BAKER HEALTHCARE CONSULTING, INC. OCCUPATIONAL MIX ADJUSTMENT (OMA) PROJECT FOR THE FEDERAL YEARS 2019, 2020 & 2021 MEDICARE WAGE INDEX Spring 2017 By Dale E. Baker Joseph R. Krause BAKER HEALTHCARE CONSULTING, INC.

CONTACTS Consultants: Dale E. Baker, President Baker Healthcare Consulting Email – dbaker@baker-healthcare.com Phone – 317-631-3613 Joseph R. Krause, Esq.,CPA, Director Phone: 414-721-0906 jkrause@baker-healthcare.com Executive Assistant Kellie L. Crowe

Medicare Wage Index Occupational Mix Adjustment (OMA) CMS uses Bureau of Labor Statistics (BLS) data Strategy is reverse logic! We need to: Minimize RN hours Maximize nursing assistants, medical assistants, orderlies and attendants. LPNs and Surgical Technologists are fairly neutral For computing the OMA – Centers for Medicare & Medicaid Services (CMS) uses the National Average Hourly Wages (AHW). Our focus is on hours but we report salaries (excluding fringes) including agency nursing fees (travelers, registry, per diem & contract employees) as well as hours, including vacation, holiday & sick hours and pay. Individual hospitals have virtually no impact on the National Average Hourly Wage.

The Survey is very simple looking 2016 Survey will be used for Federal Fiscal Year 2019, 2020 and 2021

OBJECTIVES OF OMA PROJECT Hospital Finance to prepare 2016 Survey and submit to Medicare by the July 1, 2017. This will used for FFYs 2019, 2020 and 2021 wage indexes and bring more Medicare monies to the MSA. Direct input from Nursing Administration is needed – nursing model and roles vary from hospital to hospital. Prepare Nursing Administration to assist, as needed, and respond to Medicare Administrative Contractor (CMS auditors) questions if needed with Finance personnel. We do not seek uniformity – Nursing roles vary hospital to hospital.

OCCUPATIONAL MIX COMPARISON OF % OF HrS BY CLASSIFICATION 2013 SURVEY COMPARED TO 2010 & 2007-2008 National % of Hours Per Survey 2013 2010 2007-08 RNs 71.49% 72.14% 78.68% LPNs 6.86% 7.45 11.25 Nursing Assistants, Orderlies 18.07 17.45 10.07 Medical Assistants 3.58 _2.96 _ 0.00 Nursing Subcategory 100.00 100.00 100.00 Subtotal Nursing 40.17% 39.59 36.86 All Other 59.83% 60.41 63.14 Total 100.00% 100.00% 100.00%

Occupational Mix Comparison Nationally, hospitals did a more thorough job of removing RNs that do not treat patients and reclassifying them to the “all other” category in the 2013 survey compared to the earlier surveys. Also, hospitals increased both nursing assistants and orderlies (including nurse aides) and the medical assistant lines substantially. These revisions demonstrate better understanding of the incentives for proper recording by minimizing the RN line, and maximizing the nursing attendants, orderlies line, and also the medical assistants line.

What were they thinking? Academics thought small rural hospitals had lower skill mix levels and this reduced the average hourly wage. Congress wished to improve the equity of the wage index by computing wage indexes based on national average skill mix. And they believed this would increase rural wage indexes. But for FY 2013 OMA benefits only 27 rural areas and decreases payment to 30 rural areas.  Why? When legislated, no one thought about minimum staffing levels – that can result in higher skill mix for small rurals compared to urban hospitals.   OMA has never worked right and probably never will.

THE OCCUPATIONAL MIX ADJUSTMENT (HIGHER number MEANS MORE $)

GOAL OF REVIEW Our goals are: To more accurately record wage and hour data to improve the OMA; To submit to Medicare by the July 1, 2016 receipt deadline; and Increase the DRG Medicare payments CMS published in August 2016 that OMA increased wage indexes by as much as 17% and decreased them by over 5%.

OUR NEXT STEPS Review the CMS instructions. Review roles and functions within the nursing departments covered by the survey Discuss the Bureau of Labor Statistics (BLS) definitions – which vary from the definitions generally in use in hospitals. Obtain nursing administration input as to which employees (and agency personnel) meet the BLS definitions for inclusion in each of the five categories of the survey. CMS, in computing the OMA, uses the national average hourly wages, which individual hospital data has little impact on the national averages. Hours are the driver of this survey.

Next Steps cont… Nursing executives to read survey instructions thoroughly and then categorize personnel in accordance with the OMA Survey Support Tool. (3 pages of classifications) enclosed herein. Nursing and Finance to discuss accounting for housekeeping staff changing linens should be included as nursing attendants and orderlies. Consider including only the direct time and allocation of vacation, sick, PTO, and down time as considered appropriate. The author does not believe changing bed linens would be considered the highest skill level for environmental personnel (housekeeping) and inclusion of these amounts as suggested above will result in a slightly lower OMA Adjustment, which we believe is consistent with directions included in the instructions.  Nursing and Finance decide next steps for completion of the diagnostic phase of this project.

