Greater New York Hospital Association

Medicare Wage Index Improvement ProgramPPS 24 (FFY 2011 AWI)

September 15, 2009

Contact Information – GNYHA

Elisabeth R. WynnVice President, Health Finance

Greater New York Hospital Association555 West 57th Street, Suite 1500New York, NY 10019

Phone: (212) 259-0719

E-Mail: wynn@gnyha.org

Contact Information – RCHMS

Kenneth Webdale, PresidentK. Michael Webdale, Vice President

R-C Healthcare Management Services, Inc.2226 West Northern Avenue, Suite C-100Phoenix, AZ 85021-4969

Phone: (800) 862-5368

E-Mail: (Ken) kwebdale@rcmgmt.com (Mike) mwebdale@rcmgmt.com

National AHW Increase

PPS 20 29.6169$ 5.76%PPS 21 30.9133$ 4.38%PPS 22 32.2252$ 4.24%PPS 23 33.5268$ 4.04%

National Average Hourly Wage Change

Medicaid Impact of Wage Index

• Beginning on 12/1/09, Medicaid reimbursement will be impacted by the Worksheet S-3, Part II.

• Every New York hospital’s AHW will be compared to a state AHW, and each hospital will receive a Medicaid wage index.

• New York State FY 2009 data (12/31/05, 6/30/06)

• State Average Hourly Wage = $37.97

MedPac Recommendation to Use the Bureau of Labor Statistics DataAcumen Study One-third of hospitals currently reclass. If BLS data is used, there is no guarantee that just as many exceptions will not develop. BLS data is not available by industry, and it does not include fringe benefits, part-time workers or contract labor. Despite the limitations, the Acumen study still recommends using the BLS data.

The initial study is here: http://www.acumenllc.com/reports/cms.

The final study was to be released after the FY 2010 August FederalRegister and will show how the BLS wage index would be calculated.

New York Metropolitan Commuter Transportation Mobility Tax New York State legislature passed the new payroll tax to fund MTA’s operations.

Hospitals and businesses located within the Metropolitan Commuter Transportation District must pay .34% of their gross payroll expense for this tax.

This amount can be claimed since it is paid by the employer.

Where to report this expense on wage-related costs?

Pension Costs

• Pension costs were formerly reported according to GAAP.• Pension costs now must be fully funded, and only current expenses are allowable.• Work with your actuary to get the allowable amount.

• Some court cases have been filed, but none have yet been decided.

Need to verify the hours from invoices or contracts.

Nationally 42% of hospitals included salaries and hours with an AHW of $67.00.

In New York City, 29% (25 of 87) hospitals included salaries and hours with an AHW of $91.00.

Contracted Administrative & General (Line 22.01)

The New York City Wage Index was not impacted by the Contracted A&G costs. If all NYC hospitals had included A&G at the same AHW, the Wage Index would be .25 percentage points higher.

Contracted A&G costs increased the National AHW by $.05.

Eventually, all hospitals will realize the importance of including these costs, so the early adopters will benefit until that occurs.

Contracted Administrative & General (Line 22.01)

Rural Floor Budget Neutrality No CBSA can receive a wage index lower than the rural rate in that state.

The money for increases in those hospitals’ wage indexes was funded from the national pool. Beginning on 10/1/08, CMS began shifting that burden to individual states.

Effective 10/1/2008 10/1/2009 10/1/2010

National 80% 50% 0%

Within the State 20% 50% 100%

Largest Decrease In Wage Index by State

Connecticut .97887New Jersey .98437Colorado .99413California .99415New Mexico .99576

32 states had no CBSAs with the Rural Floor, so next year they will not be decreased by this adjustment.

Impact of Rural Floor Adjustment Upon New Jersey Hospitals

New York City Wage Index 1.3190

New Jersey Hospitals in NYC 1.3005

Percentage Point Difference (1.85)

Proposed Worksheet S-3 Revisions CMS released new cost report data

For Worksheet S-3, Parts II and III, CMS made several revisions, including the removal of all subscripted lines. Comments had to be submitted by August 13, 2009. Create some confusion regarding

Teaching Physicians Could cause problems with wage-related costs

which are allocated to salaried physicians and excluded units.

Proposed Worksheet S-3 Revisions New Worksheet S-3, Part IV – Hospital Wage-Related Costs

Instructions do not clarify the removal of excluded

units. Will cause confusion as to where total wage-

related costs are to be reported.

New Worksheet S-3, Part V – Hospital Contract Labor and Benefit Costs

Collects contract labor and fringe benefits for excluded units. Why is CMS is collecting this data?

