Honesty, Integrity and Results…You Can Depend On! Wisconsin Hospital Association Wage Index...

Honesty, Integrity and Results…You Can Depend On!

Wisconsin Hospital Association

Wage Index Improvement Program & Occupational Mix

PPS 28 (FY 2015 AWI)FYE between September 30, 2011

and August 31, 2012

Presented on WednesdayOctober 2, 2013


Contact Information – WHA

Brian PotterSenior Vice President, Finance

Address: Wisconsin Hospital Association5510 Research Park DriveMadison, WI 53711

Mailing Address: Wisconsin Hospital AssociationP.O. Box 259038Madison, WI 53725-9038

Phone: (608) 274-1820

E-Mail: [email protected]


Contact Information – RCHMS

K. Michael Webdale, PresidentDaniel Silver, Vice PresidentEric Webdale, Vice PresidentDavid Hanak, Director, Sales & Marketing

R-C Healthcare Management Services, Inc.1538 East Maryland AvenuePhoenix, AZ 85014

Phone: (800) 862-5368 or (602) 995-9420

E-Mail: (Mike) [email protected] (Dan) [email protected] (Eric) [email protected] (Dave) [email protected]


Agenda• National Average Hourly Wage• Wage Index

– Wage Index for FY 2014– Largest Changes in WI

• Wage Index Changes– Census– S-3 part IV– Commuter Based Wage Index

• Wage Index Improvement Process– Timetable


Agenda (continued)

• Pension Costs • Contracted Administrative & General - Line 28

• Occupational Mix Survey–Dates–Calculation


National Average Hourly Wage Change

National AHW Increase Effective

PPS 24 34.9664$ 4.30% 10/1/2010PPS 25 36.2481$ 3.67% 10/1/2011PPS 26 37.4608$ 3.35% 10/1/2012PPS 27 38.3698$ 2.43% 10/1/2013PPS 28 39.0932$ 1.89% 10/1/2014


Wage Index for FY 2014

• Rural Floor Budget Neutrality Adjustment – 2013 is .991340– 2014 is .990150

• The wage index history at www.wageindex.com updated on the release of each Public Use File in September, February, May and August


History of Wisconsin Wage Index

CBSA# CBSA Names FY

2011 FY

2012FY

2013FY 2012 to

FY 2013 FY 2014

11540 Appleton 0.9301 0.9115 0.9425 3.1 .9375 (.5)

20740 Eau Claire 0.9552 0.9453 0.9630 1.8 1.0008 3.7

22540 Fond du Lac 0.9339 0.9354 0.9425 0.7 .9335 (.9)

24580 Green Bay 0.9395 0.9601 0.9579 (0.2) .9364 (2.1)

27500 Janesville 0.9645 0.9394 0.9666 2.7 .9269 (3.9)

29100 LaCrosse, WI-MN 0.9815 0.9639 0.9979 3.4 1.0101 1.2

29404 Lake Co.-Kenosha Co. IL-WI 1.0683 1.0150 1.0425 2.8 1.0520 .9

31540 Madison 1.1264 1.1137 1.1170 0.3 1.1303 1.3

33340Milwaukee-Waukesha-West Allis 1.0183 0.9893 0.9921 0.3 .9827 (.9)

36780 Oshkosh-Neenah 0.9466 0.9171 0.9425 2.5 .9256 (1.7)

39540 Racine 1.0598 0.8939 0.9425 4.9 .8925 (5.0)

43100 Sheboygan 0.9253 0.9269 0.9498 2.3 .9175 (3.2)

48140 Wausau 0.9749 0.9080 0.9425 3.5 .8821 (6.0)

52 Rural WI 0.9200 0.8939 0.9425 4.9 .8821 (6.0)


Comparison of FY 2013 Standardized Amounts to the FY 2014 Standardized Amount with Full Update

