Potential Unintended Consequences Due to Medicare’s
“No Pay for Errors Rule”? A Randomized Controlled Trial
of an Educational Intervention with Internal Medicine
Somnath Mookherjee, MD1, Arpana R. Vidyarthi, MD1, Sumant R. Ranji, MD1, Judy Maselli, MSPH2,
Robert M. Wachter, MD1, and Robert B. Baron, MD, MS1
1Department of Medicine, Division of Hospital Medicine, University of California, San Francisco, San Francisco, CA, USA;2Department of
Medicine, Division of General Internal Medicine, University of California, San Francisco, San Francisco, CA, USA.
BACKGROUND: Medicare has selected 10 hospital-ac-
quired conditionsfor which it will not reimburse hospitals
unless the condition was documented as “present on
admission.” This “no pay for errors” rule may have a
profound effect on the clinical practice of physicians.
OBJECTIVE: To determine how physicians might change
their behavior after learning about the Medicare rule.
DESIGN: We conducted a randomized trial of a brief
educational intervention embedded in an online survey,
using clinical vignettes to estimate behavioral changes.
PARTICIPANTS: At a university-based internal medicine
residency program, 168 internal medicine residents were
eligible to participate.
INTERVENTION: Residents were randomized to receive a
one-page description of Medicare’s “no pay for errors”
rule with pre-vignette reminders (intervention group) or
no information (control group). Residents responded to
five clinical vignettes in which “no pay for errors”
conditions might be present on admission.
MAIN MEASURES: Primary outcome was selection of the
single most clinically appropriate option from three clini-
cal practice choices presented for each clinical vignette.
KEY RESULTS: Survey administered from December
2008 to March 2009. There were 119 responses (71%).
In four of five vignettes, the intervention group was less
likely to select the most clinically appropriate response.
This was statistically significant in two of the cases. Most
residents were aware of the rule but not its impact and
specifics. Residents acknowledged responsibility to know
Medicare documentation rules but felt poorly trained to
do so. Residents educated about the Medicare’s “no pay
for errors” were less likely to select the most clinically
appropriate responses to clinical vignettes. Such choices,
if implemented in practice, have the potential for causing
patient harm through unnecessary tests, procedures,
and other interventions.
KEY WORDS: errors; Medicare; unintended consequences; residents.
J Gen Intern Med 25(10):1097–101
© The Author(s) 2010. This article is published with open access at
On 01 October 2008, Medicare’s “no pay for errors” rule went into
is designed to improve the care of Medicare patients by incentiv-
izing hospitals to prevent designated hospital-acquired adverse
events. Medicare will not reimburse the hospital for increased
physician as having been present on admission.
While it is important to understand how physicians may
change their practices as a result of these new reimbursement
rules, it may be particularly important to understand the impact
on residents. The Accreditation Council for Graduate Medical
Education (ACGME) has mandated that trainees achieve compe-
tency in systems-based practice, which is described as “aware-
ness of and responsiveness to the larger context and system of
health care”2. The implementation of this new Medicare rule
provides the ideal conditions for a natural experiment to
understand whether residents are achieving this competency.
Residents care for a large number of Medicare inpatients3,4and
potential changes in their practices as a consequence of this rule
may have clinical ramifications for these patients. Moreover,
characterizing the resident physician response to the rule
provides a framework to understand the potential for “no pay
for errors” rules to result in unintended consequences through-
out our healthcare system.
We performed a randomized trial of a brief educational
intervention, seeking to determine whether more knowledge of
the changes in Medicare reimbursement might lead resident
physicians to provide care that sought to maximize revenue
while conflicting with evidence-based guidelines.
Sites and Subjects
On October 1st, 2008, the Medicare rule on hospital-acquired
conditions went into effect. We conducted our study at the
University of California, San Francisco (UCSF) between De-
Electronic supplementary material The online version of this article
(doi:10.1007/s11606-010-1395-9) contains supplementary material,
which is available to authorized users.
Received November 15, 2009
Revised April 9, 2010
Accepted April 20, 2010
Published online June 8, 2010
cember 2008 and March 2009. None of the three clinical sites
at which residents rotate made a systematic effort to educate
residents about the rule (except for one lecture attended by 7%
of the residents) or encourage changes in documentation or
practices because of the rule.
