Back to the Drawing Board: Next Occupational Mix Survey by IPPS Hospitals Due July 3, 2017

The expression “Back to the drawing board” is associated with failure of a plan or design and the need to start fresh. The phrase actually originated as the caption to a cartoon in a 1941 New Yorker magazine. The cartoon shows military men racing toward a crashed plane and a man, with a roll of plans under his arm, walking away saying “Well, back to the old drawing board!”

CMS often takes this approach in determining how to reimburse providers for Medicare services, including how wage data is handled for Inpatient Prospective Payment System (IPPS) hospitals.

The reporting of wage index data in one form or another has been required since the implementation of DRGs and the IPPS in 1983. Initially, CMS collected the data every few years, but in 1989 Congress passed legislation directing CMS to update the index annually. The first Medicare wage data was from 1990 cost reports and was used to adjust 1994 IPPS rates. This four-year lag continues today due to the length of the cost reporting cycle and the need to allow time for review and correction.

An occupational mix adjustment was introduced also, but was not implemented for various reasons until 1990 with the passage of the Benefits Improvement and Protection Act (BIPA). BIPA mandated the collection of data on the occupational mix of employees’ data via a survey every three years.

Tip #34:

The next occupational mix survey is due July 3, 2017. Hospitals paid under IPPS must submit wage and hour data for full-time, part-time, contracted employees, and Home Office allocated salaries.

Further guidance can be found on the Centers for Medicare and Medicaid Services (CMS) website:

CMS Occupational Mix Survey

Questions? Please contact Marie White at 612.253.6546 or


New Year’s Uber Rides and SNF Contracted Personnel

Man Using the Uber Taxi App on Iphone in NYC

This week’s tip is for the Skilled Nursing Facility (SNF) folks, but also has relevance to hospitals.

Each New Year’s Eve, there is demand for taxis—and now Uber drivers—to safely transport revellers home .This year, it was reported that Uber prices surged by nearly 10X during peak times (between midnight and 3:00 a.m.) following celebrations.

A similar situation exists for health care providers and the demand for their services. With the current strong economy, it has become a huge challenge for SNFs and hospitals to find personnel to provide necessary services to residents and patients. People have their choice of employer and locations in this competitive environment. Health care providers often have to resort to using contract nurses and other professionals who may have to travel several hours to a facility. In addition to an hourly wage, the facility may have to pay mileage, hotel and other travel costs to the contractor or an agency.

CMS recognizes that contracted personnel is a necessary and allowable expense, but there are further rules that govern what can be included for wage index computations (see Tips# 4 & 8 for further insight on wage index).

Tip #24:

SNF contracted personnel costs should not include miscellaneous items, such as travel or supplies expense. (Pub. 15-2, §4105.1).

Further guidance can be found on the Centers for Medicare and Medicaid Services (CMS) website:

Provider Reimbursement Manual 15-2

Questions? Please contact Marie White at 612.253.6546 or


Porsche vs. Honda: Spend Less to Get More!

When it comes to purchasing a car, most people budget for features they want in a vehicle, such as automatic transmission, air bags and power door locks/windows. There might be additional upgrades available, but they aren’t necessary for you to get around. As long as the vehicle enables you to get from point A to B, you’re good to go. A similar situation exists for Medicare hospitals in regards to nursing personnel. CMS wants you to employ the appropriate level of nursing staff for the care to be provided.

Every three years, a Prospective Payment Hospital (PPS) hospital is required to submit a survey that identifies the wages and hours of its employees by certain job categories. CMS then uses this data to come up with a factor that either increases or decreases the wage index. An increase can occur if a hospital uses lower wage LPNs and aides, rather than RNs. CMS does this to equalize the wages paid as a hospital should not be “rewarded” for using all RNs when a lower professional level is appropriate.

The survey is due to your MAC by July 1, 2017.

Tip #23:

Start reviewing your wages and hours by job category early to ensure you have the most accurate data to submit for Occupational Mix.

Further guidance should be available on the website of the Medicare Administrative Contractor (MAC) you are assigned to.

Questions? Please contact Marie White at 612.253.6546 or

The Denominator: A Critical Factor in Calculating Average Hourly Wage

school conceptDo you remember learning about denominators in math class at school years ago? You’ll be glad you did for our topic today.

