MICHIGAN HOSPITAL ASSOCIATION

Federal Fiscal Year 2016-2018Occupational Mix Adjustment Survey

April-May 2014

By

DALE E. BAKERBAKER HEALTHCARE CONSULTING, INC.

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CONTACTS

Michigan Hospital Association:Vickie KunzEmail – vkunz@mha.org Telephone – 517-703-8608

Consultant:Dale E. BakerBaker Healthcare ConsultingEmail – dbaker@baker-healthcare.com Telephone – 317-631-3613

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MEDICARE WAGE INDEX OCCUPATIONAL MIX ADJUSTMENT (OMA)

CMS used Bureau of Labor Statistics (BLS) data Strategy is reverse logic!

We need to: Minimize RN hours Maximize nursing aides, orderlies and attendants, and medical

assistants

Our comments: For computing the OMA – Centers for Medicare &

Medicaid Services (CMS) uses the National Average Hourly Wages (AHW). Local areas have little impact on National.

Our focus is on hours but we report salaries (excluding fringes) including agency nursing fees (travelers, registry, per diem & contract employees) as well as hours, including vacation, holiday & sick hours and pay.

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OBJECTIVES OF OMA PROJECT

Carefully consider the classifications for the OMA Survey – for calendar 2013 to be submitted by 7/1/14.

Direct input from Nursing Administration Executive(s) is needed – nursing model and roles will vary from hospital to hospital.

Prepare Nursing Administration Executive(s) to respond to Medicare Administrative Contractor (CMS auditors) questions if asked (along with finance personnel).

We do not seek uniformity – Nursing roles vary hospital to hospital.

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THE WAGE INDEXWHAT IT IS & WHY IT’S IMPORTANT

A wage index is computed for each metropolitan area and statewide rural areas. The wage index adjusts the "Labor Related Portion" or either 62% or 69% of the DRG payment.

Computation of current Detroit-Livonia-Dearborn (FFY 2014) wage index:AHW based on the acute care hospitals

in the Detroit area $35.6582Divide by National AHW FY 2014 ÷38.3698Budget neutrality Factor x .99015Computed Detroit natural wage index – FY 2014 .9201

The above average hourly wage includes certain fringe benefits. CMS applies the OMA when computing the AHW and the wage index. This adjustment is not transparent.

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WHAT WERE THEY THINKING?

Academics thought small rural hospitals had lower skill mix level and a resulting reduced average hourly wage. Congress wished to improve the equity of the wage index by computing wage indexes based on national average skill mix.

But for FY 2015 OMA benefits 38 rural areas and decreases payment to 20 rural areas. 

Why? When legislated, no one thought about minimum

staffing levels – that can result in higher skill mix for small rurals compared to urban hospitals.  

OMA has never worked right.

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GOAL OF REVIEW

Review Functionality – not just job titles More accurately identify employee

classification in accordance with the instructions

Improve payment FFY 2016-2018 Hours are the driver of the OMA, CMS

uses National AHWs and local hours.

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QUESTIONS