Wisconsin Hospital Association
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1 Wisconsin Hospital Association Medicare Wage Index Improvement Program PPS 27 (FY 2014 AWI) FYE Between September 30, 2010 and August 31, 2011 Presented on October 24, 2012
2 Contact Information WHA Brian Potter Vice President, Finance & Operations Address: Wisconsin Hospital Association 5510 Research Park Drive Madison, WI Mailing Address: Wisconsin Hospital Association P.O. Box Madison, WI Phone: (608)
3 Contact Information RCHMS K. Michael Webdale, President Daniel Silver, Vice President Eric Webdale, Vice President David Hanak, Director, Sales & Marketing R-C Healthcare Management Services, Inc West Northern Avenue, Suite C-100 Phoenix, AZ Phone: (800) or (602) (Mike) (Dan) (Eric) (Dave)
4 Agenda National Average Hourly Wage Wage Index Wage Index for FY 2013 Largest Changes in WI New S-3 Worksheet Wage Index Changes Commuter Based Wage Index Wage Index Improvement Process
5 Agenda (continued) Pension Costs Contracted Administrative & General - Line Patient Protection and Affordable Care Act Rural Floor Budget Neutrality New Reclassification Requirements Frontier States Floor Occupational Mix Survey Timetable
6 National Average Hourly Wage Change National AHW Increase Effective PPS 23 $ % 10/1/2009 PPS 24 $ % 10/1/2010 PPS 25 $ % 10/1/2011 PPS 26 $ % 10/1/2012
7 Projected Wage Index for FY 2013 Based upon the August 18, 2012 Federal Register: Rural Floor Budget Neutrality Adjustment is The wage index history at updated on the release of each Public Use File in October, February, May and August
8 History of Wisconsin Wage Index CBSA# CBSA Names FY 2010 FY 2011 FY 2012 FY 2011 to FY 2012 FY 2013 FY 2012 to FY Appleton, WI (1.86) Eau Claire, WI (0.99) Fond du Lac, WI Green Bay, WI (0.2) Janesville, WI (2.51) LaCrosse, WI-MN (1.76) Lake Co.-Kenosha Co. IL-WI (5.33) Madison, WI (1.27) Milwaukee-Waukesha-West Allis, WI (2.90) Oshkosh-Neenah, WI (2.95) Racine, WI (16.59) Sheboygan, WI Wausau, WI (6.69) Rural, WI (2.61)
9 Comparison of FY 2012 Standardized Amounts to the FY 2013 Standardized Amount with Full Update Full Update (1.8 percent); Wage Index is less than or equal to FY 2012 Base Rate Labor: $3, Nonlabor: $2, FY 2013 Update Factor FY 2013 DRG Recalibration and Wage Index Budget Neutrality Factor FY 2013 Reclassification Budget Neutrality Factor FY 2013 Rural Community Demonstration Budget Neutrality Factor FY 2013 Outlier Factor Documentation and coding adjustments.9478 National Standardized Amount for FY 2013 Labor: $3, Nonlabor: $2,032.53
10 Wisconsin AHW Changes FY 2013 (PPS 26) From Oct PUF Occupational Mix Inflated - Salaries FY 2014 (PPS27) Projected AHW Change
11 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
12 Importance of the Wage Index Labor portion of the DRG is: 62% if the wage index is less than or equal to % if the wage index is greater than 1 Highest wage index Santa Cruz-Watsonville, CA = reimbursement of $10,253 Lowest wage index Rural Alabama.7071 = reimbursement of $5,542 Difference of $4,711
13 10 Largest Increases In Wage Index CBSA Code State or Urban Area FY 2012 Wage Index FY 2013 Wage Index PP Change 3 Rural Arizona % Cumberland, MD-WV % Yuma, AZ % Tucson, AZ % Muskegon-Norton Shores, MI % Napa, CA % Providence-New Bedford-Fall River, RI % Vallejo-Fairfield, CA % Atlantic City, NJ % Sacramento-Arden, CA %
14 10 Largest Decreases In Wage Index CBSA Code State or Urban Area FY 2012 Wage Index FY 2013 Wage Index PP Change Monroe, MI % Wichita Falls, TX % Anniston-Oxford, AL % Brownsville-Harlingen, TX % Macon, GA % Farmington, NM % 38 Rural Oregon % 21 Rural Maryland % Redding, CA % Rapid City, SD %
