Wisconsin Hospital Association

Wisconsin Hospital Association Wage Index Improvement Program & Occupational Mix PPS 31 (FY 2018 AWI) FYE between September 30, 2014 and August 31, 2015 Presented on July 20, 2016

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 E-Mail: bpotter@wha.org

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 85014-1448 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

Agenda National Average Hourly Wage Wage Index Wage Index for FY 2018 Largest Changes in WI Wage Index Improvement Process Accelerated Timetable Pension Costs Contracted Administrative & General - Line 28 Worksheet S-10

National Average Hourly Wage National AHW Increase Effective PPS 26 $ 37.4608 3.35% 10/1/2012 PPS 27 $ 38.3698 2.43% 10/1/2013 PPS 28 $ 39.2313 2.32% 10/1/2014 PPS 29 $ 40.1902 1.94% 10/1/2015 PPS 30 $ 41.1412 2.31% 10/1/2016 PPS 31 $ 41.5990* 1.10% 10/1/2017 * Projected from May 2016 PUF

Wage Index for FY 2017 Rural Floor Budget Neutrality Adjustment 2014 -.990150 2015 -.989455 2016 -.990135 2017 -.993806 The wage index history at www.wageindex.com updated on the release of each Public Use File in May, February, April and August

History of Wisconsin Wage Index

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.993806

Calculation of Wage Index for Rural Wisconsin FY 2017 Total salaries and hours $698,024,703 18,065,919 = $38.6377 National AHW $41.1412 Budget Neutrality Factor 0.993806 ($ 38.6377 $41.1412) x 0.993806 = 0.9333 Wage Index = 0.9333

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 1.8059 Lowest wage index Rural Alabama 0.6864

10 Largest Increases In Wage Index CBSA Code State or Urban Area FY 2016 Wage Index FY 2017 Wage Index PP Change 43340 Shreveport-Bossier City, LA 0.8130 0.9239 11.1 44700 Stockton-Lodi, CA 1.3017 1.4039 10.2 41500 Salinas, CA 1.6039 1.7001 9.6 17660 Coeur d'alene, ID 0.8866 0.9701 8.4 34620 Muncie, IN 0.9190 0.9999 8.1 46700 Vallejo-Fairfield, CA 1.6276 1.7012 7.4 41540 Salisbury, MD-DE 0.9160 0.9827 6.7 39740 Reading, PA 0.8996 0.9654 6.6 28100 Kankakee, IL 0.8617 0.9219 6.0 27780 Johnstown, PA 0.8401 0.8954 5.5

10 Largest Decreases In Wage Index CBSA Code State or Urban Area FY 2016 Wage Index FY 2017 Wage Index PP Change 22 Massachusetts 1.2956 1.0524 (24.3) 39300 Providence-Warwick, RI-MA 1.2956 1.0524 (24.3) 44140 Springfield, MA 1.2956 1.0524 (24.3) 38340 Pittsfield, MA 1.2956 1.0768 (21.9) 2 Alaska 1.3038 1.0893 (21.5) 21820 Fairbanks, AK 1.3038 1.0893 (21.5) 15764 Cambridge-Newton-Framingham, MA 1.2956 1.1011 (19.4) 10900 Allentown-Bethlehem-Easton, PA-NJ 1.1155 0.9476 (16.8) 49340 Worcester, MA-CT 1.2956 1.1549 (14.1) 45940 Trenton, NJ 1.1155 0.9764 (13.9)

Reclassification Hospitals may be re-designated from one locale to another for the of using the other area s wage index value Hospitals must demonstrate proximity (15 miles) and AHW parameters (108/84%) Applications are for a three year period but may be rescinded Approximately 30% of hospitals reclass

WI Hospitals Reclassifying FY 2017 Provider Number 3 FY 2017 Wage Index Geographic CBSA Reclassified/Redesignated CBSA Lugar/NECMA MGCRB Reclass Hospital Reclassified as Rural 5 Out-Migration Adjustment 520070 0.9444 20740 52 Y 520075 0.9444 24580 11540 Y 520088 0.9444 22540 11540 Y 0.0128 520107 0.9444 52 11540 Y 0.0066 520202 0.9444 48140 11540 Y 520011 0.9680 52 20740 Y 520113 0.9444 52 24580 Y 0.0038 520059 1.0487 39540 29404 Y 0.0101 520066 1.0445 27500 31540 Y 0.0147 520095 1.0445 52 31540 Y 0.0211 520100 1.0445 27500 31540 Y 0.0147 520208 1.0445 27500 31540 Y 0.0147 520071 0.9939 52 33340 LUGAR 0.0418 520102 0.9939 52 33340 LUGAR 0.0275 520116 0.9939 52 33340 LUGAR 0.0418 520013 1.0798 20740 33460 Y 520002 0.9444 52 48140 Y 520037 0.9444 52 48140 Y

