OIG audit: CMS should improve hospital wage index adjustments for rural hospitals

Lincoln Wylie

The Facilities for Medicare and Medicaid Services’ healthcare facility wage index method is just not carrying out more than enough to support services in the bottom quartile, exclusively those in rural destinations, in accordance to an audit conducted by the Division of Health and Human Solutions Office environment of Inspector Normal.

OIG’s audit found that of the hospitals in the bottom quartile of the area wage index for the federal fiscal calendar year 2020, 53% had been in rural areas. These hospitals also tended to be more compact and reduced-quantity services, in accordance to the report.

Since of these conclusions, the watchdog company urges CMS to concentrate its bottom quartile wage index adjustment on hospitals with very low or damaging income margins rather than the types with better, good income margins.

It further more prompt that CMS glimpse into why some hospitals in a specific area could pay back better wages than other hospitals in the exact area, even prior to the use of the bottom quartile wage index adjustment.

What is actually THE Influence

The bottom quartile was designed up of 866 hospitals across 24 states and Puerto Rico. There had been 6 that accounted for forty one% of the bottom quartile hospitals – Puerto Rico, Alabama, Louisiana, Mississippi, Arkansas and West Virginia. Every single of these experienced extra than 90% of their whole hospitals in the bottom quartile.

A lot more than half of the hospitals in the lowest quartile are in states that did not extend Medicaid underneath the provisions of the Economical Care Act. In idea, growing Medicaid can make improvements to healthcare facility revenues simply because previously uninsured clients could grow to be insured underneath Medicaid and look for treatment, ensuing in better volumes, in accordance to OIG.

States that experienced hospitals in the lowest quartile also experienced the lowest bare minimum wages, with most states that give the federal bare minimum wage ($seven.25) slipping into the bottom quartile.

The audit also found that healthcare facility income margins inside of the final quartile diverse significantly. For illustration, the margins ranged from -133% to 47% for 2016. Of the 783 hospitals for which info was gathered, 303 experienced damaging income margins that calendar year.

THE Larger sized Trend

CMS makes use of area wage indexes to modify Medicare common payments to hospitals in the inpatient and outpatient future payment systems to mirror the charges hospitals facial area in their community labor marketplaces.

It makes use of wage info from 4 many years prior in the calculations, which raises concerns about how it could avoid some hospitals from raising wages.

To make up for that, commencing in 2020, CMS commenced altering the healthcare facility wage index to bring the hospitals in the bottom quartile closer to those in better quartiles. CMS ideas to continue on this tactic for at minimum 4 many years with the hope that hospitals in the bottom quartile will use the possibility afforded by better Medicare payments to elevate wages.

CMS has also produced a new price-based mostly payment model for rural health care providers, referred to as the Local community Health Entry and Rural Transformation (CHART) Model. It supplies support via new seed funding and payment structures, operational and regulatory flexibilities and specialized and learning support.

Furthermore, CMS increased Medicare payment premiums for inpatient psychiatric services, experienced nursing services and hospices by two.two%, two.two%, and two.four%, respectively.

ON THE Report

“We identify that CMS’s initiative to decrease healthcare facility load all through the pandemic could make it complicated for CMS to concentrate on new initiatives,” OIG claimed in the audit. “Even so, when write-up-pandemic situations allow for new initiatives, CMS could think about focusing the bottom quartile wage index adjustment extra exactly toward the hospitals that are the minimum equipped to elevate wages devoid of that adjustment.”

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