Honesty, Integrity and Results…You Can Depend On! Wage Index FFY 2013 (06/30/2010) & Occupation Mix Survey: Is your hospital ready? Presented by: R-C Healthcare

Honesty, Integrity and Results…You Can Depend On!

Wage Index FFY 2013 (06/30/2010) &

Occupation Mix Survey:Is your hospital ready?

Presented by:

R-C Healthcare Management

May 3, 2011

K. Michael Webdale, CPA – Senior Vice PresidentKenneth Webdale, CPA, FHFMA - President

Daniel Silver, FACHE – Vice President


Contact Information – HHC

Stuart C. Einbinder, CPA

Director

New York City Health and Hospitals Corp

Debt Finance/Corporate Reimbursement Services

160 Water Street, Room 1026

New York, NY 10038-4922

Phone: (646) 458-7710

E-Mail: [email protected]


Agenda

•National Average Hourly Wage•Wage Index

–Projected–Medicaid Impact

•MedPac–Acumen Studies

•Pension•Contracted Administrative & General

–Line 22.01


Agenda (continued)

•Affordable Care Act–Rural Floor Neutrality–Frontier States

•Process–Timetable–Hours Issues


Agenda (continued)

• Occupational Mix General Overview

– Occupational Mix Background– Importance of the Occupational Mix– Who has to participate in the Occupational Mix Survey?– Survey due dates

• Discuss the categories for data input– Gathering the data– Contract Labor

• How the occupational mix adjustment is calculated • The impact on the wage index • What’s Next


National Average Hourly Wage Change

National AHW Increase

FFY 2009 32.2252$ 4.24%FFY 2010 33.5268$ 4.04%FFY 2011 34.9674$ 4.30%FFY 2012 36.1499$ 3.38%


Projected Wage Index for FY 2012

Based upon the April 19, 2011 Federal Register:• The New York City Wage Index is 1.3190, an increase

of .68 percentage points from the prior year’s wage index of 1.3122

• 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 2011, February 2012 and May 2012


Importance of the Wage Index

• Labor portion of the DRG is:• 62% if the Wage Index is less than or equal to 1• 68.8% if the Wage Index is greater than 1

• Highest Wage Index – Santa Cruz-Watsonville, CA 1.6989 = reimbursement of $9,399.89

• Lowest Wage Index – Rural Alabama .7286 = reimbursement of $4,964.28

Difference of $4,435.61


Medicaid Impact of Wage Index

• As of 12/1/09, Medicaid reimbursement is now impacted by the Worksheet S-3, Part II data

• Every New York hospital’s AHW is compared to a state AHW, and each hospital receives a Wage Equalization Factor (WEF)

• New York State FY 2012 data (12/31/08, 6/30/09)• State Average Hourly Wage = $42.95• HHC has significant Medicaid discharges so

increasing your AHW maximizes your WEF


MedPac Recommendation to Use the Bureau of Labor Statistics Data

Acumen 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

• Acumen recommended “Blending” & “Smoothing”

http://www.acumenllc.com/reports/c

ms


Acumen Study - Open Door Forum

• Released April 12, 2011• Revising the Medicare Wage Index to Account for

Commuting Patterns– Hospitals continue to file S-3 – Hospitals will be asked to provide zip code information on

each employee– CMS calculates an AHW for each zip code– Multiply your percentage of employees in each zip code by

the zip code AHW– Results are summed so each hospital has a unique wage

index

http://www.cms.gov/AcuteInpatientPPS/F

FD/


New York Metropolitan Commuter Transportation Mobility Tax

• This new payroll tax to fund the MTA’s operations took effect on March 1, 2009

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

• The amount may be claimable since it is paid by the employer

• Where is this expense reported in wage-related costs?