FY 2018 Wage Index Timetable May 16, 2016 Posting of Preliminary PUF September 2, 2016 Deadline to request revisions to Preliminary PUF November 15, 2016 Deadline for MAC s desk reviews January 30, 2017 Posting of PUF February 17, 2017 Deadline for hospitals to request revisions

FY 2018 Hospital Wage Index Development Timetable March 24, 2017 Completion of appeals by MACs and final transmission to CMS April 5, 2017 Deadline for hospitals to appeal in April April 28, 2017 Release of final WI & OMS Rule April/May, 2017 Posting of Proposed Rule PUF August 1, 2017 Issuance of IPPS Final Rule October 1, 2017 Effective date of FFY 2018 WI

Wage Index Improvement Process R-C Healthcare Management analyzes PUF RCHMS contacts the hospital staff with questions Hospital coordinator and RCHMS determine if any revisions are necessary RCHMS or hospital prepare revision letter

Wage Index Improvement Process (continued) Revisions are due September 2, 2016 RCHMS assists the hospitals to defend revisions during the FI s audits RCHMS verifies that revisions are included in all PUFs and provides any necessary follow-up

Wisconsin Wage Index Trends Continuing conversions from Excluded area clinics to Provider Based and expansions to existing Provider Based Clinics Favorable to individual hospital reimbursement, unfavorable to area wage index During preparation of CY2016 Occupational Mix, hospitals with expanded provider based clinics should see higher percentages of Medical Assistants and therefore higher occupational mix index

Wisconsin Wage Index Trends Corporate consolidations translating to shifts between home office expense, wage related costs, and Administration & General Verify net change compared to prior year between S-3 Pt II lines 8, 14, 17-25, and 27 (many are net negative due to cost savings from integration, allocations to other entities, and expense tracking) Verify that all administrative and wage related costs are captured between direct hospital expenses and the allocations from home office A number of hospitals report Contract A&G on home office line 14 instead of line 28. NGS has accepted this, but during audit has been known to reduce both A&G and core home office expense when A&G is not properly documented. Hospitals need to verify A&G expense on line 14 and secure documentation

Worksheet S-3 Analysis Is Line 1 greater than in the prior year s filing? Are wage-related costs comparable to prior year s Have A&G costs been included on Line 28?

Hours Issues Eliminate on-call, standby and bonus hours Eliminate the 1.5 overtime hours Analyze credits to payroll accounts Ensure there were only 26 pay periods and not 27

Pension Costs Currently Reductions in past are being amortized for ten years (seven more years) Defined Benefit Plan - CMS now uses a three year average of cash contributions cash paid in each fiscal year In FY 2018 will use 3-years of data; FY 2018, FY 2017 & FY 2016 Identify defined contribution separately Backup of payments is being requested

Pension Worksheet Wage Index Pension Cost Worksheet Provider Name: # Step 1: Determine the 3-Year Averaging Period (1) Wage Index FY ending 2018 (2) Provider cost reporting period used for Wage Index year shown on Line 1 to (3) Midpoint of provider's cost reporting period shown on Line 2 (+ or - in highlighted cell to adjust to first of month) + (4) Beginning the 3-year averaging period (Subtract 18 months from midpoint shown on Line 3) (5) End of the 3-year averaging period (Add 18 months to midpoint shown on Line 3.) Step 2: Adjust Averaging Period for a New Plan (See instructions) (Leave this section blank if Provider has not elected to use an adjusted averaging period) (6) Effective date of pension plan (7) First day of the provider cost reporting period containing the pension plan effective date (8) Start adjusted averaging period (Date on Line 7 if first of the month, or +/ - in highlighted cell to adjust to first of month) + If this date occurs after the period shown on Line 2 (Step 1), stop here and see instructions. No cost is reportable for a period which is excluded from the averaging period. Step 3: Average Pension Contributions During the Averaging Period (9) Beginning date of averaging period from Line 4 or Line 8 (10) Ending date of averaging period from Line 5 (11) Enter provider contributions made during the averaging period shown on Lines 9 & 10 Data may be grouped within the averaging period to agree with documentation records (enter beginning date of grouped date range) Deposit Date(s) Contributions Deposit Date(s) Contributions 1 19 2 20 3 21 4 22 5 23 6 24 7 25 8 26 9 27 10 28 11 29 12 30 13 31 14 32 15 33 16 34 17 35 18 36 (12) Total Number of Months Included in Averaging Period 36 (13) Total Contributions Made During Averaging Period $0 (14) Average Monthly Contribution (Line 13 divided by line 12) $0 (15) Number of Months in Provider Cost Reporting Period shown on Line 2 0 (16) Average Pension Contributions (Line 14 multiplied by Line 15) $0 Step 4: Total Pension Cost for Wage Index If Wage Index FY shown on Line 1 is after 2022, enter "0" on Lines 17 and 18.

