DMC Children’s Hospital of Michigan passed an unannounced inspection and is no longer in danger of losing federal funding, according to a decision released Tuesday by the federal Centers for Medicare and Medicaid Services.

Tuesday’s decision means all Detroit Medical Center hospitals are back in good standing with state and federal regulators. In September, a six-month Detroit News investigation uncovered problems with dirty surgical instruments at the health system’s Midtown hospitals.

“The revisit survey revealed that your hospital is now in compliance with the Conditions of Participation,” CMS wrote Tuesday in a letter to Children’s Hospital officials. “Therefore, we are rescinding our decision to terminate your participation in the Medicare program.”

In a statement released by email Tuesday afternoon, DMC said: “The safety and well-being of our patients is our top priority, and we remain committed to sustaining all improvements we have made regarding the processing of sterile instruments.”

Children’s had failed a federal inspection conducted as part of an inspections sweep of three DMC hospitals and Karmanos Cancer Center on Jan. 30 and 31. Harper University and Detroit Receiving hospitals passed inspections on the same days. Karmanos, which is not part of the DMC but uses the health system’s operating rooms, also failed in January but passed a follow-up inspection in late March.

Children’s, which serves some of Michigan’s poorest and sickest pediatric patients, passed a follow-up inspection conducted on April 3 and 4. CMS had begun the process of terminating the hospital’s participation in the federal Medicare program, which would have triggered the loss of Medicaid funds administered by both the state and federal government.

In an interview with the News on March 29, three top DMC officials said the system had spent $1.2 million since September to address the instrument issues reported by the News. The health system hired an outside firm to manage its instrument-cleaning department and took other corrective actions.

Harper University and Detroit Receiving hospitals had failed inspections in September, but CMS and the Michigan Department of Licensing and Regulatory Affairs closed the investigations after both hospitals passed follow-up inspections in December.

The hospitals were inspected again in January after the News reported that a patient was exposed to a dirty instrument during a surgery at Children’s one day after the hospitals passed their December inspections. Inspectors determined that both Harper and Receiving were in “substantial compliance” with federal certification requirements.

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