All UCSF internal medicine residents were eligible to
participate (N=168). The study was approved by UCSF’s
institutional review board.
Eighty-four residents were assigned to each group by equal
size block-randomization using the Microsoft Excel © comput-
erized random number generator.
We designed our brief educational intervention to resemble
common ways that new billing, reimbursement, and docu-
mentation information is conveyed to clinicians, both in
content and in appearance. Clinicians often receive emails
and brief communications from various stakeholders seeking
to improve reimbursement, providing information meant to
influence documentation and billing practices. At our institu-
tion, physicians frequently receive emails from medical staff
leaders on important patient safety, quality, and reimburse-
ment issues comprised of a single paragraph summary of the
issue followed by a bulleted list of salient data. Following this
format, the initial part of our intervention was a one paragraph
explanation of the rule, followed by a list of Medicare’s ten “no
pay for errors” conditions. This statement was integrated into
the survey for the intervention group and was visible on a
standard sized computer monitor without scrolling.
Additionally, to simulate clinical reminders that aim to
influence both the documentation and clinical practices of
physicians5,6, we inserted a single sentence prior to each
clinical vignette in the intervention group, reminding the
subject of the applicable “No pay for error” condition.
To measure potential changes in behavior as a result of the
intervention, we used an experimental vignette design7. In this
study design, two groups of subjects are presented with
identical vignettes and asked to make selections on multiple-
choice clinical questions. One group is presented with addi-
tional information (intervention group) in order to determine
how that information may influence their choices in compar-
ison to the control group (Fig. 1).
Experimental vignettes were initially developed by the
principal investigator (SM), and then reviewed and modified
by UCSF experts in the fields of medical education, outcomes
research, and quality improvement. Questions measuring
resident knowledge and attitudes underwent the same itera-
tive process. The survey and vignettes were felt to represent
strong content validity, and were pre-tested on non-internal
medicine housestaff and recent internal medicine residency
Each vignette was designed to have a single most clinically
appropriate answer. This correct clinical choice, however,
might place reimbursement at risk. Two other answers were
presented that were clinically inappropriate but were designed
to protect hospital reimbursement in the face of the new policy.
For example, for hospital-acquired “vascular catheter-associ-
ated infection,” a vignette described a patient without evidence
of infection who needed a central line. Three options were
presented: one option represented appropriate care (place the
central line) and two reflected unnecessary or inappropriate
care (place the line and send blood cultures or place the line
and start prophylactic antibiotics) that might be seen as
helping to defend hospital reimbursement in the context of
the new Medicare policy. The final survey including the clinical
vignettes is shown in the Online Appendix.
The primary outcome for this study was the selection of the
pre-designated most clinically appropriate choice for the
The pre-randomized groups received identical email invita-
tions, and were then directed to either the intervention or
control group online survey, which used the proprietary
Zoomerang © platform. A coffee card was offered as incentive
to complete the survey. The survey was available from
December 2008 through March 2009, and periodic reminders
were sent to residents who had not completed it. Participation
Figure 1. Study flow of participants.
Mookherjee et al.: Potential Consequences of “No Pay for Errors”
was voluntary, and consent was implied by completing the
In addition to direct comparisons between groups, we per-
formed multivariate logistic regression to adjust for confound-
ing baseline characteristics. Residents were dichotomized by
baseline knowledge, by their sense of personal responsibility to
“know new Medicare rules regarding hospital reimbursement,”
and by the amount of teaching they had received about
Medicare reimbursement prior to the survey. We used logistic
regression to adjust for these baseline characteristics and
determined odds ratios and 95% confidence intervals (95% CI).
To compare the attitudes of the control and intervention
groups, the means of responses on a five point Likert scale of
the control group were compared to the means of the
intervention groups’ responses using t-tests, and p-values
were obtained. All analyses were carried out using SAS,
version 9.2 (SAS Institute, Inc., Cary, NC).
Of 168 internal medicine residents surveyed, 119 responded
(71%). There were no significant differences in the control and
intervention groups in age breakdown, post-graduate year, or
number of hours of teaching about Medicare reimbursement.
