Wisconsin Hospital Association

1. Wage Index Improvement Program & Occupational MixPPS 28 (FY 2015 AWI)FYE between September 30, 2011 and August 31, 2012Presented on WednesdayOctober 2, 2013 Wisconsin Hospital Association

2. Contact Information – WHA Brian Potter Senior Vice President, Finance Address: Wisconsin Hospital Association 5510 Research Park Drive Madison, WI 53711 Mailing Address: Wisconsin Hospital Association P.O. Box 259038 Madison, WI 53725-9038 Phone: (608) 274-1820 E-Mail:bpotter@wha.org

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. 1538 East Maryland Avenue Phoenix, AZ 85014 Phone: (800) 862-5368 or (602) 995-9420 E-Mail: (Mike) mwebdale@rcmgmt.com (Dan)dsilver@rcmgmt.com (Eric) ewebdale@rcmgmt.com (Dave) dhanak@rcmgmt.com

4. 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

5. Agenda (continued) • Pension Costs • Contracted Administrative & General - Line 28 • Occupational Mix Survey • Dates • Calculation

6. National Average Hourly Wage Change

7. 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

8. History of Wisconsin Wage Index

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

10. 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

11. 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

12. 10 Largest Increases In Wage Index

13. 10 Largest Decreases In Wage Index

14. 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

15. New Worksheet S-3, Part IV

16. 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

17. 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

18. 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

19. 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

20. 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

21. 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?

22. 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)

23. 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

24. 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

25. 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

26. Pension Costs (continued)

27. 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

28. Contracted Administrative & General (Line 28) 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

29. Contracted Administrative & General (Line 28) • 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

30. 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

31. 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)

32. Cost Centers to be Used for Occupational Categories – from Worksheet A Medicare Reimbursement Experts Since 1990

33. 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 Medicare Reimbursement Experts Since 1990

34. 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

35. Impact of the Occupational Mix Survey • 100% of Wisconsin (64 of 64) Hospitals submitted • 93% Nationally submitted • Currently no Penalty

36. Occupational Mix Impact on Wisconsin Wage Index

37. 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 Medicare Reimbursement Experts Since 1990

38. Positive Occupational Mix Adjustment Medicare Reimbursement Experts Since 1990

39. Negative Occupational Mix Adjustment Medicare Reimbursement Experts Since 1990

40. 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 Medicare Reimbursement Experts Since 1990

41. 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

42. 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

43. ??? QUESTIONS ??? R-C Healthcare Management Services, Inc. 1538 E. Maryland Avenue Phoenix, AZ 85014 Phone: (800) 862-5368 or (602) 995-9420 www.rcmgmt.com Contacts: K. Michael Webdale – President Daniel Silver – Vice President Eric Webdale – Vice President David Hanak – Director, Sales & Marketing