Occupational Mix Adjustment

The most recent Occ Mix survey was conducted from 7/1/07 to 6/30/08. Data will not be collected again until 2011. Revisions can still be made to 2008 survey data. The most important factor is RN hours to total nursing hours. The national percent was 71.4%, so if your RN percentage was greater than that, you received a negative occ mix adjustment. If it was less than 71.4%, then the adjustment was positive.

On CMS’s website, http://www.cms.hhs.gov/acuteinpatientpps/wifn/list.asp#topofpage, this file will show you the impact of the Occupational Mix Adjustment upon your hospital: FY 2009 Proposed Occupational Mix Adjusted and Unadjusted Average Hourly Wage by Provider.

How the Wage Index is Calculated

Total salaries and hours Adjust for overhead departments. Adjust to a common period with an inflation factor. Total salaries and hours at the CBSA level. Total salaries and hours nationally. Divide each CBSA’s AHW by the National AHW. Each hospital has an Occupational Mix

Adjustment, and each CBSA has a Rural Floor Budget Neutrality Factor.

Impact of the Wage Index

Labor portion of the DRG is: - 62% if the Wage Index is less than or equal to 1 - 67% if the Wage Index is greater than 1 Previously, it was 62% if the Wage Index was less than or equal to 1, and 69.17% if the Wage Index was greater than 1.

Highest Wage Index – Santa Cruz-Watsonville, CA

1.6191 = reimbursement of $9,436.75 Lowest Wage Index – Rural Alabama .7389 = reimbursement of $5,587.84

Difference of $3,848.91

Cooperative Effort at a Regional Level

All hospitals within each Core-Based Statistical Areaare dependent upon each other’s wage data.

If one hospital has an error, the entire CBSA is negatively impacted.

New Reclassification Requirements

3-year Average Hourly Wage

Individual Urban – 108% of Original Area and 88% of New Area

Individual Rural – 106% of Original Area and 86% of New Area

Group – 88% of the CBSA into which it wishes to reclassify

Process

R-C Healthcare Management analyzes the hospital’s original Worksheet S-3 and contacts the hospital staff regarding any out-of-standard line items.

Hospital coordinator and RCHMS determine if any revisions are necessary, and RCHMS prepares the revision letter.

Revisions must be submitted by the hospital to its FI no later than December 7, 2009.

RCHMS assists the hospital in defending its revisions during the FI audits.

Timetable

Important Dates:

October 5, 2009 – Release of the first Public Use File, which will include the original, unaudited S-3s

December 7, 2009 – Deadline to submit any wage data revisions

February 22, 2010 – Release of the next Public Use File, which will include the revisions submitted in December

Timetable

Important Dates:

May 7, 2010 – Release of the final Public Use File

August 1, 2010 – Approximate date of publication of the FY 2011 Final Rule. The wage index includes the final wage index data corrections.

October 1, 2010 – Effective date of the FY 2011 Wage Index

Hours Issues

Eliminate on-call and stand-by hours.

Eliminate the hours associated with bonuses. (Bonus pay includes award pay and pay in lieu of time off.)

Get the salaries and hours by pay code to eliminate differential hours.

Hours Issues

Eliminate the overtime hours if they were recorded at 1.5 times the regular pay hours.

Analyze the credits to payroll accounts to ensure that the related hours were also removed.

Check to ensure that there were only 26 pay periods and not 27.

Wage-Related Costs

Make sure to include all wage-related costs for all departments.

Allocate health insurance costs based upon hours (FTEs) and not salaries.

Worksheet S-3 Questions to Ask

Is Line 1 greater than in the prior year’s filing?

Do salaried physician lines compare to those in the prior year’s filing?

Do Contract Labor and Physician AHWs seem reasonable?

Are wage-related costs greater than in the prior year’s filing?

Have applicable A&G costs been included on Line 22.01?

Projected Wage Index for FY 2010Based upon the August 27, 2009 Federal Register:

The New York City Wage Index is 1.3190, an increase of 1.94 percentage points from the prior year’s wage index of 1.2996.

A 3-year Wage Index history for all CBSAs and Rural Areas in the United States is provided at www.wageindex.com.

The Wage Index history is updated upon the release of each Public Use File in October 2009, February 2010 and May 2010.

Resources

CMS Website to access Public Use Files:

http://www.cms.hhs.gov/acuteinpatientpps/wifn/ list.asp#topofpage

Federal Register:

http://www.gpoaccess.gov/fr/index.html

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R-C Healthcare Management Services, Inc.2226 W. Northern Avenue, Suite C-100

Phoenix, AZ 85021-4969Phone: (800) 862-5368

www.rcmgmt.com

Presented by:Kenneth Webdale – President

K. Michael Webdale – Vice President