1. Federal Fiscal Year 2016-2018 Occupational Mix Adjustment Survey April-May 2014 By DALE E. BAKER BAKER HEALTHCARE CONSULTING, INC.

2.  Michigan Hospital Association: Vickie Kunz Email – vkunz@mha.org Telephone – 517-703-8608vkunz@mha.org  Consultant: Dale E. Baker Baker Healthcare Consulting Email – dbaker@baker-healthcare.com Telephone – 317-631-3613dbaker@baker-healthcare.com 2

3.  CMS used Bureau of Labor Statistics (BLS) data  Strategy is reverse logic!  We need to:  Minimize RN hours  Maximize nursing aides, orderlies and attendants, and medical assistants  Our comments:  For computing the OMA – Centers for Medicare & Medicaid Services (CMS) uses the National Average Hourly Wages (AHW). Local areas have little impact on National.  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. 3

4.  Carefully consider the classifications for the OMA Survey – for calendar 2013 to be submitted by 7/1/14.  Direct input from Nursing Administration Executive(s) is needed – nursing model and roles will vary from hospital to hospital.  Prepare Nursing Administration Executive(s) to respond to Medicare Administrative Contractor (CMS auditors) questions if asked (along with finance personnel).  We do not seek uniformity – Nursing roles vary hospital to hospital. 4

5.  A wage index is computed for each metropolitan area and statewide rural areas. The wage index adjusts the "Labor Related Portion" or either 62% or 69% of the DRG payment.  Computation of current Detroit-Livonia-Dearborn (FFY 2014) wage index: AHW based on the acute care hospitals in the Detroit area$35.6582 Divide by National AHW FY 2014÷38.3698 Budget neutrality Factorx.99015 Computed Detroit natural wage index – FY 2014.9201  The above average hourly wage includes certain fringe benefits. CMS applies the OMA when computing the AHW and the wage index. This adjustment is not transparent. 5

6.  Academics thought small rural hospitals had lower skill mix level and a resulting reduced average hourly wage. Congress wished to improve the equity of the wage index by computing wage indexes based on national average skill mix.  But for FY 2015 OMA benefits 38 rural areas and decreases payment to 20 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. 6

7.  Review Functionality – not just job titles  More accurately identify employee classification in accordance with the instructions  Improve payment FFY 2016-2018  Hours are the driver of the OMA, CMS uses National AHWs and local hours. 7

8. QUESTIONS 8