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

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The Facilities for Medicare and Medicaid Services’ hospital wage index program isn’t really doing enough to help amenities in the base quartile, particularly those people in rural areas, according to an audit performed by the Section of Health and Human Products and services Business of Inspector Basic.

OIG’s audit uncovered that of the hospitals in the base quartile of the space wage index for the federal fiscal calendar year 2020, fifty three% have been in rural regions. These hospitals also tended to be lesser and lessen-quantity amenities, according to the report.

Because of these conclusions, the watchdog agency urges CMS to concentrate its base quartile wage index adjustment on hospitals with lower or detrimental earnings margins relatively than the types with bigger, favourable earnings margins.

It further proposed that CMS glimpse into why some hospitals in a specific space could pay bigger wages than other hospitals in the same space, even prior to the use of the base quartile wage index adjustment.

What is THE Effects

The base quartile was designed up of 866 hospitals throughout 24 states and Puerto Rico. There have been six that accounted for forty one% of the base quartile hospitals – Puerto Rico, Alabama, Louisiana, Mississippi, Arkansas and West Virginia. Each individual of these experienced much more than ninety% of their total hospitals in the base quartile.

Far more than fifty percent of the hospitals in the lowest quartile are in states that did not develop Medicaid underneath the provisions of the Economical Treatment Act. In theory, expanding Medicaid can strengthen hospital revenues due to the fact earlier uninsured patients could develop into insured underneath Medicaid and search for cure, ensuing in bigger volumes, according to OIG.

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

The audit also uncovered that hospital earnings margins in the very last quartile assorted drastically. For illustration, the margins ranged from -133% to 47% for 2016. Of the 783 hospitals for which details was gathered, 303 experienced detrimental earnings margins that calendar year.

THE Bigger Trend

CMS employs space wage indexes to change Medicare typical payments to hospitals in the inpatient and outpatient future payment methods to reflect the price ranges hospitals face in their nearby labor markets.

It employs wage details from 4 years prior in the calculations, which raises issues about how it could avert some hospitals from elevating wages.

To make up for that, commencing in 2020, CMS commenced modifying the hospital wage index to bring the hospitals in the base quartile nearer to those people in bigger quartiles. CMS plans to continue on this tactic for at the very least 4 years with the hope that hospitals in the base quartile will use the opportunity afforded by bigger Medicare payments to increase wages.

CMS has also made a new price-primarily based payment model for rural healthcare providers, termed the Neighborhood Health Accessibility and Rural Transformation (CHART) Design. It delivers help through new seed funding and payment constructions, operational and regulatory flexibilities and technological and finding out help.

Moreover, CMS increased Medicare payment prices for inpatient psychiatric amenities, skilled nursing amenities and hospices by 2.2%, 2.2%, and 2.4%, respectively.


“We recognize that CMS’s initiative to lower hospital load in the course of the pandemic could make it tricky for CMS to concentrate on new initiatives,” OIG mentioned in the audit. “Even so, when write-up-pandemic situations allow for new initiatives, CMS could consider focusing the base quartile wage index adjustment much more specifically towards the hospitals that are the the very least equipped to increase wages without that adjustment.”

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