WSR 09-17-103



(Health and Recovery Services Administration)

[ Filed August 18, 2009, 9:00 a.m. ]

Original Notice.

Preproposal statement of inquiry was filed as WSR 09-04-071.

Title of Rule and Other Identifying Information: The department is creating WAC 388-550-1650 Serious adverse events, hospital-acquired conditions, and present on admission indicators.

Hearing Location(s): Blake Office Park East, Rose Room, 4500 10th Avenue S.E., Lacey, WA 98503 (one block north of the intersection of Pacific Avenue S.E. and Alhadeff Lane. A map or directions are available at or by calling (360) 664-6094), on September 22, 2009, at 10:00 a.m.

Date of Intended Adoption: Not sooner than September 23, 2009.

Submit Written Comments to: DSHS Rules Coordinator, P.O. Box 45850, Olympia, WA 98504-5850, delivery 4500 10th Avenue S.E., Lacey, WA 98503, e-mail, fax (360) 664-6185, by 5 p.m. on September 22, 2009.

Assistance for Persons with Disabilities: Contact Jennisha Johnson, DSHS rules consultant, by September 8, 2009, TTY (360) 664-6178 or (360) 664-6094 or by e-mail at

Purpose of the Proposal and Its Anticipated Effects, Including Any Changes in Existing Rules: The rule implements new policy pertaining to payment or denial of payment for hospital claims that involve serious adverse events, hospital-acquired conditions, and/or present on admission indicators, and tells hospital providers the conditions under which the department will not pay for, or only make partial payments for, claims involving serious adverse events, hospital-acquired conditions, and/or present on admission indicators.

Reasons Supporting Proposal: The new section is consistent with the guidelines set by the Centers for Medicare and Medicaid Services (CMS) for medicare payment reforms that support adjusting payments to hospitals based on quality and efficiency of care. The rule provides a strong incentive for hospitals to make a correct diagnosis of symptoms upon admission (or as soon thereafter), exercise precautions to avoid unnecessary surgical procedures, reduce hospital-acquired conditions, and improve the quality of care that medical assistance clients receive in hospitals.

Statutory Authority for Adoption: RCW 74.08.090 and 74.09.500.

Statute Being Implemented: RCW 74.08.090 and 74.09.500.

Rule is not necessitated by federal law, federal or state court decision.

Name of Proponent: Department of social and health services, governmental.

Name of Agency Personnel Responsible for Drafting: Kathy Sayre, P.O. Box 45505, Olympia, WA 98504-5504, (360) 725-1342; Implementation and Enforcement: Carolyn Adams, P.O. Box 45510, Olympia, WA 98504-5510, (360) 725-1854.

No small business economic impact statement has been prepared under chapter 19.85 RCW. These rules do not impact small businesses.

A cost-benefit analysis is required under RCW 34.05.328. A preliminary cost-benefit analysis may be obtained by contacting Carolyn Adams, Health and Recovery Services Administration, P.O. Box 45510, Olympia, WA 98504-5510, phone (360) 725-1854, fax (360) 753-9152, e-mail

August 10, 2009

Don Goldsby, Manager

Rules and Policies Assistance Unit

WAC 388-550-1650   Serious adverse events, hospital-acquired conditions, and present on admission indicators.   (1) The rules in this section apply to:

(a) Inpatient hospital claims with dates of admission on and after November 1, 2009;

(b) Payment or denial of payment for any inpatient hospital claims identified in (a) of this subsection, including medicaid supplemental or enhanced payments and medicaid disproportionate share hospital (DSH) payments or denial of payment;

(c) Serious adverse events, hospital-acquired conditions (HACs), and present on admission (POA) indicators (defined in subsection (2) of this section);

(d) Hospital requirements to report serious adverse events and HACs to the department (see subsection (4)(a) of this section);

(e) Hospital requests for retrospective utilization reviews and the related requirements to provide root cause analysis of events to the department (see subsection (4)(d) through (f) of this section); and

(f) Hospital requirements to use POA indicator codes on claims (see subsection (4)(g) of this section).

(2) The following definitions apply to this section:

(a) "Serious adverse events" (also known as "adverse health events," "adverse events," or "never events") are the events that must be reported to the department of health (DOH) under WAC 246-320-146. These events are clearly identifiable, preventable, and serious in their consequences for patients, and of a nature such that the risk of occurrence is significantly influenced by the policies and procedures of the healthcare organization. Some "hospital-acquired conditions (HACs)" can become a serious adverse event if the:

(i) Patient dies or is seriously disabled; or

(ii) Level of severity is great, such as the patient develops level 3 or 4 pressure ulcers.