Contracted Administrative & General National FY 2015, 73%, $2.5B, with an AHW of $100.28 FY 2016 74%, $2.9B, with an AHW of $97.06 FY 2017 77%, $3.5B, with an AHW of $94.64 Wisconsin FY 2015, 78% (51 of 65), $27M, AHW of $88.07 FY 2016, 73% (48 of 65), $26M, AHW of $114.23 FY 2017, 69% (53 of 65), $29M, AHW of $109.87

Contracted Administrative & General The contracted A&G costs increased national AHW by $.22 or 0.5% More hospitals are adding these costs

Contracted Administrative & General 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 hours

Contracted Housekeeping & Dietary If all is outsourced CMS wants contracted recorded Fiscal intermediaries will estimate hours if nothing is reported

Occupational Mix Survey Survey is done every three years New survey to be done in 2017 (due July 1, 2017) For calendar year 2016 Affects hospitals for 3 years beginning in FY 2019 (October 1, 2018)

Impact of the Occupational Mix Survey 98.5% (64 of 65) Wisconsin Hospitals submitted 93% Nationally submitted Currently no penalty for non-submission

Audit Issues Contract Labor NGS requesting more detail Part A & Part B physicians Home office expense Pension costs We want to be involved before any denials (easier process) If denied or you do not agree, we want to be involved in the appeal

Worksheet S-10 Used to calculate Hospital s total unreimbursed care ACA requires reduction in DSH payments based on reduced number of uninsured $6.0 billion to be distributed in FY 2017; a $400 million decrease from FY2016 For FY 2018 CMS proposes to phase in S-10 data into methodology for fund distribution using a three-year average In general, states expanding Medicaid will see reductions in DSH payments (see table) Medicare Reimbursement Experts Since 1990

Worksheet S-10 States with highest projected S-10 DSH have lowest Medicaid/indigent coverage (Florida, Texas) Two hospitals in Texas reported $1.6 billion and $1.3 billion total charity (Line 20) Texas provides 18% federal poverty level coverage to families (kff.org) States with lowest projected S-10 DSH have expanded Medicaid to ACA minimum coverage and have most liberal coverage (California, New York) Wisconsin expanded to 100% federal poverty level for families and childless adults Medicare Reimbursement Experts Since 1990

States Expanding Medicaid Source: FamiliesUSA.org

Worksheet S-10 230 US hospitals that qualify for DSH did not submit an S-10 or reported negative uncompensated amounts Forty Wisconsin hospitals qualify for DSH (projecting -$25.2 million with S-10 formula) Eleven DSH hospitals in Wisconsin did not submit S-10 ($-14.3 million with S-10 formula) Medicare Reimbursement Experts Since 1990

Worksheet S-10 Definition of Uncompensated care: Defined as the amount on line 30 of Worksheet S-10, which is the cost of charity care and the cost of non-medicare bad debt Medicaid payment shortfalls are not included in the definition of uncompensated care Timing of reporting of Charity Care Current S-10, line 20 instructions specify to report charity services provided during period FY17 IPPS April Proposed Rule acknowledged concern about timing of charity write-offs during period; intends to revise S-10 instructions Medicare Reimbursement Experts Since 1990

Worksheet S-10 Latest S-10 instructions dated March, 2016. Stay tuned to FY17 IPPS August Final Rule CMS encourages hospitals to work with MACs to complete and revise, as appropriate, their FY2014 Worksheet S-10 as soon as possible. Medicare Reimbursement Experts Since 1990

Worksheet S-10 What is counted in DSH Factor 3 Cost to Charge Ratio (Line 1) Cost of charity care (Line 23) Cost of non-medicare and non-reimbursable bad debt expense (Line 29) Cost of Non-Medicare uncompensated care (Line 30) Medicare Reimbursement Experts Since 1990

What s Next? Any revisions for S-3 due September 2, 2016 Medicare Reimbursement Experts Since 1990

Resources R-C Healthcare Management Resources: http://www.rcmgmt.com/wisconsin/ Wage Index History AHW Comparison FY 2018 Hospital Wage Index Timetable Worksheet S-3, Parts II and III Instructions Wage Index Pension Cost Worksheet Copy of your S-3 with comparison to prior year

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

??? 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