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

The Facilities for Medicare and Medicaid Services’ clinic wage index system isn’t performing more than

The Facilities for Medicare and Medicaid Services’ clinic wage index system isn’t performing more than enough to assist services in the base quartile, particularly those in rural spots, in accordance to an audit done by the Section of Overall health and Human Companies Office of Inspector Typical.

OIG’s audit observed that of the hospitals in the base quartile of the spot wage index for the federal fiscal year 2020, fifty three% have been in rural spots. These hospitals also tended to be smaller and reduced-quantity services, in accordance to the report.

Due to the fact of these results, the watchdog company urges CMS to concentration its base quartile wage index adjustment on hospitals with minimal or negative profit margins fairly than the types with higher, favourable profit margins.

It even more instructed that CMS appear into why some hospitals in a specific spot could shell out higher wages than other hospitals in the identical spot, even just before the use of the base quartile wage index adjustment.

What is actually THE Effect

The base quartile was produced up of 866 hospitals throughout 24 states and Puerto Rico. There have been 6 that accounted for forty one% of the base quartile hospitals – Puerto Rico, Alabama, Louisiana, Mississippi, Arkansas and West Virginia. Every single of these experienced more than ninety% of their complete hospitals in the base quartile.

Extra than 50 percent of the hospitals in the cheapest quartile are in states that did not broaden Medicaid underneath the provisions of the Affordable Treatment Act. In principle, increasing Medicaid can make improvements to clinic revenues due to the fact beforehand uninsured patients could become insured underneath Medicaid and request cure, ensuing in higher volumes, in accordance to OIG.

States that experienced hospitals in the cheapest quartile also experienced the cheapest minimum amount wages, with most states that present the federal minimum amount wage ($seven.25) slipping into the base quartile.

The audit also observed that clinic profit margins within the previous quartile varied drastically. For case in point, the margins ranged from -133% to 47% for 2016. Of the 783 hospitals for which information was gathered, 303 experienced negative profit margins that year.

THE More substantial Development

CMS takes advantage of spot wage indexes to regulate Medicare typical payments to hospitals in the inpatient and outpatient potential payment devices to reflect the rates hospitals encounter in their community labor marketplaces.

It takes advantage of wage information from 4 decades prior in the calculations, which raises fears about how it could reduce some hospitals from elevating wages.

To make up for that, starting in 2020, CMS commenced modifying the clinic wage index to convey the hospitals in the base quartile nearer to those in higher quartiles. CMS programs to proceed this tactic for at least 4 decades with the hope that hospitals in the base quartile will use the opportunity afforded by higher Medicare payments to elevate wages.

CMS has also developed a new benefit-based mostly payment design for rural health care suppliers, termed the Group Overall health Obtain and Rural Transformation (CHART) Product. It supplies assist via new seed funding and payment structures, operational and regulatory flexibilities and technological and mastering assist.

Also, CMS greater Medicare payment charges for inpatient psychiatric services, skilled nursing services and hospices by 2.2%, 2.2%, and 2.four%, respectively.

ON THE Report

“We acknowledge that CMS’s initiative to minimize clinic stress during the pandemic could make it difficult for CMS to concentration on new initiatives,” OIG explained in the audit. “Even so, when publish-pandemic circumstances make it possible for for new initiatives, CMS could take into account focusing the base quartile wage index adjustment more precisely towards the hospitals that are the least ready to elevate wages without the need of that adjustment.”

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