Industries

May 2008

Pay attention to proposed Wage Index Data changes
Improper data reporting could cost your organization

On April 30, 2008, Centers for Medicare and Medicaid Services (CMS) published the Medicare Program Proposed Changes to the Hospital Inpatient Prospective Payment Systems and Fiscal Year 2009 Rates. There are numerous proposed changes that will affect both the federal fiscal year (FFY) 2009 and FFY 2010 Hospital Wage Index section. Wage Index information needs to be monitored closely throughout Medicare's data gathering process to ensure accurate rates are computed. CMS has made it clear hospitals are responsible for the accuracy of their salary and wage data, so you want to make sure you give this area the attention it deserves.

Following are some of the more significant changes related to Wage Index:

Medicare Geographic Reclassification
CMS is proposing a new baseline for both the urban and rural reclassification average hourly wage criteria to be set at 88/108% for urban facilities and 86/106% for rural facilities. While the 108% and 106% criteria have not been adjusted, the current 84% standard for urban and 82% standard for rural appears to be too low a threshold to establish wage comparability with a proximate labor market.

CMS believes that hospitals seeking to reclassify to another area should be required to demonstrate more similarity to the area than the current criteria permit. The change will take place for new applications for FFY 2010 which will be due by September 1, 2008.

Finally, CMS is proposing to adjust the 85% criterion for both urban and rural county group reclassifications to equal the proposed 88% standard for urban reclassifications.

Rural Floor
CMS is proposing to apply a state-level rural floor budget neutrality adjustment to the wage index beginning in FFY 2009. States that have no hospitals receiving a rural floor wage index would no longer have a negative budget neutrality adjustment applied to their wage indices. Conversely, states with hospitals receiving a rural floor would have their wage indices downwardly adjusted to achieve budget neutrality within the state. All hospitals within each state would, in effect, be responsible for funding the rural floor adjustment applicable within that specific state.

Within-State Budget Neutrality Adjustment for Geographic Reclassification CMS is proposing to apply a budget neutrality adjustment at the state level that would focus the costs of geographic reclassification closer to the areas where hospitals that benefit from the reclassification are located (similar to, but separate from, the rural floor adjustment noted above). The provision of applying geographic reclassification budget neutrality at the state level would be applied to all reclassifications and wage index exceptions beginning in FFY 2009.

Verification of FFY 2010 Worksheet S-3 Wage Data
The wage data used to compute the FFY 2010 wage index will be published around the first week in October 2008. This data is obtained from Worksheet S-3, Parts II and III of the FFY 2006 Medicare cost reports. CMS will allow for a verification and revision process to amend any errors in this data though the first week of December 2008.

2007-2008 Occupational Mix Survey for the FY 2010 Wage Index
A revised 2007-2008 occupational mix survey will provide for the collection of hospital-specific wages and hours data for a one-year period from July 1, 2007 through June 30, 2008. The revised 2007-2008 occupational mix survey will be applied beginning with the FY 2010 wage index.

Hospitals must submit their completed surveys to their fiscal intermediaries/MAC by September 1, 2008. The preliminary, unaudited 2007-2008 occupational mix survey data will be released in early October 2008, along with the FY 2006 Worksheet S-3 wage data, for the FY 2010 wage index review and correction process.

Recommended Action
The Occupational Mix adjustment is one of the only ways that a hospital can directly affect its own IPPS payments. It is important for hospitals to ensure that the data reported on the survey is accurate and verifiable through supporting documentation. Not completing, or inaccurately completing, the survey could cost your facility hundreds of thousands or potentially millions of dollars in lost reimbursement. As one of the biggest redistributions of Medicare money in recent years, don't let this survey have a detrimental effect on your Medicare payments.
Keep the September 1, 2008 due date in mind because the occupational mix survey will have an impact on Medicare payments. Proper filing of this data is essential to ensure appropriate Medicare reimbursement.

Author: Marty Orwitz leads RSM McGladrey's wage index improvement services and works with hospitals nationwide to address wage index issues. RSM McGladrey has filed hundreds of occupational mix surveys on behalf of our clients. If you have any questions regarding the information in this article, please contact Marty at marty.orwitz@rsmi.com or John Anderson at john.anderson2@rsmi.com.