Pension Costs

• Pension costs were formerly reported according to GAAP

• Worksheet for last two years required Form 5500, Schedule B data

• New methodology uses three year average of actual funded amounts


Contracted Administrative & General (Line 22.01)

• Need to verify the hours from invoices or contracts

• Nationally 59% of hospitals included salaries and hours with an AHW of $79.55

• In New York City, 63% (52 of 82) hospitals included salaries and hours with an AHW of $138


Contracted Administrative & General (Line 22.01)

• The New York City Wage Index was not impacted positively or negatively by Contracted A&G

• Contracted A&G costs increased the National AHW by $.10


Impact of Affordable Care Act

• State level budget neutrality returned to national budget neutrality

• Budget neutrality adjustment is .993834. All wage index reduced by .0061

• Imputed Rural Floor for NJ was not extended


Impact on NJ Hospitals

CBSA Name FY 2011 FY 2012 PP Change

10900 Allentown-Bethlehem-Easton, PA-NJ 1.1246 0.9436 (18.1)

12100 Atlantic City-Hammonton, NJ 1.1246 1.0884 (3.6)

15804 Camden, NJ 1.1246 1.0125 (11.2)

20764 Edison-New Brunswick, NJ 1.1246 1.0737 (5.1)

35084 Newark-Union, NJ-PA 1.1292 1.1147 (1.5)

36140 Ocean City, NJ 1.1246 1.0616 (6.3)

45940 Trenton-Ewing, NJ 1.1246 0.9941 (13.1)

47220 Vineland-Millville-Bridgeton, NJ 1.1246 1.0659 (5.9)

48864 Wilmington, DE-MD-NJ 1.1246 1.0810 (4.4)


Frontier States Floor

• Beginning in FY 2011 no hospital in a Frontier State can have a wage index less than 1.00

• Five states qualify: Montana, Nevada, North Dakota, South Dakota and Wyoming

• 50 hospitals receive additional $90 million which is not budget neutral


Process• R-C Healthcare Management collects data

• Hospital coordinator and RCHMS determine if any revisions are necessary

• RCHMS prepares the revision letter

• Revisions submitted by early December

• Assist the hospitals during FI audits in January and February

• Verify revisions are included in all PUFs and follow-up if necessary


Timetable

Similar Dates Anticipated for this Year• October 4, 2010 – Release of the first Public Use

File, which will include the original, unaudited S-3s

• December 6, 2010 – Deadline to submit any wage data revisions

• February 22, 2011 – Release of the next Public Use File, which will include the revisions submitted in December


Timetable

• May 6, 2011 – Release of the final Public Use File

• August 1, 2011 – Approximate date of publication of the FY 2012 Final Rule. The wage index includes the final wage index data corrections

• October 1, 2011 – Effective date of the FY 2012 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


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?


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 (.993834)


Occupational Mix Survey


Occupational Mix Background

• Section 304(c) of Public Law 106-544 amend section 1886(d)(3)(E) of the Act requires Centers of Medicare and Medicaid (CMS) to collect data every 3 years on the occupational mix of employees for each short-term, acute care hospital participating in the Medicare program.

• Initial 3 month filing was only to be used at 10% implementation. Bellevue Hospital Center vs. Leavitt forced CMS to implement at 100% with a three year phase in. – Another 3 months of data was required in order to be more

reliable.


Occupational Mix Background

• The most recent survey was for periods from 7/1/2007 to 6/30/2008.

• Impacted FY 2010, 2011 and 2012 so final year of impact begins October 1, 2011


Why is Occupational Mix important?

• The purpose of occupational mix is to control the effect of the hospitals’ employment choices on the wage index.

• The varying labor cost associated with these choices reflect hospital management decisions rather than geographical differences in the cost of labor.

• If you decide to staff with higher RN levels your wage index would be higher so Occupational Mix reduces the wage index.


Why is Occupational Mix important?

• Markets with an expensive mix of employees and contract labor have their AHW adjusted downward;those with a cheaper mix of employees and contract labor have their AHW increased.

• The most important factor is RN hours to total nursing hours. The national percent from the previous survey was 71.4%– RN percentage greater than 71.4%, you received a negative

occupational mix adjustment (OMA). – Less than 71.4%, then adjustment was positive.


