2013 WSHA Project Report Washington Wage Index Improvement Strategy Services January 28, 2014

2013 WSHA Project Report

Washington Wage Index Improvement Strategy Services

January 28, 2014

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Meeting Roadmap

HFS Consultants | www.hfsconsultants.com

Goal of the 2013 WIISS

Scope of Work What has HFS been doing with WA hospitals the last 6 months?

Results of This Year’s Work What does our work together mean for Washington?

Key Findings

Next Steps and Timeline What can WA hospitals expect from HFS in the next few months?

Future Needs What’s coming up in 2014?

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2013 Project Goals


Increase Wage Index Reporting Compliance Normalizing average hourly wage data

Improving Accuracy of Average Hourly Wage Data Frequently findings mean positive adjustments to the average hourly

wage

Knowledge Transfer Transparency of average hourly wage findings

Best practices for future average hourly wage data reporting

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Scope of Work – 9 Months of Collaboration


Discovery Collection of the necessary wage and financial data from hospital staff

Analysis HFS’s specialized analysis and “dig deeper” approach of the wage index data

identifies items that do not meet CMS guidance and areas of opportunity to

enhance average hourly wage reporting

Revision HFS proposes revised wage index data, and with hospital approval, submits

proposed revisions to MAC corresponding with its deadline

MAC Audits

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HFS Worked in Multiple Geographic Areas


2013 Wage Index Improvement Strategy Services Seattle-Bellevue-Everett CBSA

Tacoma CBSA

Spokane CBSA

Rural Washington CBSA

44 hospitals in Washington either participated or are impacted by the work

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Who Participated in Seattle-Bellevue-Everett?


Providence Health & Services

University of Washington

Virginia Mason Medical Center

Overlake Hospital Medical Center

Central Washington Hospital

Evergreen Hospital Medical Center

Skagit Valley Hospital

Auburn Medical Center

Island Hospital

Cascade Valley Hospital

These participants represent 93% of the CBSA wages

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Who Participated in Tacoma?


MultiCare Health System Tacoma General Allenmore Hospital

Good Samaritan Hospital

MultiCare represent 55% of the CBSA wages

Franciscan Health System – St. Joseph Medical Center

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Who Participated in Spokane?


Providence Health & Services Providence Sacred Heart Medical Center

Providence Holy Family Hospital

These two hospitals represent 71% of the CBSA wages

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Who Participated in Rural Washington?


PeaceHealth St. Joseph Medical Center

Gray’s Harbor Community Hospital

Providence St. Mary Medical Center

Providence Centralia Hospital

Samaritan Hospital

Walla Walla General Hospital

Wenatchee Valley Medical Center

Olympic Medical Center

These members represent 100% of the CBSA wages

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Net Findings and Projected Impact


Core Based Statistical Area (CBSA)Findings to CBSA

AHW

Estimated Impact to Inpatient

Medicare FFS Revenue

Seattle-Bellevue-Everett, WA (Seattle) $0.39 $5,041,000

Spokane, WA ($0.30) ($1,055,000)

Tacoma, WA $0.06 $393,000

Rural Washington ($0.10) ($91,000)

Yakima, WA (Rural Floor Recipient) ($0.10) ($129,000)

Kennewick-Pasco-Richland, WA (Rural Floor Recipient) ($0.10) ($113,000)

Net Impact to Washington Hospitals $4,046,000

Key Findings


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Summary of Findings


Key CBSA Findings Seattle Spokane Tacoma Rural WA

Revision to Salaries ($0.01) $0.04 $0.00 ($0.01)

Revisions to Physicians, Interns and Residents ($0.09) $0.00 $0.00 $0.02

Revisions to Patient Care and Overhead Contract Labor $0.15 $0.11 $0.01 $0.13

Revisions to Home Office $0.01 $0.00 $0.00 ($0.01)

Revisions to Hours Related to Paid Salaries $0.14 ($0.48) $0.00 ($0.12)

Revisions to Hours Related to Paid Salaries – Severance $0.00 ($0.12) $0.00 ($0.12)

Revisions to Wage Related Costs $0.12 ($0.01) $0.03 ($0.04)

