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Vital Signs Blog

Medicare termination? Really?

The chief quality officer of the Cleveland Clinic Health System says he was startled the first time he read a formal threat from Medicare saying the government might cut off the funding for the system's flagship hospital for management failures that limited the hospital's capacity to render safe and adequate care.

“The first time I got one of those, I said, 'Oh my God, what's all this about?'” Dr. Michael Henderson, the system's top quality executive, said in an interview with northeast Ohio's National Public Radio affiliate, WCPN.

Over time, though, Henderson came to learn that such language in Medicare's termination warnings is just a part of "the standard forms" following hospital inspections with adverse findings.

The Cleveland Clinic declined to make Henderson or any other executive available for interviews for Modern Healthcare's June 9 cover story, "Cleveland Clinic cases highlight flaws in safety oversight." The story reported that Medicare's only recourse for failing hospitals is to cut them out of the program, which officials are loath to do. The result, experts say, is that some hospitals end up cited repeatedly for the same types of violations, even after claiming to have resolved the problems.


Medicare threatened the Cleveland Clinic with termination at least four times between 2010 and 2013, CMS documents say. The hospital was not alone in that, either. CMS issued its most serious warning—“immediate jeopardy," which comes with a fast-track to termination—at least 230 times between 2011 and 2014, CMS records cited in the story say.

It's not clear how often Medicare terminates hospitals' contracts to care for patients on the government program, but everyone interviewed said it's exceedingly rare.

In Chicago, Medicare terminated Sacred Heart Hospital last year after the FBI raided the West Side facility and arrested the CEO and other officials for allegedly running a massive kickback scheme that led to needless tracheotomies and even patient deaths. CMS terminated the hospital after it was already closed. (The executives maintain their innocence in that case.)

Medicare termination would be tantamount to closing down a hospital in most cases. In 2012, the Cleveland Clinic received 29% of all its net patient revenue from Medicare, according to audited financial statements.

It's an open secret in healthcare that executives don't see the warning of Medicare termination as a literal threat. Accrediting agencies like the Joint Commission can also revoke a hospital's accreditation, which would have the effect of cutting off Medicare funding and many private insurers' funding. But that's not seen as a credible threat, either.

"If you put hospital CEOs under truth serum, I would guess a lot of them do not think they will really lose their accreditation status," said Curt Chase, a partner in the healthcare practice at Husch Blackwell in Kansas City, Mo.

Indeed, Joint Commission officials declined to say how many hospitals they've de-accredited, but they noted in an interview that it was something less than 1% per year of the 4,000 hospitals the organization oversees. Although hospitals must be accredited to get paid, they don't have to do it through the Joint Commission.

“Our goal is to help organizations improve,” said spokeswoman Elizabeth Eaken Zhani. It's better, that is, for an organization to remain accredited so the Joint Commission can continue its oversight, she said. “We feel that our standards are the best that are out there."

Likewise, a CMS official said Medicare's goal is "to ensure compliance with Medicare rules, not close down hospitals that are essential to local communities."

But at hospitals, executives insist that the ultimate penalty need not be carried out often to carry a lot of weight. It's like being terminated from a job: most employees don't need to see a lot of their peers fired to understand that termination is always a risk.

"Very few people get fired, but that doesn't mean that they fail to take the concerns of their bosses into account," said Nancy Foster, vice president for quality and patient safety policy at the American Hospital Association.

Follow Joe Carlson on Twitter: @MHJCarlson






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