Full Update (1.7 percent); Wage Index is greater than 1.0000

FY 2013 Base Rate Labor: $4,176.63 Nonlabor: $1,824.27

FY 2014 Update Factor 1.017

FY 2014 DRG Recalibration and Wage Index Budget Neutrality Factor

.997936

FY 2014 Reclassification Budget Neutrality Factor

.990718

FY 2014 Rural Community Demonstration Budget Neutrality Factor

.999415

FY 2014 Operating Outlier Factor .948995

Cost of Policy on Admission .998

Documentation and coding adjustments .9403

Final Rate for FY 2014 Labor: $3,737.71Nonlabor: $1,632.57


How the Wage Index is Calculated

• Total salaries and hours– Adjust for overhead departments– Adjust to a common period with an inflation

factor– Adjust for Occupational Mix– Total salaries and hours at the CBSA level– Total salaries and hours nationally– Divide each CBSA’s AHW by the National

AHW• Each CBSA has a Rural Floor Budget

Neutrality Factor .990150


Importance of the Wage Index

• Labor portion of the DRG is: 62% if the wage index is less than or equal

to 1 69.6% if the wage index is greater than 1

• Highest wage index – – Santa Cruz-Watsonville, CA 1.7276

• Lowest wage index – – Rural Alabama .7094


10 Largest Increases In Wage Index

CBSA Code State or Urban Area

FY 2013 Wage Index

FY 2014 Wage Index PP Change

7 Rural Connecticut 1.1759 1.3062 13.0335980 Norwich-New London, CT 1.1759 1.3062 13.03

25540 Hartford-West Hartford, CT 1.1759 1.3062 13.03

29 Rural Nevada 1.0256 1.1454 11.9839900 Reno-Sparks, NV 1.0256 1.1454 11.98

16180 Carson City, NV 1.0373 1.1454 10.81

35300 New Haven-Milford, CT 1.2054 1.3062 10.0840340 Rochester, MN 1.0625 1.1548 9.23

2 Rural Alaska 1.2727 1.3556 8.2911260 Anchorage, AK 1.2727 1.3556 8.29


10 Largest Decreases In Wage Index

CBSA Code State or Urban Area

FY 2013 Wage Index

FY 2014 Wage Index PP Change

37380 Palm Coast, FL .9567 .7980 -15.87

46060 Tucson, AZ 1.0569 .9133 -14.36

3 Rural AZ 1.0569 .9133 -14.36

49740 Yuma, AZ 1.0569 .9667 -9.02

39140 Prescott, AZ 1.1804 1.0907 -8.97

19060 Cumberland, MD-WV .8763 .7976 -7.87

29420Lake Havasu City-Kingman, AZ 1.0569 .9789 -7.80

44220 Springfield, OH .9155 .8411 -7.44

14500 Boulder, CO 1.0266 .9563 -7.03

17980 Columbus, GA-AL .8873 .8171 -7.02


New Worksheet S-3, Part IV• 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 G/L benefits and total Wage Related Costs on S-3 Lines 17-25


New Worksheet S-3, Part IVPART IV - WAGE RELATED COSTSRetirement Cost

1.00 401k 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) 5.00 401K/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 10.00 Dental, Hearing & Vision Plans 11.00 Life Insurance (If employee is owner or beneficiary) 12.00 Accident Ins. (If employee is owner or beneficiary) 13.00 Disability Ins. (If employee is owner or beneficiary)

14.00 Long-Term Care Ins. (If employee is owner or beneficiary) 15.00 Workmen's Compensation Ins. 16.00 Retiree Health Care Cost

Taxes 17.00 FICA-Employers portion only 18.00 Medicare Taxes-Employers Portion Only 19.00 Unemployment Insurance 20.00 State or Federal Unemployment Taxes

Other 21.00 Executive Deferred Compensation 22.00 Day Care Cost and Allowances 23.00 Tuition Reimbursement 24.00 Total Wage Related cost (Sum lines 1 - 23)

Part B - Other than Core Related Cost 25.00 OTHER WAGE RELATED COSTS (SPECIFY)