Our Next Steps cont… Meeting(s) to be scheduled between nursing and finance.  Finance - Consider contacting your MAC representative and discuss the level of detail requested by the MAC for the 2016 Survey which should be similar to 2013 Level of details.  Complete the Internal approval process.  Submission to MAC by July 1, 2017 (receipt by MAC) – obtain proof of receipt from the MAC and discuss contact persons with MAC and with hospital personnel.

Specific Review Areas Registered Nurses Excluded from the survey are advance practice nurses who are billed under Medicare Part B. Include the following in “All Other” Nursing Administration RNs that do not provide direct care RNs in “includable nursing departments” that are in educational positions, administrative positions, supervisory positions, that do not provide direct patient care themselves Consider including RNs (including floor RNs) that only occasionally provide direct patient care and whose administrative leadership/educational responsibility are clearly their highest skill level What other functions are rendered in your hospital that might require reclassification or rethinking of the appropriate nursing classification

Licensed practical nurses and surgical assistants This is largely a “neutral category” and the definitions are generally well understood, therefore, little time needs to be spent in reviewing this area, however, if variances are noted they should be explored and corrected.

Nursing Aides, Orderlies & Attendants Nursing Aides, Orderlies, & Attendants – Provide basic patient care under direction of nursing staff. Perform duties, such as feed, bathe, dress, groom, or move patients, or change linens. Examples: Certified Nursing Assistant; Hospital Aide; Infirmary Attendant." You may reclassify individuals into this category that are recorded in other categories on the general ledger. Work with nursing and accounting personnel familiar with departmental recording of the following functions: Transporters "who move patients" Housekeepers "who change linens“ * Telemetry Techs Lift Teams Doulas Possibly Sitters Others? Instructions indicate that ward clerks or unit secretaries must be excluded from nursing aides…but if cross trained in clinical function they might be included as medical assistants (see next page). Workers must be "under direction of nursing staff". but Direct and indirect direction should satisfy requirement. By law all activities on the nursing floor are the responsibility of the nursing staff and medical staff. *Housekeepers that change linens (perhaps only on discharge) meet the definition of nursing attendants and orderlies. We believe that using time study data (which include breaks, vacations, & holiday hours) these hours and wages can be included in the nursing attendants categories.

MEDICAL ASSISTANTS Common definitions throughout hospital industry is that medical assistants are nursing positions employed in physician practices. Bureau of Labor Statistics definition include the following: “Performs administrative and certain clinical duties under the direction of physician. Administrative duties may include scheduling appointments, maintaining medical records, billing, and coding for insurance purposes. Clinical duties may include taking and recording vital signs and medical histories, preparing patients for examination, drawing blood, and administering medications as directed by physician. Include only those employees who perform administrative and certain clinical functions under the direction of a physician in the IPPS cost centers and outpatient areas of the hospital that are listed above….”

MEDICAL ASSISTANTS cont… However, if medical secretaries, ward clerks, or unit secretaries are cross trained and have clinical responsibilities similar to the above definition they would appear to meet the BLS definition of medical assistants. A second question is what is the highest skill level? If nursing administration determines that the clinical skills are the highest skill level, then the entire wages and hours would be includable in the medical assistant category. Review term “under direction of physicians”. What other unique classifications?

Calculation of National Occupational Mix Adjustment for FFY 2017 Wage Index Calendar 2013 Data   National AHW per August 22, 2016 Federal Register p. 56117  Average National Percent hours by Category¹  Extension Assumed Hospital Revisions to Percent Hours by Category  Hospital Occupational Mix Revised Extension RNs $38.83416971 71.49% 27.76 .6600 $25.63 LPNs and Surgical Technologists  22.73766932   6.8% 1.56 06.86 Nurse Attendants Orderlies 15.95353295 18.07% 2.88 21.00 3.35 Medical Assistants 18.0489696 3.58% .65 06.14 1.11 Total AHW all Nursing 32.8589243 100.00 $32.85 $31.65 Original Occupational Mix $32.85/32.85 = 1.000 (the National Average) Revised Occupational Mix $32.85/31.65 = 1.0379  ¹ Per Baker Healthcare Consulting 2013 National Data Base ¹ Per Baker Healthcare Consulting National Data Base

Calculation of Annual Increase in Medicare payment from increase in OMA & from 1.0000 to 1.0379 (per example) Labor Non Labor Total Standardized Amount per Discharge 2017 per August 22, 2016 Federal Register   $3,839.57 $1,677.06 $5,516.63 Assumed Case Mix Index (Average) x 1.66 x 1.66 x 1.66  Medicare Occupational Mix Adjusted Wage Index $6,373.69   x 1.0379 $2,783.92 $9,157.61 6,615.25 2,783.92 9,399.17 Assumed Number of Medicare Discharges Impacts 1000 discharges $241,560 2000 discharges 483,120 3000 discharges 724,680 4000 " 966,240 (possibly) 5000 " 1,207,800 7500 " 1,811,700 10,000 " 2,415,600 Increase in per Discharge IPPS Payments $241,560 Excludes Budget Neutrality and excludes Medicare Advantage and Medicaid.

QUESTIONS