Three Year Impact

• The purpose of the data collection is to construct a OMAF that will be applied to the FFY 2013, 2014 and 2015 wage index.


Salary Information on the Survey

• Salaries used to calculate each category AHW.

• AHW information in Occupational Mix• Based on all hospitals - using national AHW

within each covered occupation.


Who has to participate in the survey?

• Any hospital subject to the Inpatient Prospective Payment System (IPPS) or any hospital that would be subject to IPPS if not granted a waiver.– Excluded from the survey

• Critical Access Hospitals• Any hospital which terminated participation in the

Medicare program before the calendar year 2010

• Non-Compliant Hospitals– No Penalty– Hospitals are assigned the average factor for the CBSA


Important Dates

• This filing is calendar year 2010 (pay periods ending between January 1, 2010 and December 31, 2010).– They are looking for 26 pay periods without any accruals or

other adjustments.


Important Dates

• Occupational Mix Survey is due July 1, 2011 and will be applied to the FFY 2013.

– Completed occupational mix survey must be submitted to your fiscal intermediaries, on the Excel reporting form.

• Form CMS – 10079 OMS

– The Excel version of the occupational mix survey can be downloaded from CMS website

www.cms.gov/AcuteInpatientPPS/WIFN/list.asp


Occupational Categories

• The occupational categories derive directly from the BLS standard occupational categories.

• Include employees, directly hired and acquired under contract.– Registered Nurses– Licensed Practical Nurses and Surgical Technologists– Nursing Aids, Orderlies, and Attendants– Medical Assistants– All Other Occupations


Occupational Categories

Occupational Category Paid Salaries Paid Hours Average Hourly Wage

(Salaries/ Hours)

Nursing Occupation

RNs

LPNs and Surgical Technologists

Nursing Aides, Orderlies, & AttendantsMedical Assistants

Total Nursing

All Other Occupations

Total (Nursing and All Other)


Cost Centersto be used for Occupational Categories – from Worksheet A

COST CENTER DESCRIPTIONSLines for 2552-96

Lines for 2552-10

Nursing Administration 14 13Adults and Pediatrics (General Routine Care) 25 30Intensive Care Unit 26 31Coronary Care Unit 27 32Burn Intensive Care Unit 28 33Surgical Intensive Care Unit 29 34Other Special Care (specify) 30 35Nursery 33 43Operating Room 37 50Recovery Room 38 51Delivery Room and Labor Room 39 52Electrocardiology 53 66Renal Dialysis 57 71Ambulatory Surgical Center (Non-Distinct Part) 58 72Other Ancillary 59 73Clinics 60 90Emergency 61 91Observation Beds 62 92

Note: Subscripted cost centers that would normally fall into one of these cost centers should be included on the survey.


Gathering the Data

• Use Worksheet S-3 Rules• Paid Salaries

– Regular, overtime, vacation, holiday, sick, lunch, other paid time off, severance and bonuses.

• Paid Hours– Regular, overtime, vacation, paid holiday, sick, lunch, other

paid time-off and severance hours.– Overtime hours paid at time and a half should be recorded

as one hour.– Salaried employees paid a fixed rate should be 40 hours per

week or hours actually worked.– Do not include non-paid lunch periods, and on-call hours in

the total paid hours.– No hours are required for bonus pay.


Where to assign the Data

• Director of Nursing or anyone handling those functions should be in the “All Other” category.

• Transportation for surgery– Include in LPN’s and Surgical Technologists per the

instructions.

• Techs reported in “All Other”

• Advanced Practice Nurses– Exclude if billed under Part B – “All Other” if included on S-3.


Contract Labor

• Include all contract labor included on Worksheet S-3.– Lines 9, 22.01, 26.01 and 27.01– Line 10 reported as “All Other”– Use amounts paid in Calendar Year 2010


What is not included• Employees in areas excluded from IPPS.

