updated 1/23/2008 2:44:35 PM ET 2008-01-23T19:44:35

Pennsylvania announced Tuesday it would no longer make Medicaid payments to hospitals for serious, preventable medical errors, apparently the first state in the nation to follow a similar policy by the federal government.

The policy change is intended to make hospitals more vigilant about patient care and reduce costs as part of Gov. Ed Rendell's broader health care initiative. It is being issued to hospitals this month in a Department of Public Welfare bulletin.

Hospitals that treat low-income Medicaid patients covered under fee-for-service programs will have to absorb the cost of avoidable mistakes, such as operating on the wrong body part or patient and failing to prevent patients from killing or seriously harming themselves.

Rendell's administration developed Pennsylvania's policy with input from the Hospital and Healthsystem Association of Pennsylvania, which supports the measure.

Paula Bussard, an association lobbyist, said the new policy will complement the department's efforts to reward hospitals for meeting or exceeding certain quality standards.

"They are really trying to create a balance between incentives and sanctions," Bussard said.

Pennsylvania's approach mirrors one taken by the federal government toward Medicare, which provides coverage for elderly and disabled people. Medicare officials said in August that the program would stop paying hospitals the costs of certain preventable conditions, such as when objects are left in patients during surgery.

Mary Kahn, a spokeswoman for the federal agency, said she was unaware of any other states adopting Medicaid hospital payment policies similar to Pennsylvania's. States, however, don't have to seek federal approval for payment policy changes, she said.

"We believe it is another milestone in improving the quality of care," Public Welfare Secretary Estelle Richman said at a Capitol news conference.

Officials have not estimated how much the new rule would save, and the policy does not apply to managed-care organizations that enroll Medicaid patients, although the state expects those companies to adopt similar policies, department spokeswoman Stacey Witalec said.

The state will spend $670 million on Medicaid inpatient hospital care in the current fiscal year, which ends June 30. Of the 1.9 million Pennsylvanians enrolled in Medicaid, about one-third are covered by fee-for-service plans, Witalec said.

Medicaid hospital payments totaled $59 billion in the federal 2006-07 fiscal year, with $34 billion coming from the federal government and $25 billion from the states, Kahn said.

Copyright 2008 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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