The respondents were equally distributed across post-graduate
year (Table 1).
Changes in Responses to Clinical Vignettes
as a Result of Being Informed of the New Rule
Residents in the intervention group tended to be less likely
than those in the control group to select the most appropriate
clinical practice choice in the clinical vignettes. In four out of
five clinical vignettes, a lower percentage of residents in the
intervention group selected the most appropriate choice; two of
these four differences were statistically significant (Table 2).
These results were unchanged after a multivariate logistic
regression adjusting for baseline knowledge, self-described
responsibility to know about new Medicare reimbursement
rules, self-described awareness of new Medicare rule, and
hours of teaching about Medicare reimbursement (not shown).
Baseline Knowledge Regarding Medicare
There were no significant differences between the control and
intervention groups in the baseline knowledge of residents
regarding Medicare reimbursement rules. The large majority of
residents were aware of the basics of Medicare, but most
harbored misconceptions about the scope of the new “no pay
for errors” policy, with 83% [n=99] believing incorrectly that
hospitals would receive no reimbursement at all if a patient
had a preventable adverse event, and 87% [n=103] believing
that Medicare has forecasted over one billion dollars in cost
savings from the policy, a vast overestimate8.
While residents tended to know that documenting that a
“preventable adverse event” was present on admission allowed
for full Medicare payment for that condition [n=108, 91%],
they were unsure as to what the specific conditions were. For
example, residents knew that conditions such as “Foreign
Object Retained after Surgery,” [n=117, 98%] and “Falls and
Trauma Occurring in the Hospital,” [n=114, 96%] were
considered preventable complications by Medicare. However,
only 52% [n=62] knew that “Manifestations of Poor Control of
Blood Sugar Levels” was a “no pay” condition and only 67% [n
=80] knew that “Pulmonary Edema from Excessive Intrave-
nous Fluids” was not.
Attitudes Around Medicare Reimbursement Rules
and Preventable Complications
Residents strongly agreed that it was their responsibility to
reduce hospital-acquired infections and preventable complica-
tions in their patients [using a five-point Likert scale with 5 =
strongly agree, 1 = strongly disagree; mean score=4.8, SD 0.6].
They also agreed that it was their responsibility to know new
Medicare rules affecting hospital reimbursement [mean 3.8,
SD 0.9] and to change their documentation practices based on
new Medicare reimbursement rule [mean 3.7, SD 0.9]. Resi-
Table 1. Demographic Information of Responding Internal
N (%) n=58
N (%) n=61
Hours of teaching
5 or more
Table 2. Responses to Clinical Vignettes-Percentage Selecting Most Appropriate Clinical Practice Choice
Control Group, N (%)Intervention Group, N (%)
Case 1: Catheter-Associated Urinary Tract Infection (1).
Case 2: Vascular Catheter-Associated Infection.
Case 3: Catheter-Associated Urinary Tract Infection (2).
Case 4: Deep Vein Thrombosis following total knee replacement.
Case 5: Stage III and IV Pressure Ulcers.
Mookherjee et al.: Potential Consequences of “No Pay for Errors”
dents did not feel, however, that they had been adequately
trained in reimbursement, disagreeing with the statement “I
have received sufficient training about Medicare reimburse-
ment during residency to document appropriately in the
medical record,” [mean 1.8, SD 0.8] (Table 3).
This randomized trial of a brief educational intervention of
internal medicine residents showed that residents who were
informed about the Medicare “no pay for errors” rule tended to
be less likely to choose the most appropriate clinical practice
choices in response to clinical vignettes. While actual beha-
viors were not measured in this study, if these clinical practice
choices were to be implemented in practice, they could result
in patient harm through unnecessary tests, procedures, and
other interventions. Most residents were aware of the new rule,
but most had important misconceptions regarding the scope
and content of the rule, revealing an important gap in resident
competence in systems-based practice.
There is a growing trend in the United States for insurers to
use incentives and disincentives in an attempt to lower costs
and increase quality of care9. One result of this movement is
that clinicians now frequently receive brief communications
seeking to modify their documentation and billing practices. It
is critical for practicing physicians to be aware of these new
regulations, as well as to appropriately respond to the steady
stream of information, which is often limited and may well be
misleading, meant to influence their clinical practices.