Wage Index Changes• Secretary of HHS submitted a plan to reform

the wage index to Congress on April 11, 2012

• Commuter Based Wage Index– Report hospital data by zip code– Calculates an AHW by zip code– Each hospital accumulates employees by zip code

• Potential Issues – Collection of zip code data– Transparency– Exception process starting over


FY 2015 Hospital Wage Index Development Timetable

• September 13, 2013 – Release of the first Public Use File, which will include the original, unaudited S-3s and occupational mix survey

• November 21, 2013 – Deadline to submit any wage data and occupational mix revisions

• February 20, 2014 – Release of the next Public Use File, which will include the revisions submitted in December


FY 2015 Hospital Wage Index Development Timetable

• May 2, 2014 – Release of the final Public Use File

• August 1, 2014 – Approximate date of publication of the FY 2015 Final Rule. The wage index includes the final wage index data corrections

• October 1, 2014 – Effective date of the FY 2015 wage index


Wage Index Improvement Process

• R-C Healthcare Management analyzes HCRIS and September PUF data

• 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


Wage Index Improvement Process (continued)

• Revisions are due November 21, 2013

• RCHMS assists the hospitals to defend the revisions during the FI’s audits in December 2013 and January 2014

• RCHMS verifies that the revisions are included in all PUFs and provides any necessary follow-up


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 28?


Hours Issues

• Eliminate on-call and standby hours

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

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


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


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 SB, Form 5500 data


Pension Costs Currently

• When pension plans were over-funded, the worksheet reduced the allowable pension costs– Any reductions are being amortized over 10 years

(eight years remaining)

• CMS will now use three year average of cash contributions – cash paid in fiscal year


Pension Costs (continued)Defined Benefit Pension Calculator

Provider Fiscal YearWage Index

YearBeginning Ending Total Defined Benefit

Pension Cash Contributions

Allowed (per audit) Wage Index Pension Cost

2009 1/1/2005 12/31/2005 1,300,000 800,000 #2010 1/1/2006 12/31/2006 2,700,000 3,000,000 #2011 1/1/2007 12/31/2007 4,100,000 3,600,000 #2012 1/1/2008 12/31/2008 3,000,000 200,000 #2013 1/1/2009 12/31/2009 1,000,000 2014 1/1/2010 12/31/2010 3,000,000 * 2015 1/1/2011 12/31/2011 2,000,000 *2016 1/1/2012 12/31/2012 1,000,000 *

3 Year Average of Funded Amounts 2,000,000 *

10 Year Amortization Amount 350,000 #

Pension Cost Allowed on Wage Index for

12/31/2010 2,350,000


Contracted Administrative & General (Line 28)

• The contracted A&G costs increased the national AHW by $.14

• More hospitals are understanding the importance of this data and are including these costs



National• FY 2012, 60%, $1.6B, with an AHW of $80.66• FY 2013, 66%, $1.8B, with an AHW of $91.42• FY 2014, 68%, $2.0B, with an AHW of $97.50

Wisconsin• FY 2012, 66% (43 of 65), $25M, AHW of

$109.32• FY 2013, 68% (43 of 63), $24M, AHW of

$123.65• FY 2014, 63% (40 of 64), $17M, AHW of

$96.93



• Include amounts for A&G services under contract

• Personnel costs from Worksheet A, line 5 and subscripts, column 2

• Types of services: Legal, tax preparation, cost report preparation, consulting, wage index

• Need to verify the hours


Impact of the Patient Protection and Affordable Care Act (PPACA)• Budget neutrality was returned to national

level from the state level

• Urban Hospital in AZ changed where they reclassify and Rural AZ WI decreased 14 percentage points

• MA – One Rural hospital determines Wage Index for Massachusetts

• CT – One Rural hospital


Occupational Mix Survey

• For pay periods ending between January 1, 2013 and December 31, 2013

• Due July 1, 2014• Affects hospitals for 3 years beginning in FY

2016 (October 1, 2015)