15 New Worksheet S-3 Crosswalk Old S-3 New Line # Line # SALARIES 1 1 Total Salaries (see instructions) 2 2 Non-physician anesthetist Part A 3 3 Non-physician anesthetist Part B 4 4 Physician-Part A Teaching Physician Salaries 5 5 Physician-Part B Non-physician - Part B 6 7 Interns & Residents (in an approved program) 7 8 Home office personnel 8 9 SNF Excluded area salaries (see instructions) OTHER WAGES & RELATED COSTS 9 11 Contract labor: (see instructions) Management and Administrative Services Contract labor: physician-part A Home office salaries & wage-related costs Home office: physician Part A Teaching Physician Salaries WAGE-RELATED COSTS Wage-related costs (core) Wkst S-3, Part IV line Wage-related costs (other) Wkst S-3, Part IV line Excluded areas Non-physician anesthetist Part A Non-physician anesthetist Part B Physician-Part A Physician Part A (Teaching) Physician-Part B Wage Related Costs (RHC/FQHC) Interns & Residents (in an approved program)
16 New Worksheet S-3 Crosswalk Old S-3 New Line # Line # OVERHEAD COSTS - DIRECT SALARIES Employee Benefits Administrative & General Administrative & General under Contract Maintenance & Repairs Operation of Plant Laundry & Linen Service Housekeeping Housekeeping under Contract Dietary Dietary under Contract Cafeteria Maintenance of Personnel Nursing Administration Central Services and Supply Pharmacy Medical Records & Medical Records Library Social Services Other General Service (specify) PART III - HOSPITAL WAGE INDEX SUMMARY 1 1 Net salaries (see instructions) 2 2 Excluded area salaries (see instructions) 3 3 Subtotal salaried (line1 minus line 2) 4 4 Subtotal other wages & related costs (see inst.) 5 5 Subtotal wage-related costs (see inst.) 6 6 Total (sum of lines 3 thru 5) 13 7 Total overhead costs (see inst.)
17 New Worksheet S-3 Eliminated Lines Line 9.01 Pharmacy Services Under Contract Line 9.02 Laboratory Services Under Contract Line Teaching Physician Under Contract Line Part A Teaching Physicians Part III, Lines 8-12
18 New Worksheet S-3 Per instructions - Salaried Teaching Physicians are not removed New Line 4.01 Added to Form Contracted I&R are added to Line 7.01 and Line 11
19 New Worksheet S-3, Part IV Hospital Wage Related Costs Replaces Form 339, Exhibit 7 Part II, Line 17, Wage-related costs (core) = Part IV Line 24, Total Wage Related Cost Part IV should not include excluded unit or physician benefits We recommend a reconciliation between total Wage Related Costs and what is included on Lines 17-25
20 New Worksheet S-3, Part IV PART IV - WAGE RELATED COSTS Retirement Cost k Employer Contributions 2.00 Tax Sheltered Annuity (TSA) Employer Contribution 3.00 Qualified and Non-Qualified Pension Plan Cost 4.00 Prior Year Pension Service Cost Plan Administrative Costs (Paid to External Organization) K/TSA Plan Administration fees 6.00 Legal/Accounting/Management Fees-Pension Plan 7.00 Employee Managed Care Program Administration Fees Health and Insurance Costs: 8.00 Health Insurance (Purchased or Self-Funded) 9.00 Prescription Drug Plan Dental, Hearing & Vision Plans Life Insurance (If employee is owner or beneficiary) Accident Ins. (If employee is owner or beneficiary) Disability Ins. (If employee is owner or beneficiary) Long-Term Care Ins. (If employee is owner or beneficiary) Workmen's Compensation Ins Retiree Health Care Cost Taxes FICA-Employers portion only Medicare Taxes-Employers Portion Only Unemployment Insurance State or Federal Unemployment Taxes Other Executive Deferred Compensation Day Care Cost and Allowances Tuition Reimbursement Total Wage Related cost (Sum lines 1-23) Part B - Other than Core Related Cost OTHER WAGE RELATED COSTS (SPECIFY)