It has long been recognized that societal systemic “purpo-
sive” changes can result in unintended consequences10. This
phenomenon has been described in other large health systems
changes, such as the implementation of the “time to antibiotics
for pneumonia” performance measure, which may result in the
inappropriate early use of antibiotics in an attempt to excel on
a performance measure11–13. Similarly, the physician response
to the new “no pay for errors” rules could have major
consequences, both intended and unintended14,15. Our study
supports concerns that giving clinicians information regarding
“no pay for errors” and other reimbursement rules may lead to
unintended consequences with the potential to harm patient
care unless such education balances individual patient needs
with a more systems and reimbursement-based emphasis.
These findings have implications for both graduate medical
education and for the care of hospitalized patients in general.
Most importantly, in the face of financial incentives and
disincentives meant to influence their behavior, physicians
must continue to make patient-centered, evidence-based
clinical decisions. Our study demonstrates how physicians
may infer that they are expected to perform certain actions
simply as a result of being informed about a new rule.
Although physician professionalism should act as a counter-
vailing force when inevitable tensions between reimbursement
and patients’ best interests arise, history tells us that reim-
bursement-centered decisions sometimes prevail16,17. There-
fore, when providing information to clinicians about changes
in payment policies, the underlying goal should be empha-
sized: increased patient safety and quality of care, not
necessarily increased reimbursement.
This study has several limitations. Most importantly, since
clinical vignettes variably predict true clinical behavior18–21, it
is not possible to generalize these results to actual clinical
practices. Based on this study, we are unable to determine
whether residents changed their actual behaviors as a result of
being informed of new reimbursement rules, and if so, whether
this had a deleterious effect on patients. Secondly, the clinical
vignettes were reviewed by experts in medical education,
outcomes research, and quality improvement and were felt to
have strong content validity, however, they did not undergo
external validation. Finally, this study was performed with
internal medicine residents at a single university-based train-
ing program. Therefore, these results may not be applicable to
practicing clinicians or to training programs in community-
“No pay for errors” rules and similar incentives meant to
lower costs and improve quality and safety are here to stay.
Our data support concerns that these rules can result in
unintended consequences. Therefore, education in systems-
based practice should teach trainees about these and other
reimbursement rules, while strongly emphasizing the need to
follow evidence-based medicine and a patient-centered ap-
proach. Further clinical research will be needed to determine if
physician practices actually change after the implementation
of “No pay for errors” rules, and whether these changes
positively or negatively impact the care of patients.
Acknowledgements: Financial Support: UCSF Office of GME
funded the survey and incentives to participate.
Prior presentation (earlier version of this work): Poster presenta-
tion at the Society For Hospital Medicine Annual Meeting, Chicago,
May 16 2009.
Table 3. Internal Medicine Residents’ Attitudes Around Medicare Reimbursement Rules and Preventable Complications
Control, n=58 Intervention,
“Please describe your agreement or disagreement with the statements listed below”
It is my responsibility to reduce hospital acquired infections and preventable
complications in my patients
It is my responsibility to know new Medicare rules affecting hospital reimbursement
It is my responsibility to change my documentation practice based on new Medicare
rules affecting hospital reimbursement
Medicare’s new “No pay for errors” policy will unfairly penalize hospitals
Medicare’s new “No pay for errors” policy will unfairly increase physician workload
It is my responsibility to improve reimbursement for the hospital
I have received sufficient training about Medicare reimbursement during residency
to document appropriately in the medical record
5 = Strongly agree, 4 = Agree, 3 = Neutral, 2 = Disagree, 1 = Strongly disagree
Mookherjee et al.: Potential Consequences of “No Pay for Errors”
Conflict of Interest Information: None disclosed.
Open Access: This article is distributed under the terms of the
Creative Commons Attribution Noncommercial License which
permits any noncommercial use, distribution, and reproduction
in any medium, provided the original author(s) and source are
Corresponding Author: Somnath Mookherjee, MD; Department of
Medicine, Division of Hospital Medicine, University of California, San
Francisco, 533 Parnassus Avenue, U-101, Box 0131, San Francisco,
CA 94143, USA (e-mail: email@example.com).