Cost Centers to be Used for Occupational Categories – from

Worksheet ACOST CENTER DESCRIPTIONS

Lines for 2552-10

Nursing Administration 13Adults and Pediatrics (General Routine Care) 30Intensive Care Unit 31Coronary Care Unit 32Burn Intensive Care Unit 33Surgical Intensive Care Unit 34Other Special Care (specify) 35Nursery 43Operating Room 50Recovery Room 51Delivery Room and Labor Room 52Electrocardiology 66Renal Dialysis 71Ambulatory Surgical Center (Non-Distinct Part) 72Other Ancillary 73Clinics 90Emergency 91Observation Beds 92

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

Medicare Reimbursement Experts Since 1990


What is Not Included

• Employees in areas excluded from IPPS

– Skilled-nursing facilities, psychiatric, or rehabilitation units• Worksheet S-3, Part II, Lines 9 and 10

– Part A Teaching Physician, Physician Part B, and CRNAs• Worksheet S-3, Part II, Lines 3, 4.01, 5, & 6

– Interns and Residents• Worksheet S-3, Part II, Lines 7



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


Impact of the Occupational Mix Survey

• 100% of Wisconsin (64 of 64) Hospitals submitted

• 93% Nationally submitted

• Currently no Penalty


Occupational Mix Impact on Wisconsin Wage IndexCBSA# CBSA Names

Percentage Point Change due to Occupational Mix

11540 Appleton .23

20740 Eau Claire .05

22540 Fond du Lac (.49)

24580 Green Bay (1.29)

27500 Janesville 2.86

29100 LaCrosse, WI-MN (.05)

29404 Lake Co.-Kenosha Co. IL-WI (.28)

31540 Madison .001

33340 Milwaukee-Waukesha-West Allis .68

36780 Oshkosh-Neenah (.50)

39540 Racine 1.10

43100 Sheboygan .62

48140 Wausau .48

52 Rural WI .04


Occupational Mix Adjustment Factor

• CMS calculator at:– www.cms.gov/AcuteInpatientPPS/WIFN/list.asp

– Click on the FY 2013 Wage Index Home Page– Then look for FY 2013 Final Rule AHW Calculator

• CMS has not posted new calculator yet



Positive Occupational Mix Adjustment


Spreadsheet for Final FY 2013 Calculation of Provider Occupational Mix AHW

You Must Fill Out the AHW Calculator Tab Before Filling Out the Occupational Mix Calculator

Fields in PINK are filled in by the provider from the provider's occupational mix spreadsheet

Fields in GREEN are filled in from IPPS wage index Web Site or Federal Registers

Fields in BOLD and/or Blue are calculated fields--DO NOT ENTER any information here

Provider Information

Provider Number

FI #

Occ Mix Begin Date 1/1/2009

Occ Mix End Date 12/31/2009

step 1 step 2 step 3 step 5 step 6 in step 7

Provider Occ

Mix HoursProvider Occ Mix Salaries

Provider % by Subcategory

FY 2011 Final National AHWs by

Subcategory

Provider Adjusted

AHWFinal FY 2011 National Adjusted Nurse AHW

Nurse Occ Mix Adjustment

FactorProvider %

by Total

RN 2,500,000 74,000,000 67.92% $37.435806262 25.425025

LPN and Surgical Technicians 169,000 3,200,000 4.59% $21.779745192 0.9999394

National Nurse Aides, Orderlies, and Attendants 1,000,000 14,000,000 27.17% $15.334363984 4.1658147

Medical Assistants 12,000 150,000 0.33% $17.232523608 0.0561777

Total Nurse Hours and Salaries 3,681,000 91,350,000 30.646956 $31.852574284 1.0393 47.74%

ALLOTHER 4,500,000 100,000,000 step 4 52.26%

TOTAL 8,181,000 191,350,000

Wage Data from Cost Report

Wages (From S-3, Parts II and III) $146,433,337(These are inflated wages, from cell B99 from AHW calculator).