Revisions to Wage Related Costs – Pension $0.18 $0.16 $0.02 $0.09

Improper AHW Reporting – Compliance ($0.03) $0.00 $0.00 ($0.04)

Client Proposed Revisions ($0.08) $0.00 $0.00 $0.00

Net Impact to CBSA AHW $0.39 ($0.30) $0.06 ($0.10)

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Hours Related to Paid Salaries


The following hours should be removed from the payroll file for accurate wage index reporting: Hours associated with accrued, not paid, salaries

Bonus hours

On-Call hours

Shift Differential hours

PTO paid out at employee termination

Buy/Sell back PTO

Paid hours associated with capitalized labor costs

Missed meal and missed break pay

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The following hours should be removed from the payroll file for accurate wage index reporting (cont’d):

Unpaid Family Medical Leave

Unpaid Disability

Unpaid Leave of Absence

Baylor Plan Example: Employees work 36 hours, but get paid for 40 hours – remove 4 hour

difference

Seasonal Plan Example: Employees work certain months of the year, but get paid for 52 weeks –

remove the time not actually employed

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Severance Hours General Rule: If severance is booked a "salary" expense then include hours; if

severance is booked as a non-salary expense than do not include hours

Disability Hours General Rule: If disability hours are reduced on the payroll report they need

to gross up to 100%

Holiday Pay for Nurses Example: May be paid regular pay + holiday pay + overtime; ensure that

hours are not being double- counted

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Contract Labor


Patient Care

Remove wages and hours from excluded and non-allowable cost centers

Remove non-patient care wages and hours related to: Non-professional fees (i.e. travel, miscellaneous overhead)

Non-patient care and overhead services (i.e. transcription)

Report additional amounts related to: Dialysis

Perfusion

Other temporary patient care staff not reported as “Registry”

Patient care staff reported from the home office

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Contract Labor


Overhead Contract Labor

Report additional Administrative & General (A&G, e.g. legal and consulting services), dietary, and housekeeping contract labor identified from a thorough review of trial balance and accounts payable detail

Report additional A&G contract labor from the corporate and regional home office

Remove non-allowable overhead amounts (i.e. security).

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Wage Related Costs


Defined Benefit Pension Plans For wage index purposes, allowable pension costs will be calculated

as the average cash contributions paid over a 3-year period

The 3-year period used is the current cost report period and the periods immediately preceding and following it

CMS states that the 3-year average is allowable even if it exceeds the current period contribution

There is no requirement to demonstrate that the amount satisfies a liability under ERISA or any other actuarial basis

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Wage Related Costs


For Defined Benefit Pension Plans, hospitals will need to: Obtain contribution data from the pension trustee, insurance carrier,

Schedule B or SB of IRS Form 5500 and, if applicable, from accounting records documenting allocations among providers

Retain and make available support for the 3-year average, the prefunding balance and the prefunding installment, where applicable

High scrutiny from MAC auditors

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2013 WIISS Next Steps


HFS monitors and supports the wage index revisions through MAC audit and Final Rule January – August 2014

Review February 2014 PUF to ensure revisions are accepted and

properly reflected in HCRIS data

HFS will provide a final report in March with final impact estimates

Future Wage Reporting Issues


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What does HFS see in Your Future?


2014 Occupational Mix Survey (OMS) CMS estimates it takes about 400 hours to complete

Similar to wage index reporting, the OMS is deceptively complex and difficult to

report accurately

OMS has a material impact on wage index and Medicare reimbursement OMS can reduce the AHW of a hospital and CBSA significantly reducing Medicare

reimbursement

Due by July 1, 2014 Short turn around and infrequency of the survey can make it difficult to complete

the survey accurately

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Purpose of the Occupational Mix Adjustment


Control the effect of hospitals’ employment choices on the wage index

Hospitals may choose to employ different combinations of nursing personnel

The varying labor costs associated with these choices reflect hospital management decisions rather than geographic differences in the costs of labor

Using the CMS methodology, we can measure the impact of the most recent OMS (CY10) on hospitals in Washington

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How does Occupational Mix work?


a b c = a*b d e = d/sum of c

Provider OMA Categories Wages Hours

Provider % by Sub-Category (Hours)