1. CMS Improves Patient Safety For Medicare and Medicaid by Addressing
Never Events. Centers for Medicare and Medicaid Services, Office of
Public Affairs; August 04, 2008. Available at: http://www.cms.hhs.gov/
April 27, 2010.
2. ACGME Program Requirements for Resident Education In Internal
Medicine. Accreditation Council for Graduate Medical Education 2009.
Available at: http://www.acgme.org/acwebsite/rrc_140/140_prindex.
asp. Accessed April 27, 2010.
3. Brotherton SE, Etzel SI. Graduate medical education, 2008–2009.
4. Teaching hospitals: What Roles Do Teaching Hospitals Fulfill? Vol. 2009.
Washington, D.C.: Association of American Medical Colleges.; 2009.
Available at: http://www.aamc.org/teachinghospitals.htm. Accessed
April 27, 2010.
5. Galanter WL, Hier DB, Jao C, Sarne D. Computerized physician order
entry of medications and clinical decision support can improve problem
list documentation compliance. Int J Med Inform. 2008.
6. Richter E, Shelton A, Yu Y. Best practices for improving revenue
capture through documentation. Healthc Financ Manage. 2007;61
7. Ballard DW, Reed ME, Wang H, Arroyo L, Benedetti N, Hsu J.
Influence of patient costs and requests on emergency physician deci-
sionmaking. Ann Emerg Med. 2008;52(6):643–650.
8. Pear R. Medicare Says It Won't Cover Hospital Errors. The New York
Times 2007 August 19, 2007.
9. Fuhrmans V. Insurers Stop Paying for Care Linked to Errors. Wallstreet
Journal 2008 January 15, 2008.
10. Merton RK. The Unanticipated Consequences of Purposive Social
Action. American Sociological Review. 1936;1(6):894–904.
11. Wachter RM, Flanders SA, Fee C, Pronovost PJ. Public reporting of
antibiotic timing in patients with pneumonia: lessons from a flawed
performance measure. Ann Intern Med. 2008;149(1):29–32.
12. Nicks BA, Manthey DE, Fitch MT. The Centers for Medicare and
Medicaid Services (CMS) community-acquired pneumonia core mea-
sures lead to unnecessary antibiotic administration by emergency
physicians. Acad Emerg Med. 2009;16(2):184–7.
13. Welker JA, Huston M, McCue JD. Antibiotic timing and errors in
diagnosing pneumonia. Arch Intern Med. 2008;168(4):351–6.
14. Wachter RM, Foster NE, Dudley RA. Medicare's decision to withhold
payment for hospital errors: the devil is in the details. Jt Comm J Qual
Patient Saf. 2008;34(2):116–23.
15. Saint S, Meddings JA, Calfee D, Kowalski CP, Krein SL. Catheter-
associated urinary tract infection and the Medicare rule changes. Ann
Intern Med. 2009;150(12):877–84.
16. Gawande A. The Cost Conundrum: What a Texas town can teach us
about health care. The New Yorker; July 1 2009. Available at: http://
Accessed April 27, 2010.
17. Sox HC, ed. Medical professionalism in the new millennium: a physician
charter. Ann Intern Med. 2002;136(3):243–6.
18. Carey TS, Garrett J. Patterns of ordering diagnostic tests for patients
with acute low back pain. The North Carolina Back Pain Project. Ann
Intern Med. 1996;125(10):807–14.
19. Jones TV, Gerrity MS, Earp J. Written case simulations: do they predict
physicians' behavior? J Clin Epidemiol. 1990;43(8):805–15.
20. Morrell DC, Roland MO. Analysis of referral behaviour: responses to
simulated case histories may not reflect real clinical behaviour. Br J Gen
21. Peabody JW, Luck J, Glassman P, et al. Measuring the quality of
physician practice by using clinical vignettes: a prospective validation
study. Ann Intern Med. 2004;141(10):771–80.
Mookherjee et al.: Potential Consequences of “No Pay for Errors”