21 Wage Index Changes Secretary of HHS submitted a plan to reform the wage index to Congress on April 11, 2012 Commuter Based Wage Index Gathers hospital employee data by ZIP code Calculates an AHW by ZIP code Each hospital would have their own WI Potential Issues Collection of ZIP code data Exception process Transparency Impact on non-hospital payment systems
22 Wage Index Improvement Process R-C Healthcare Management analyzes HCRIS and October PUF data We posted S-3 s and data to RCHMS 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
23 Wage Index Improvement Process (continued) Revisions are due by December 3, 2012 RCHMS assists the hospitals to defend the revisions during the FI s audits in December 2012 and January 2013 RCHMS verifies that the revisions are included in all PUFs and provides any necessary follow-up
24
25 Worksheet S-3 Questions to Ask Is Line 1 greater than in the prior year s filing? Do salaried & contract physician lines seem reasonable? Are wage-related costs comparable to prior year s filing? Have A&G costs been included on Line 22.01?
26 Hours Issues Eliminate on-call and standby hours Eliminate the hours associated with bonuses (Bonus pay includes award pay and pay in lieu of time off) Obtain payroll report with salaries and hours (by pay code) to eliminate differential hours
27 Hours Issues (continued) 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
28 Wage-Related Costs Make sure to include wage-related costs for all departments Allocate health insurance costs based upon hours (FTEs) and not salaries
29 Pension Costs Defined benefit pension costs were formerly reported according to GAAP CMS required pension costs to be funded within 12 months, and only current expenses were allowable Pension Cost Calculations for Medicare Reporting worksheet used the IRS Schedule B, Form 5500 data
30 Pension Costs (continued) When pension plans were over-funded, the worksheet reduced the allowable pension costs Any reductions are being amortized for the next nine years Be sure to add 10% amortization From August 18, 2011 Federal Register, CMS will now use three-year average of cash contributions cash paid in fiscal year
31 Wage Index Year Pension Costs (continued) Defined Benefit Pension Calculator Provider Fiscal Year Beginning Ending Total Defined Benefit Pension Cash Contributions Allowed (per audit) Wage Index Pension Cost /1/ /31/2003 3,200,000 2,500, /1/ /31/2004 2,800, /1/ /31/2005 1,300, ,000 # /1/ /31/2006 2,700,000 3,000,000 # /1/ /31/2007 4,100,000 3,600,000 # /1/ /31/2008 3,000, ,000 # /1/ /31/2009 1,000,000 * /1/ /31/2010 2,000,000 * 1/1/ /31/2011 2,000,000 * 3 Year Average of Funded Amounts 1,666,666 * 10 Year Amortization Amount 350,000 # Pension Cost Allowed on Wage Index for 12/31/2010 2,350,000
32 Contracted Administrative & General (Line 22.01) National FY 2011, 52%, $1.3B, with an AHW of $75.00 FY 2012, 60%, $1.6B, with an AHW of $80.66 FY 2013, 66%, $1.8B, with an AHW of $91.42 Wisconsin FY 2011, 56% (36 of 64), $25M, AHW of $ FY 2012, 66% (43 of 65), $25M, AHW of $ FY 2013, 68% (43 of 63), $24M, AHW of $123.65
33 Contracted Administrative & General (Line 22.01) The contracted A&G costs increased the national AHW by $.12 More hospitals are understanding the importance of this data and are including these costs
34 Contracted Administrative & General (Line 22.01) Include amounts for A&G services under contract Personnel costs from Worksheet A, line 6 and subscripts, column 2 Types of services: Legal, tax preparation, cost report preparation, wage index, consulting Need to verify the hours