Wage Index is one of the key adjustments Medicare makes to your payments. They adjust your payments based on the cost of staffing in your geographic area. In addition, they determine an Average Hourly Wage (AHW) and then compare that to the National AHW to determine your payment factor. One of the most important components in calculating AHW is the hours used in the denominator. The misreporting of hours can have a significant impact on your Wage Index adjustment.

Tip #11:

Ensure hours for wage index are adjusted to reflect A-6 wage reclassifications (Pub 15-2, §4005.2).

Whenever you have a salary adjustment there should be a corresponding hours reclassification.

Further guidance on the types of dollars and hours that should be included on S-3, part II can be found on the Centers for Medicare and Medicaid Services (CMS) website:

Provider Reimbursement Manual 15-2

Questions? Please contact Marie White at 612.253.6546 or



Wage Index: Defining It and Understanding Yours

Most everyone knows the saying, “Keep your friends close and your enemies closer.” In the world of health care, we don’t really have enemies per se, but we definitely have competitors. It is important to stay in touch with competitors for various reasons, such as:

  • You may benefit from understanding their perspective and/or ideas on a subject
  • You may need to work together someday
  • You may have shared interests if you dig deep enough

A practical application of this concept is the wage index. The index is an adjustment for differences in hospital wage rates among labor markets. It is computed using individual hospital data that is then compared to metropolitan statistical area (MSA) or statewide rural area to the nationwide average.

Since the inception of a Prospective Payment System (PPS) for Skilled Nursing Facilities (SNF), hospital wage data has been used to develop a wage index to be applied to SNFs. The SNF PPS wage index values for any fiscal year are calculated from the same data used to compute that fiscal year’s acute care hospital inpatient wage index data.

Tip #8:

Educate yourself on what your own wage index ratio is and how it compares to your marketplace, your state and the national average.

You should also consider establishing a task force among the hospitals and SNFs in your area to analyze how each other are reporting their wage data and if there are ways you can enact change that would result in an improved index.

Guidance is available on the Centers for Medicare and Medicaid Services (CMS) website:

Medicare Wage Index home page

Questions? Please contact Marie White at 612.253.6546 or



What a “Happy Meal” Has in Common With Overhead Costs

fast food isolated on white backgroundWhen you order a combo meal at a fast-food restaurant, the bill is for a sandwich, side and drink. You don’t get charged separately for the lettuce, tomato, pickles, ketchup, wrapper, carton and cup. The same concept applies to a hospital. If you get an X-ray, you’re charged for the X-ray. There’s not a separate charge for the registration clerk, the technician who performs the test, the electricity that was used to run the equipment, etc. However, all of these things—and many more—are costs that are necessary in operating a hospital.

These overhead costs must be assigned to the various patient care-related service lines of the hospital. This is done through the use of overhead allocation statistics. The regulations have several different options for assigning the costs, as well as options for the statistics that can be used.

Tip #9:

Periodic time studies, in lieu of ongoing time reports, may be used to allocate direct salary and wage costs of overhead departments (Pub 15-1, §2313).

There are specific criteria for the time studies in section 2313. You should familiarize yourself with the criteria and periodically review the time studies of your hospital to ensure they are in compliance.

Further guidance is available on the Centers for Medicare and Medicaid Services (CMS) website:

Provider Reimbursement Manual

Questions? Please contact Marie White at 612.253.6546 or



Documentation: “If a Tree Falls . . .”

“If a tree falls in a forest and no one is around to hear it, does it make a sound?”

Marie White

Marie White

One of the most challenging issues in health care is documentation. Like the above quote, it’s become somewhat of a cliché, but nevertheless it’s true: if you didn’t document it, you didn’t do it or it didn’t happen. This mantra is equally important for services you provide to patients, as well as services you purchase from others.

The hospital must ensure that supporting documentation for both salaries and hours are based on actual data maintained in a form that permits validation by the contractor. The use of estimates for these amounts is unacceptable for the wage index.

Tip #5:

When reporting contract labor for wage index, ensure you have hours to match expense (Pub 15-2, §4005.2)

Further guidance on the types of hours that should be included on Worksheet S-3, part II can be found on the Centers for Medicare and Medicaid Services (CMS) website:

Provider Reimbursement Manual 15-2

Questions? Please contact Marie White at 612.253.6546 or