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September 19, 2018 (Cleveland)

Hospitals to See Gain Under 2019 Medicare Wage Index Initiative

Hospitals in the Greater-Cleveland area will receive an estimated $7.2 million in additional reimbursement during the upcoming federal fiscal year as a result of the latest Medicare wage index initiative led by The Center for Health Affairs.

The wage index is a factor utilized by the Centers for Medicare & Medicaid Services (CMS) in the annual adjustment of the Medicare diagnosis-related group (DRG) payment rate that goes into effect at the start of each federal fiscal year on Oct. 1. The wage index is calculated for providers that are grouped into core-based statistical areas and can result in the adjustment of providers’ base payment rates either upward or downward.

The data used to determine the Medicare wage index for the 2019 federal fiscal year is drawn from the 2015 Medicare cost reports. The Center for Health Affairs, through work with its hospital Reimbursement Forum, coordinates an annual review of cost report data by a consultant with expertise in this area. For the 2019 project, Comprehensive Reimbursement, Inc. (CRI), a member of the Reimbursement Alliance Group specializing in the review of Medicare wage index data, began work in January 2017.

CRI’s review included an analysis of the original data submitted, comparison of year-to-year data, interviews with hospital finance staff, and review of adjustments made by the Medicare auditors. This process helps identify possible gaps, inconsistencies and unique transactions that impact the wage index. Upon completion of the review, CRI prepares a revision package submitted to the fiscal intermediary to consider adjustments to the wage index data. CRI discusses changes and if necessary files appeals of the Medicare auditor’s decision on acceptance of the revised data.

CRI’s work on the 2019 wage-index project has brought about in the final wage index an increase from the original proposed index of 0.8680 to 0.8827. Adjustments impacting this change included:

• An increase in the average hourly salary rate due to a decrease in hours that can be excluded.
• An increase in the average hourly rate due to additional identified contract labor.
• A wage-related cost increase due to identifying additional pension funding.
• A contracted administrative and general average hourly rate increase due to identification of additional contract labor.

The resulting estimated $7.2 million in additional reimbursement for traditional Medicare fee-for-service patients is a conservative calculation and does not include any gains in revenue from Medicare managed care or any other reimbursement tied to Medicare rates.

While work on the 2019 Medicare wage index initiative has wrapped up, work for the 2020 initiative has been underway for some time already, having commenced late December 2017. CRI has been retained again to perform the review of the wage-index data for 2020. CRI has completed the fieldwork and delivered the proposed revision packages for Medicare’s review early in September. Over the coming months, CRI will be responding to Medicare inquiries regarding the revision packages. The preliminary estimate of the impact of the review will be known in early March 2019, when Medicare releases the preliminary federal fiscal year 2020 Public Use File.

For more on The Center for Health Affairs’ Medicare wage index initiative, contact us.