Hours (From S-3, Parts II and III) 3,125,000(Revised hours from cell B100 from AHW calculator).

Unadjusted AHW 46.85866784(Should match AHW in cell B103 from AHW calculator).

Nurse Occ Mix Wages $72,656,961step 7

All Other Unadjusted Occ Mix Wages $76,526,437step 7

Total Occ Mix Wages $149,183,398step 8

Final Occ Mix Adjusted AHW 47.73868738step 8

Occupational Mix Adjustment 1.9%


Negative Occupational Mix Adjustment


Spreadsheet for Final FY 2013 Calculation of Provider Occupational Mix AHW

You Must Fill Out the AHW Calculator Tab Before Filling Out the Occupational Mix Calculator

Fields in PINK are filled in by the provider from the provider's occupational mix spreadsheet

Fields in GREEN are filled in from IPPS wage index Web Site or Federal Registers

Fields in BOLD and/or Blue are calculated fields--DO NOT ENTER any information here

Provider Information

Provider Number

FI #

Occ Mix Begin Date 1/1/2009

Occ Mix End Date 12/31/2009

step 1 step 2 step 3 step 5 step 6 in step 7

Provider Occ

Mix HoursProvider Occ Mix Salaries

Provider % by Subcategory

FY 2011 Final National AHWs by

Subcategory

Provider Adjusted

AHWFinal FY 2011 National Adjusted Nurse AHW

Nurse Occ Mix Adjustment

FactorProvider %

by Total

RN 1,000,000 35,000,000 84.46% $37.435806262 31.61808

LPN and Surgical Technicians 170,000 3,000,000 14.36% $21.779745192 3.1271594

National Nurse Aides, Orderlies, and Attendants 14,000 200,000 1.18% $15.334363984 0.1813185

Medical Assistants 0 0 0.00% $17.232523608 0

Total Nurse Hours and Salaries 1,184,000 38,200,000 34.926557 $31.852574284 0.9120 32.59%

ALLOTHER 3,800,000 79,000,000 step 4 67.41%

TOTAL 4,984,000 117,200,000

Wage Data from Cost Report

Wages (From S-3, Parts II and III) $146,433,337(These are inflated wages, from cell B99 from AHW calculator).

Hours (From S-3, Parts II and III) 3,125,000(Revised hours from cell B100 from AHW calculator).

Unadjusted AHW 46.85866784(Should match AHW in cell B103 from AHW calculator).

Nurse Occ Mix Wages $43,527,574step 7

All Other Unadjusted Occ Mix Wages $98,705,065step 7

Total Occ Mix Wages $142,232,639step 8

Final Occ Mix Adjusted AHW 45.51444461step 8

-2.9%


What’s Next?• Plan ahead – Data required is this calendar year

– Who is preparing the form?

• Collecting your data– Pay Periods ending between January 1, 2013 – December

31, 2013• No Accruals

– Contract labor hours– Home office– Related organization



Resources

R-C Healthcare Management Resources:• http://www.rcmgmt.com/wisconsin/

– Wage Index History – Wisconsin Average Hourly Wage Comparisons – FY 2015 Hospital Wage Index Development

Timetable – Worksheet S-3, Parts II and III Instructions– Pension - 3 Year Average Worksheet – Copy of your S-3 with comparison to prior year


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

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


??? QUESTIONS ???

R-C Healthcare Management Services, Inc.

1538 E. Maryland AvenuePhoenix, AZ 85014

Phone: (800) 862-5368 or (602) 995-9420www.rcmgmt.com

Contacts:K. Michael Webdale – PresidentDaniel Silver – Vice PresidentEric Webdale – Vice President

David Hanak – Director, Sales & Marketing

Honesty, Integrity and Results…You Can Depend On! Wisconsin Hospital Association Wage Index...

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