35 Impact of the Patient Protection and Affordable Care Act Upon Wage Index June 28, 2012 Supreme Court Decision upheld majority of the law Encompasses Senate Bill (P.L ) and the House Reconciliation Bill (P.L ) Rural floor budget neutrality Reclassification requirements Frontier States
36 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/ /1/ /1/2010 National 80% 50% 0% Within the State 20% 50% 100%
37 Impact of the Patient Protection and Affordable Care Act (PPACA) Budget neutrality was returned to national level from the state level One hospital in Arizona reclassified from Urban to Rural Phoenix & Tucson now receive the rural floor (1.0569) Prior Year one hospital in Massachusetts become rural The national adjustment for the rural and imputed floor is
38 Reclassification Requirements Prior to the Implementation of the PPACA Based upon a Three-Year Average Hourly Wage CMS increased percentages over a two-year phase-in period Individual Urban 108% of Original Area Individual Rural 106% of Original Area Percent of New Area: FY Urban 84% 86% 88% Rural 82% 84% 86% Group 85% 86% 88%
39 New Reclassification Requirements Returns reclassification standards to what they were for FY 2008 Individual Urban 108% of Original Area and 84% of New Area Individual Rural 106% of Original Area and 82% of New Area Group 85% of the CBSA into which it wishes to reclassify
40 Frontier States Floor Beginning in FY 2011, no hospital in a Frontier State can have a wage index of less than 1.00 Five states qualify: Montana, Nevada, North Dakota, South Dakota and Wyoming
41 Occupational Mix Survey Most Current Survey For pay periods ending between January 1, 2010 and December 31, 2010 Submitted July 1, 2011 Affects hospitals for 3 years beginning in FY 2013 (October 1, 2012)
42 Occupational Mix Survey The most important factor was RN hours to total nursing hours. National percent was 72.3% If RN percentage was greater than that, you received a negative Occupational Mix Adjustment. If it was less than 72.3%, then the adjustment was positive
43 Occupational Mix Impact on Wisconsin Wage Index CBSA# CBSA Names Percentage Point Change due to Occupational Mix Appleton, WI Eau Claire, WI Fond du Lac, WI (1.87) Green Bay, WI Janesville, WI LaCrosse, WI-MN (.47) Lake Co.-Kenosha Co. IL-WI Madison, WI (.03) Milwaukee-Waukesha-West Allis, WI Oshkosh-Neenah, WI Racine, WI Sheboygan, WI (.07) Wausau, WI (1.52) 52 Rural, WI (.47)
44 FY 2014 Hospital Wage Index Development Timetable October 3, 2012 Release of the first Public Use File, which will includes two wage index files and occupational mix survey December 3, 2012 Deadline to submit any wage data and occupational mix revisions February 21, 2013 Release of the next Public Use File, which will include the revisions submitted in December
45 FY 2014 Hospital Wage Index Development Timetable May 3, 2013 Release of the final Public Use File August 1, 2013 Approximate date for publication of the FY 2014 Final Rule; wage index includes final wage index data corrections October 1, 2013 Effective date of the FY 2014 wage index
46 Resources CMS Website to access Public Use Files: Service-Payment/AcuteInpatientPPS/ Federal Register: on?collectioncode=fr
47 Resources R-C Healthcare Management Website: Worksheet S-3 Comparison Wage Index History FY 2014 Timetable S-3, Part II & III Instructions Pension Three-Year Average Worksheet
48 Resources PowerPoint Presentation and PDF document available at: Wage Index History and Estimate:
49 ??? QUESTIONS??? R-C Healthcare Management Services, Inc W. Northern Avenue, Suite C-100 Phoenix, AZ Phone: (800) or (602) Contacts: K. Michael Webdale President Daniel Silver Vice President Eric Webdale Vice President David Hanak Director, Sales & Marketing
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