– Skilled-nursing facilities, psychiatric, or rehabilitation units• Worksheet S-3, Part II, Lines 8 and 8.01

– Part A Teaching Physician, Physician Part B, and CRNAs• Worksheet S-3, Part II, Lines 3, 4.01, 5, & 5.01

– Interns and Residents• Worksheet S-3, Part II, Lines 6


Occupational Mix Adjustment Factor• Calculating the OMAF

– Step 1 - Determine % of each subcategory by hours– Step 2 - Multiply each subcategory by National AHW– Step 3 - Determines AHW by subcategory– Step 4 - Sum for Hospital Nursing AHW – Step 5 - Compare Hospital Nursing AHW to National– Step 6 - Calculates Nurse Occ Mix factor– Step 7 - Multiply this by Nursing % to total salaries– Step 8 - Add “All Other” % to total salaries

– Equals Occupational Mix Adjustment


Occupational Mix Adjustment Factor

• Or use CMS calculator at CMS Website– www.cms.gov/AcuteInpatientPPS/WIFN/list.asp

– Then click on the FY 2011 Wage Index Home Page

– Now look for FY 2011 Final Ruling AHW calculator


OMA Calculator


Occupational Mix Adjustment Factor

• OMA calculated and applied:

– Hospitals with a nursing % lower than the

national % will have a OMAF > 1

– Hospitals with a nursing % greater than the national % will have OMAF < 1


Positive Occupational Mix Adjustment

Occupational Category Salaries Hours Average

Hourly Wage Nursing % Total %

RNs 74,000,000$ 2,500,000$ 29.60$ 67.90%

LPNs and Surgical Technologists 3,200,000$ 169,000$ 18.93$ 4.60%

Nursing Aides, Orderlies, & Attendants 14,000,000$ 1,000,000$ 14.00$ 27.20%

Medical Assistants 150,000$ 12,000$ 12.50$ 0.30%

Total Nursing 91,350,000$ 3,681,000$ 24.82$ 100% 48%

All Other Occupations 105,000,000$ 4,500,000$ 22.22$ 52%

Total (Nursing and All Other) 191,350,000$ 8,181,000$ 23.39$ 100%

Occupational Mix Adjustment 1.0156


Negative Occupational Mix Adjustment

Occupational Category Salaries Hours Average

Hourly Wage Nursing % Total %

RNs 40,000,000$ 1,200,000$ 33.33$ 88.40%

LPNs and Surgical Technologists 2,900,000$ 151,000$ 19.21$ 11.10%

Nursing Aides, Orderlies, & Attendants 100,000$ 7,000$ 14.29$ 0.50%

Medical Assistants 0.00%

Total Nursing 43,000,000$ 1,358,000$ 31.66$ 100% 35%

All Other Occupations 79,000,000$ 3,800,000$ 20.79$ 65%

Total (Nursing and All Other) 122,000,000$ 5,158,000$ 23.65$ 100%

Occupational Mix Adjustment 0.961


Past Impact on Wage Index for New York City CBSA Hospitals

• New York City CBSA Wage Index increased by approximately 1.9 percentage points due to Occupational Mix.

• Approximately $44 million in reimbursement increase in New York City CBSA per year.


What’s next?

• Start today – July 1, 2011 is 2 months away– Who is preparing the form?

• Collecting your data– Pay Periods ending between January 1, 2010 – December

31, 2010– Contract labor hours– Home office– Related organization

• Have your survey reviewed before submitting to the FI


Resources

CMS Website to access Public Use Files:• http://www.cms.hhs.gov/acuteinpatientpps/wifn/

Federal Register:• http://www.gpoaccess.gov/fr/index.html

Wage Index History and Estimate:• http://www.wageindex.com


Questions

Kenneth Webdale, CPA, FHFMA - PresidentK. Michael Webdale,CPA - Senior Vice PresidentDaniel Silver, FACHE - 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) [email protected](Mike) [email protected](Dan) [email protected]

Documents

Honesty, Integrity and Results…You Can Depend On! Wage Index FFY 2013 (06/30/2010) & Occupation Mix Survey: Is your hospital ready? Presented by: R-C Healthcare