June 16, 2024


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

The Centers for Medicare and Medicaid Services’ hospital wage index technique isn’t really doing ample to support services in the bottom quartile, precisely individuals in rural areas, in accordance to an audit performed by the Section of Health and Human Services Workplace of Inspector General.

OIG’s audit uncovered that of the hospitals in the bottom quartile of the region wage index for the federal fiscal calendar year 2020, fifty three% were in rural regions. These hospitals also tended to be more compact and decrease-volume services, in accordance to the report.

Since of these findings, the watchdog company urges CMS to target its bottom quartile wage index adjustment on hospitals with small or unfavorable gain margins fairly than the ones with increased, positive gain margins.

It even further recommended that CMS seem into why some hospitals in a specified region could pay back increased wages than other hospitals in the similar region, even right before the use of the bottom quartile wage index adjustment.

What is THE Influence

The bottom quartile was built up of 866 hospitals throughout 24 states and Puerto Rico. There were six that accounted for forty one% of the bottom quartile hospitals – Puerto Rico, Alabama, Louisiana, Mississippi, Arkansas and West Virginia. Each individual of these had more than 90% of their full hospitals in the bottom quartile.

Extra than 50 percent of the hospitals in the lowest quartile are in states that did not develop Medicaid less than the provisions of the Economical Treatment Act. In principle, increasing Medicaid can strengthen hospital revenues due to the fact earlier uninsured sufferers could become insured less than Medicaid and find therapy, resulting in increased volumes, in accordance to OIG.

States that had hospitals in the lowest quartile also had the lowest least wages, with most states that provide the federal least wage ($7.25) falling into the bottom quartile.

The audit also uncovered that hospital gain margins within the previous quartile various considerably. For illustration, the margins ranged from -133% to forty seven% for 2016. Of the 783 hospitals for which details was gathered, 303 had unfavorable gain margins that calendar year.

THE Larger sized Development

CMS uses region wage indexes to change Medicare normal payments to hospitals in the inpatient and outpatient prospective payment systems to reflect the costs hospitals encounter in their regional labor marketplaces.

It uses wage details from four many years prior in the calculations, which raises worries about how it could avert some hospitals from elevating wages.

To make up for that, beginning in 2020, CMS began modifying the hospital wage index to deliver the hospitals in the bottom quartile closer to individuals in increased quartiles. CMS options to carry on this tactic for at minimum four many years with the hope that hospitals in the bottom quartile will use the option afforded by increased Medicare payments to elevate wages.

CMS has also created a new benefit-based mostly payment product for rural health care suppliers, referred to as the Neighborhood Health Obtain and Rural Transformation (CHART) Model. It gives support as a result of new seed funding and payment constructions, operational and regulatory flexibilities and specialized and mastering support.

In addition, CMS elevated Medicare payment prices for inpatient psychiatric services, proficient nursing services and hospices by two.two%, two.two%, and two.four%, respectively.


“We understand that CMS’s initiative to minimize hospital burden during the pandemic could make it hard for CMS to target on new initiatives,” OIG claimed in the audit. “Even so, when post-pandemic problems permit for new initiatives, CMS could consider focusing the bottom quartile wage index adjustment more specifically towards the hospitals that are the minimum equipped to elevate wages without the need of that adjustment.”

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