Area Wage Index September 17, 2003
Outline • Session I • Overview • Current Area Wage Index Facts & Calculations • MSA Specifics and Profiles • Session II • Sleeping Dogs and Edit Checks • Hot Topics & Changes on the Horizon • Geographic Reclassification • Occupational Mix Survey • S-3 Samples
Overview • Healthcare Affiliates, Inc is a national healthcare • reimbursement consulting firm specializing in • governmental reimbursement issues associated with • Medicare/Medicaid , Blue Cross and other payors. • Since 1992 we have performed close to 1,000 consulting • engagements associated with wage index issues alone. • Our primary services are: • Area Wage Index (AWI) annual reviews • Disproportionate Share Reviews and SSI appeals • Cost Report IME, DGME and ESRD Reviews • Healthcare Employee Benefit Reviews • Specialized Billing Issues
CURRENT WAGE INDEX FACTS & CALCULATIONS Presented byHealthcare Affiliates, Inc
Cost Reporting Data Used For the Wage Index By Year • Data for FFY 2001 (cost reporting periods beginning October 1, 2000 through September 30, 2001) will be used for FFY 2005 wage index computation. • For short periods beginning October 1, 2000 through September 30, 2001, CMS uses the longest period, or if two periods are the same length, the most recent period. CMS annualizes short period data.
Table of Hospitals with Various Fiscal Year Ends Hospital FYE Inpatient Acute Care Acute Outpatient, Home Rehab& Long Term Care Health, Hospice & SMF Sept 30, 2000 FFY 2004 Calendar 2004 Dec 31, 2000 FFY 2004 Calendar 2004 April 30, 2001 FFY 2004 Calendar 2004 June 30, 2001 FFY 2004 Calendar 2004 Aug 31, 2001 FFY 2004 Calendar 2004 Sept 30, 2001 FFY 2005 Calendar 2005 Dec 31, 2001 FFY 2005 Calendar 2005 April 30, 2002 FFY 2005 June 30, 2002 FFY 2005 Aug 31, 2002 FFY 2005 For Medicare geographic reclassification purposes the wage index data is used to satisfy the criteria for a wage index reclassification for the subsequent FFY to the payment year. This means that the most recent wage index data available at the filing date is used for reclassification purposes.
AWI Facts • AWI factor is multiplied times the labor portion of the DRG base amount. This is 71% of the base DRG calculation. (Proposed to be higher) • AWI will, in FFY 2005, impact DRG’s, Outpatient PPS, SNF, etc. • In FFY 2005 the reduction for Medical Education cost will be at 100%. (Part of “Behind the Sheet Adjustment) • Changes have been made in the overhead calculation (Part of “Behind the Sheet Adjustment)
AWI Facts • National average has been moving approximately 3% a year. It grew by 6.8% last year. • CMS has shortened time frames for Hospital corrections from May to March to February to November. Because of the reduced time frame, these months play havoc with a hospital’s responses. • Hospitals in their respective MSAs need to work together. Now!
AWI Facts • FIs have edit checks that direct their attention to increases above a certain percentage, their edit checks do not direct them to decreases of any size. (For instance, in FFY 2000, there were 147 hospitals nationwide with $0 for fringes. Forty-seven (47) of those hospitals were in Texas. In FFY 2001,there were still 34 w/o Fringes. In FFY 2003 there were 3 hospitals with $1 in WRC. In FFY 2004, there is 1 hospital with $1 in WRC and 60 with under 10% WRC. • The data supplied herein is from various data sources, most from CMS. • Of 4,784 hospitals in the latest PUF, 333 were not adjusted • 1759 were adjusted after 1/1/03 with all but 124 after 2/2/03 • Florida had 94 after 1/1/03 – out of 182 hospitals • Additional “errors”: there are 13 hospitals with over 40% WRC and 1 at 72%. • There is a hospital in Texas with a $9.25 rate.
Sample Area Wage Index Salaries/WRCs % Hours AHW Impact • Hosp A $40,000,000 40 2,000,000 $20.00 $8.00 • Hosp B $20,000,000 20 1,100,000 $18.18 $3.62 • Hosp C $30,000,000 30 1,600,000 $18.75 $5.61 • Hosp D $10,000,000 10 505,000$19.80 $1.98 • Total $100,000,000 100 5,205,000 $19.21 $19.21 • National Average $20.00 • MSA’s AWI $19.21/$20.00 0.9605 • If Hospital A increases by $1.00, this would equal a $0.40 increase (40% X $1) to MSA and an AWI change to .9805 ($19.61/$20.00). This is a positive increase of 2% to entire MSA. • To get this same impact we would have to move Hospital D $4.00, or Hospital B $2.00, or Hospitals C + D $1.00 each.
