provide that no 

medical assistance will be paid for 

‘‘provider-preventable conditions’’ as 

defined in this section. 

(2) Reductions in provider payment 

may be limited to the extent that the 

following apply: 

(i) The identified providerpreventable conditions would otherwise 

result in an increase in payment. 

(ii) The State can reasonably isolate 

for nonpayment the portion of the 

payment directly related to treatment 

for, and related to, the providerpreventable conditions. 

(3) FFP will not be available for any 

State expenditure for providerpreventable conditions. 

(4) A State plan must ensure that 

payment for services is sufficient to 

assure access to services for Medicaid 

beneficiaries in accordance with section 

1902(a)(30)(A) of the Act. 

(d) Reporting. State plans must 

require that providers identify providerpreventable conditions that are 

associated with claims for Medicaid 

payment or with courses of treatment 

furnished to Medicaid patients for 

which Medicaid payment would 

otherwise be available. 

Authority: Catalog of Federal Domestic 

Assistance Program No. 93.778, Medical 

Assistance Program. 

Dated: November 17, 2010. 

Donald M. Berwick, 

Administrator, Centers for Medicare & 

Medicaid Services. 

Approved: December 13, 2011. 

Kathleen Sebelius, 

Secretary, Department of Health and Human 

Services. 

[FR Doc. 2011–3548 Filed 2–16–11; 8:45 am] 

BILLING CODE 4120–01–P 

DEPARTMENT OF HEALTH AND 

HUMAN SERVICES 

45 CFR Part 5b 

RIN 0906–AA91 

Privacy Act; Exempt Record System 

AGENCY: Health Resources and Services 

Administration (HRSA), HHS. 

ACTION: Notice of proposed rulemaking. 

SUMMARY: This proposed rule would 

exempt the system of records (09–15– 

0054, the National Practitioner Data 

Bank for Adverse Information on 

Physicians and Other Health Care 

Practitioners, HHS/HRSA/BHPr) for the 

National Practitioner Data Bank (NPDB) 

from certain provisions of the Privacy 

Act. The exemption is necessary due to 

the recent expansion of the NPDB under 

section 1921 of the Social Security Act 

to include the investigative materials 

compiled for law enforcement purposes 

reported to the Healthcare Integrity and 

Protection Data Bank (HIPDB). The 

system of records for the HIPDB has an 

exemption from certain provisions of 

the Privacy Act. In order to maintain the 

exemption for the HIPDB investigative 

materials, which are now also available 

through the NPDB, it is necessary to 

expand the same privacy act exemptions 

for the HIPDB to the NPDB. This rule 

specifically seeks public comments on 

the proposed exemption. 

DATES: To assure consideration, public 

comments must be delivered to the 

address provided below by no later than 

5 p.m. on April 18, 2011. 

ADDRESSES: You may submit comments 

in one of the three ways listed below. 

The first is the preferred method. Please 

submit your comments in only one of 

these ways, so that no duplicates are 

received. 

• Federal eRulemaking Portal. You 

may submit comments electronically to 

http://www.regulations.gov. Click on the 

link ‘‘Submit electronic comments on 

HRSA regulations with an open 

comment period.’’ Submit your actual 

comments as an attachment to your 

message or cover letter. (Attachments 

should be in Microsoft Word or 

WordPerfect; however, we prefer 

Microsoft Word.) 

• By regular, express or overnight 

mail. You may mail written comments 

to the following address only: Health 

Resources and Services Administration, 

Department of Health and Human 

Services, Attention: HRSA Regulations 

Officer, Parklawn Building Rm. 14A–11, 

5600 Fishers Lane, Rockville, MD 

20857. Please allow sufficient time for 

mailed comments to be received before 

the close of the comment period. 

• Delivery by hand (in person or by 

courier). If you prefer, you may deliver 

your written comments before the close 

of the comment period to the same 

address: Parklawn Building Room 14A– 

11, 5600 Fishers Lane, Rockville, MD 

20857. Please call in advance to 

schedule your arrival with one of our 

HRSA Regulations Office staff members 

at telephone number (301) 443–1785. 

Because of staffing and resource 

limitations, and to ensure that no 

comments are misplaced, we cannot 

accept comments by facsimile (FAX) 

transmission. 

In commenting, please refer to RIN 

0906–AA91. Comments are available for 

public viewing on the Federal 

eRulemaking portal at http:// 

www.regulations.gov. Comments 

received on a timely basis will be 

available for public inspection as they 

are received in Room 14A–11 of the 

Health Resources and Services 

Administration’s offices at 5600 Fishers 

Lane, Rockville, MD, Monday through 

Friday of each week (Federal holidays 

excepted) from 8:30 a.m. to 5 p.m. 

(phone: 301–443–1785). 

FOR FURTHER INFORMATION CONTACT: 

Director, Division of Practitioner Data 

Banks, Bureau of Health Professions, 

Health Resources and Services 

Administration, Parklawn Building, 

5600 Fishers Lane, Room 8–103, 

Rockville, MD 20857; telephone 

number: (301) 443–2300. 

SUPPLEMENTARY INFORMATION: On 

January 28, 2010, the Health Resources 

and Services Administration published 

a final rule in the Federal Register (75 

FR 4656) designed to implement section 

1921 of the Social Security Act (herein 

referred to as section 1921). Section 

1921 expands the scope of the NPDB. 

Section 1921 requires each state to 


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