National AHWs by

Sub-Category

Provider Adjusted

AHW

National Nurse AHW

Nurse Occ Mix

Adjustment Factor

RN Staff & RN Management $90,000,000 2,000,000 82.99% $36.07 $29.94LPNs and Surgical Technologists $3,000,000 100,000 4.15% $20.87 $0.87Nursing Aides, Orderlies, & Attendants $5,000,000 300,000 12.45% $14.62 $1.82Medical Assistants $100,000 10,000 0.41% $16.48 $0.07

Total Nurse Salaries and Hours $98,100,000 2,410,000 100.00% $32.69 $30.47 0.9322

All Other Salaries and Hours $85,000,000 3,000,000

Total $183,100,000 5,410,000

Nurse Salaries as a % of Total 53.58%

All Other Salaries as a % of Total 46.42%

Check = 100% 100.00%

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How does Occupational Mix work?


Description Key

Salaries, Wage Related Costs, Contract Labor Hours AHW

Cost Report Salaries and Hours Before OMA* A $200,000,000 5,600,000 $35.71

Occupational Mix Adjustment:

Nursing Portion of Total Salaries (Calculated from Survey) B 53.58%

Total Salaries Related to Nursing C = A*B $107,154,560

Occupational Mix Factor (Calculated from Survey) D 0.9322

Nursing Salaries Adjusted for Occ Mix E = (C*D) $99,889,348

All Other Portion of Total Salaries F 46.42%

All Other Salaries G = A*F $92,845,440Total Adjusted Salaries and Hours (Final Rule Table 2) H = E+G $192,734,787 5,600,000 $34.42

Occupational Mix Impact to AHW I = H - A ($1.30)

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Impact of the OMS on Washington


OMS Impact – Calendar Year 201010 out of 11 CBSAs in WA were negatively impacted

CBSA Name Impact of Occ Mix to AHWEstimated Impact to IP

Medicare Revenue*

Olympia, WA ($2.39) ($3,716,000)

Bellingham, WA ($0.80) ($711,000)

Kennewick-Pasco-Richland, WA ($0.72) ($817,000)

Rural Washington ($0.50) ($734,000)

Yakima, WA ($0.42) ($547,000)

Mount Vernon-Anacortes, WA ($0.34) ($210,000)

Wenatchee-East Wenatchee, WA ($0.33) ($286,000)

Spokane, WA ($0.27) ($945,000)

Seattle-Bellevue-Everett, WA ($0.17) ($1,980,000)

Bremerton-Silverdale, WA ($0.05) ($59,000)

Tacoma, WA $0.62 $2,309,000

Total Net Impact to Washington Hospitals ($7,696,000)

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Tips for Preparing the OMS


Review Payroll and Contract Labor Records

• Identify all possible core nursing personnel

• Remaining personnel is denoted as “all other”

Research the Job Descriptions of Core Nursing Personnel

• Sort by job code• Account for

personnel with the same job code and varying responsibilities

Record Paid Wages and Hours for Core Nursing and All Other Personnel

• Account for WS A-6 Reclassifications

• Apply Excluded Unit Overhead Calculation

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Knowledge Sharing


Knowledge Sharing and Future Wage Index Support

Carry findings forward into FFY 2016 FYE 2012/2013 cost reports likely contain the same wage index

corrections that were revised during this year’s work

FYE 2011/2012 FYE 2012/2013 FYE 2013/2014

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Knowledge Sharing


Knowledge Sharing and Future Wage Index Support

Further study to correct compliance findings from this year’s work

HFS recommends targeted studies in Washington to address specific recommendations found during the 2013 work

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Thank You – WSHA and HFS Contacts


Eric Schulz – Manager Ryan Sader – Senior Consultant

HFS – Government Programs HFS – Government Programs

(503) 765-5442 (714) 656-4485

[email protected] [email protected]

Katie Holmes Claudia Sanders

Senior VP, Operations and Membership Senior VP, Policy Development

(206) 216-2506 (206) 216-2508

[email protected] [email protected]

mailto:[email protected]





Questions / Discussion


Documents

2013 WSHA Project Report Washington Wage Index Improvement Strategy Services January 28, 2014