(b) "Hospital-acquired condition (HAC)" is a condition that is reasonably preventable and was not present or identifiable at hospital admission but is either present at discharge or documented after admission. HACs are identified by the U.S. Secretary of Health and Human Services per Section 5001(c) of the Deficit Reduction Act (DRA) of 2005 (42 U.S.C. 1395ww (d)(4)(D)) and the medicare hospital-acquired condition policy ( HACs are conditions that:

(i) Are high cost or high volume or both;

(ii) Result in the assignment of a case to a diagnosis related group (DRG) that has a higher payment when present as a secondary diagnosis; and

(iii) Could reasonably have been prevented through the application of evidence-based guidelines.

(c) "Serious disability" means a physical or mental impairment that substantially limits the major life activities of a patient.

(d) "Present on admission (POA) indicator" is a status code the hospital uses on an inpatient hospital claim that indicates if a condition was present or incubating at the time the order for inpatient admission occurs. A POA indicator can also identify a condition that develops during an outpatient encounter. (Outpatient encounters include, but are not limited to, emergency department visits, diagnosis testing, observation, and outpatient surgery.)

(e) "Root cause analysis" is a class of problem-solving methods aimed at identifying the root causes of events instead of addressing the immediate, obvious symptoms.

(3) Medicare crossover inpatient hospital claims. The department applies the following rules for these claims:

(a) If medicare denies payment for a claim at a higher rate for the increased costs of care under its HAC and/or POA indicator policies:

(i) The department limits payment to the maximum allowed by medicare;

(ii) The department does not pay for care considered nonallowable by medicare; and

(iii) The client cannot be held liable for payment.

(b) If medicare denies payment for a claim under its National Coverage Determination authority from Section 1862 (a)(1)(A) of the Social Security Act (42 U.S.C. 1395) for a serious adverse health event:

(i) The department does not pay the claim, any medicare deductible, and/or any co-insurance related to the inpatient hospital services; and

(ii) The client cannot be held liable for payment.

(4) Inpatient hospital claims (excludes medicare crossover inpatient hospital claims discussed in subsection (3) of this section). The department applies the following rules for these claims:

(a) When the department requests information from a hospital regarding serious adverse events that the hospital reported to DOH, the hospital must provide the information requested for any affected medical assistance client (this includes both fee-for-service clients and clients enrolled in a managed care organization (MCO) contracted with the department). If no medical assistance client was affected by a serious adverse event, the hospital must provide a written response to the department with an assurance that no medical assistance clients were affected.

(b) The department does not pay for serious adverse events reported to DOH by the hospital or identified through the department's retrospective utilization review process (see (a) of this subsection).

(c) The client cannot be held liable for payment.

(d) A hospital may request a retrospective utilization review by the department, as described in WAC 388-550-1700 (6)(a) and (b) (iii), from the department or its designee to determine if the payment of a serious adverse event should be only partially denied.

(e) A hospital that requests a department retrospective utilization review of a serious adverse event must provide the department with the hospital's root cause analysis, as described in WAC 246-320-146 (3) and (4), of the serious adverse event claim.

(f) The healthcare information that is part of the retrospective utilization review, including the root cause analysis of the serious adverse event claim, is exempt from public disclosure under RCW 42.56.360 (1)(c).

(g) All hospitals that have signed a core provider agreement with the department must provide information to the department by using POA indicator codes on each claim (refer to the table in this subsection). These POA indicator codes must designate which procedures or complications were present on admission, and which occurred during, or as a result of, hospital care. POA indicator codes are to be assigned to principal and secondary diagnosis (as defined in Section II of the Official Guidelines for Coding and Reporting), and the external cause of injury codes.

POA Indicator Codes
Code Reason for Code
Y Diagnosis was present at time of inpatient admission.
N Diagnosis was not present at time of inpatient admission.
U Documentation insufficient to determine if condition was present at the time of inpatient admission.
W Clinically undetermined. Provider unable to clinically determine whether or not the condition was present at the time of inpatient admission.

(5) The department:

(i) Does not make additional payments for complications and comorbidities (CC) and major complications and comorbidities (MCC) that are coded with POA indicator codes "N" or "U" if the claim meets the definition of an HAC.

(ii) Denies payment for any HAC that results in death or serious disability.

(6) A hospital that disagrees with a department decision to deny payment or partial payment of a serious adverse event or hospital-acquired condition may follow the administrative appeal process in WAC 388-502-0220.


Washington State Code Reviser's Office