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Thousands of people die each year from infections or medical complications that happen in the hospital. Now, Medicare wants to use its financial clout to try to prevent some of those deaths. Under new rules published today, Medicare will soon make hospitals pay for their mistakes, literally.

As NPR's Julie Rovner reports, the new program could ultimately improve care for all hospital patients.

JULIE ROVNER: When Medicare sneezes, hospitals do more than just catch a cold. The federal program pays about 40 percent of the nation's annual hospital bill. But until now, says Medicare's Herb Kuhn…

Mr. HERB KUHN (Director, Center for Medicare Management): We kind of, in a perverse way, reward and pay when certain infections or problems occur.

ROVNER: That's because a sicker patient gets a new diagnosis and more treatment. All that generates more money for the hospital. Starting in October 2008, Medicare will stop those extra payments, at least for eight conditions. They include four common hospital acquired infections. Three are things that should never happen like surgeons operating on the wrong arm or leg, and the last is injuries that result from a fall. Kuhn says Medicare specifically chose conditions that hospitals can prevent. He hopes the financial disincentives will force hospitals to change the way they do business. They're forbidden from passing the additional costs onto patients.

Mr. KUHN: Over the last few years, I don't think hospitals can assert anymore that they deliver high-quality care. They need to demonstrate it.

ROVNER: But the hospital industry has some doubts about the new rules.

Nancy Foster handles quality and patient-safety issues for the American Hospital Association.

Dr. NANCY FOSTER (Senior Associate Director of Health Policy, American Hospital Association): The concept of a payment policy that supports quality and safety is something we support. Whether this particular policy is the most effective way of altering payment to help induced a higher quality care is a question that I think we need to ask.

ROVNER: One problem, she says, is that hospitals really don't know how to prevent some things like falls.

Dr. FOSTER: People may wake up in the middle of the night, need to use the restroom, not remember that the nurse instructed them to, you know, call for help first, or think they were okay, go to stand up and find out that the surgery they had has weakened them in a way that they are unable to support their own weight and fall to the floor and be injured. No one wants that to happen. We just don't have a perfect strategy for preventing it.

ROVNER: Foster also says it may be hard to implement the rules. For example, starting this October, hospitals will have to check for certain infections in every Medicare patient coming into the hospital. That's the only way to know if those infections started in the hospital. But Foster says getting that information from a patient being admitted through the emergency room might not be appropriate.

Dr. FOSTER: They're in a great deal of pain and they're struggling to get their breath. They're scared because they know they have a life-threatening condition. Is that the right time to focus on determining whether they have a urinary tract infection?

ROVNER: But Lucian Leape of the Harvard School of Public Health thinks that the changes are long overdue. Leape is one of the top experts in patient safety and an author of the 1999 report from the Institute of Medicine that documented the depth of the medical error problem. Back then, he says…

Dr. LUCIAN LEAPE (Adjunct Professor of Health Policy, Harvard School of Public Health): We really didn't know much about specifically what we should do. It was - hospitals ought to do something, but it wasn't quite clear what it was.

ROVNER: Today, he says, dozens of safe practices have been developed to prevent such errors, but there hasn't been enough of a push for hospitals to put them into use.

Dr. LEAPE: I think it's fair to say that progress in patient safety up to now has relied on altruism. It's been largely accomplished by good people trying to do the right thing. And what we're saying is that that hasn't gotten us far enough and now we'll go to what really moves things in our society, which is money.

ROVNER: And it's not just Medicare. If the new program proves successful, private insurance companies are also likely to start refusing to pay for medical mistakes.

Julie Rovner, NPR News, Washington.

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