Uses of Medicare Wage Index INPATIENT Standardized Amount (eff) 10/1/03) – Applicable to DRG Payment pre Discharge Other Urban and Rural Large Urban (over 1 Million) (same as Large Urban 4/1/03 – 9/30/03) 71% 29% 71% 29% Labor Non-Labor 100% Labor Non-Labor 100% RelatedRelated TotalRelatedRelatedTotal $3,145 $1,279 $4,424 $3,095 $1,259 $4,354 X .9807 X .9807 $2,963.98 $1,226.48 $4,192.46 $2863.98 $1,228.48 $4,192.46 Note: Congress is expected to legislate use of large urban standardized amount for all hospitals. “Geographic adjustment factor” (GAF) is computed from the wage index. Wage index to the power .6848. The wage index also affects Disproportionate Share Payments (DSH) and Indirect Medical Education (IME) and the adjustment factor for the labor related portion of outpatient prospective payment is 60% rather than 71%.
Uses of Medicare Wage Index OTHER The wage index is also used for SNF, Home Health, Hospice, ambulatory surgical centers, and rehabilitation hospitals (or units). In Summary The wage index is a primary determinant of Medicare Payments. Wage Index Examples: Wage Index Highest: Oakland, CA 1.5058 Average: 1.0000 Lowest: Dothan, AL .7734
Wage Data Corrections • 4 Year Old Data from Worksheet S-3 • FFY 2004 Wage Index based on FFY 2000 data • Increased Volume of Corrections • 1997 Wage Index: 13% of hospitals • 2001 Wage Index: 32% of hospitals • 2002 Wage Index: 30% of hospitals
Desk Audit Issues • Inconsistencies among auditors, FIs • Definition of self-insurance. • Calculations of costs under GAAP. • Allocation of wage costs to exclude units (salaries v. hours). • Reasonable, Sample, AWI vs. cost report, Refiling CR, overall documentation, etc.
Appeal Rights • CMS policy: no appeal to PRRP to challenge incorrect wage data if hospital failed to comply with all steps of data verification process. • Expedited Judicial Review
Midyear Corrections • Only if hospital can show FI or CMS error in tabulating data and hospital did not know or have opportunity to correct prior to start of FFY • Corrected WI applied prospectively only. • Hospitals can not seek correction of another hospitals wage data in this process. • Does not preclude hospitals from appealing to challenge WI based on erroneous data (if procedures followed).
Comparability of Wage Data • Statute requires comparison of area’s wage level to national average wage level.
Wage Index Appeals • Timing: 180 days from publication of final wage index. • Group Appeal? • Expedited Judicial Review? • Relief: Retrospective or Prospective.
Area Wage Index Calendar • Audit/desk review 10/1 to 11/15 Not Happening • Hospital review of adjustments 11/15 to 11/25 9/15 to 11/15 • FI submits data to HCRIS file 11/26/02 Early Feb • Updated HCRIS file released 1/8/03 Adjustments to Adjustments 3/8 • Last day for Hospital to update and document 2/8/03 Initial 11/15, A to A 3/8 • Last day for FI to transmit final data 4/9/04 • First “preliminary” release 6/5/04 • Correction of transmission errors only 7/5/04 • Final rate publication 8/1/04 • Rates go into effect 10/1/04 Note: This schedule may be compressed because #’s 9 and 10 can not change
Area Wage Index Calendar Our suggestions: Get your MSA organized • Prioritize Hospitals and MSA’s a.Hospitals that dropped for FY 2004 or prior b.Hospitals with apparent issues c.Hospitals with “hits” (teach, I/R, CRNA, other) • Prepare and perform field work now on #1’s. • Handle all questions • Review S-3’s as adjusted by FI for Hospitals not addressed in #1 above. Reasons: Data available now Not yet Avoid delays from FI’s side Still Ensures multiple levels of review No Still allows for additional changes later No
AWI Calendar TimeframeSteps in Wage Index Development Process Mid-SeptemberPreliminary and unaudited wage data file published as a public use file (PUF) on CMS website. Mid-NovemberDeadline for hospitals to send requests for revisions to fiscal intermediaries. Early FebruaryFiscal intermediaries review revisions and desk review wage data; notify hospitals of changes and resolution of revision requests; and submit preliminary revised data to CMS. Early MarchDeadline for hospitals to request wage data reconsideration of desk review adjustments and provide adequate documentation to support the request. Early AprilDeadline for the fiscal intermediaries to submit additional revisions resulting from the hospitals' reconsideration requests.This is also the deadline for hospitals to request CMS intervention in cases where the hospital disagrees with the fiscal intermediary's policy interpretations. Early May*Release of final wage data PUF on CMS web site. Early June*Deadline for hospitals to submit correction requests, to both CMS and their fiscal intermediary, for errors due to the mishandling of the final wage data by CMS or the fiscal intermediary.
MSA’S SPECIFICS AND PROFILES Presented byHealthcare Affiliates, Inc