1. Greater New York Hospital Association Medicare Wage Index Improvement Program September 15, 2009

2. National Average Hourly Wage Change

3. Medicaid Impact of Wage Index Beginning 12/01/2009 Medicaid reimbursement is impacted by Worksheet S-3, Part II. Every hospital AHW in New York State will be compared to a state AHW and receive a Medicaid wage index. New York State FY 2009 Data (12/31/05, 06/30/2006) State Average Hourly Wage $37.97

4. Acumen Study MedPac Recommendation to use Bureau of Labor Statistics Data - One third of hospital reclass. If BLS data is used eventually there will be just as many exceptions. - BLS is not available by industry, does not include fringe benefits, no part time workers and no contract labor is included. Acumen study still recommends using BLS data. Initial Study is here: http://www.acumenllc.com/reports/cms/http://www.acumenllc.com/reports/cms/ Final study was going to be released after FY 2010 August Federal Register. It will show how the BLS wage index would be calculated.

5. New York Metropolitan Commuter Transportation Mobility Tax New York State legislature passed the new payroll tax to fund MTA’s operations. Hospitals and business must pay.34% of their payroll expense for employees within the Metropolitan Commuter Transportation District Can be claimed, since it is paid by the employer Where to report on wage related costs?

6. Pension Used to be reported according to GAAP. Now needs to be funded and only current expenses are allowed. Work with your actuary to get the allowed amount. There are a few court cases but none have been decided yet.

7. Need to verify the hours from invoices or contracts. Nationally 42% of hospitals included salaries and hours with an AHW of $67. In New York City 29% (25 of 87) hospitals included salaries and hours at an AHW of $91. New York City had no impact due to Contracted A&G. If all NYC hospitals had included at the same average the Wage Index would be.25pp higher. It increased the National AHW $.05 Eventually all hospitals will include these costs so those that do first will get the most benefit. Contracted Administrative & General (Line 22.01)

8. Rural Floor Budget Neutrality No CBSA can receive a wage index lower that the rural rate in that state - The money for increases in those hospitals wage index was funded from national pool. Beginning 10/1/2009 CMS decided to start to make each state fund the differences.

9. Largest Decrease In Wage Index by State Connecticut.97887 New Jersey.98437 Colorado.99413 California.99415 New Mexico.99576 32 States had no CBSAs with the Rural Floor so next year they will not be decreased by this adjustment.

10. Impact to New Jersey Hospitals New York City Wage Index1.3190 New Jersey Hospitals in NYC1.3005 Percentage Point Difference(1.85)

11. Proposed Worksheet S-3 CMS released new cost report data - For Worksheet S-3 Parts, II and III they made some changes. - Removed all subscripted lines. - Comments had to be submitted by August 13, 2009. Some confusion regarding Teaching Physicians - Could cause problems with wage related costs which are allocated to salaried physicians and excluded units.

12. Proposed Worksheet S-3 New Form S-3, Part IV - Hospital Wage Related Cost –Instructions do not clarify to remove excluded units. –Will cause confusion as to where are total wage related costs to be reported. New Form S-3, Part V - Hospital Contract Labor and Benefit Cost -The form collects contract labor and fringe benefits for excluded units. -We are not sure why CMS is collecting this data.

13. Occupational Mix Last survey was 7/1/2007 – 6/30/2008. It should not have to be filed again until 2011. Revisions can still be made to 2008 survey. The most important factor was RN hours to total nursing hours. The national percent was 71.4% so if your RN percent was greater than that you had a negative adjustment, if it was below 71.4% then your adjustment was positive. On CMS’s website – http://www.cms.hhs.gov/AcuteinpatientPPS/WIFN/list.asp#TopOfPage http://www.cms.hhs.gov/AcuteinpatientPPS/WIFN/list.asp#TopOfPage This file will show you the impact of Occupational Mix on your hospital: FY 2009 Proposed Occupational Mix Adjusted and Unadjusted Average Hourly Wage by Provider

14. How the Wage Index is Calculated Total salaries and hours - Adjust for Overhead. - Adjust to a common period with an inflation factor. - Total salaries and hours for each CBSA. - Total National salaries and hours. - Divide each CBSA AHW by National AHW. Each hospital has an Occupational Mix Adjustment and each CBSA has a Rural Floor Budget Neutrality Factor.

15. Impact of Wage Index Labor portion of DRG is: ‣ 62% if Wage Index is less than or equal to 1 ‣ 67%, if the Wage Index is greater than 1. It used to be 62%, if Wage Index is less than or equal to 1 and 69.17% if the Wage Index was greater than 1. ‣ Highest Wage Index - Santa Cruz-Watsonville, CA 1.6191 for Reimbursement of $9,436.75 ‣ Lowest Wage Index - Rural Alabama. 7389 for Reimbursement of $5,587.84 Difference of $3,848.91

16. Cooperative Effort at a Regional Level All hospitals in each Core Based Statistical Area Are dependent on each others data. If one hospital has an error the whole CBSA has an error.

17. New Reclassification Limits 3 Year Average Hourly Wage Individual Urban 108% of Original, 88% of New Area Individual Rural 106% of Original, 86% of New Area Group 88% of the CBSA it wants to reclassify to

18. Process R-C Management contacts hospitals about out of standard items. Hospital coordinator and R-C determine if any revisions are necessary. Revisions need to be submitted by December 7, 2009. If there are any questions during FI audits we will assist the hospitals.

19. Timetable Important Dates: October 5, 2009 – First Public Use File December 7, 2009 – Deadline to submit any revisions February 22, 2010 – Release of next Public Use File. This should include revised S-3’s May 7, 2010 – Release of final Public Use File August 1, 2010 – Approximate date of the FY 2011 final rule October 1, 2010 – Effective date of FY 2011 wage index

20. Hours Issues Eliminate on-call and stand by hours. Eliminate hours associated with bonuses. (Bonus pay includes award pay and pay in lieu of time off.) Get salaries and hours by pay code to eliminate differential hours. Eliminate overtime hours if they is recorded at 1.5 times regular pay. Analyze credits to payroll accounts to ensure related hours are also removed Check to ensure there are only 26 pay periods and not 27.

21. Wage Related Cost Make sure to include all wage related costs for all departments. Allocate health insurance costs based on FTE’s and not hours.

22. Worksheet S-3, Questions Is Line 1 greater than prior year? Do salaried physician lines compare to prior year? Are Contract Labor and Physician AHW reasonable? Are wage related costs greater than prior year? Does Line 22.01 include anything?

23. Projected Wage Index for FY 2011 Based on June 2009 HCRIS file  www.wageindex.comwww.wageindex.com  Wage Index History on website  New York City Wage Index 1.3190 up 1.94 percentage points from 1.2996  Updated with each Public Use File – October 2009, February 2010 and May 2010

24. Resources CMS Website to access Public Use Files  http://www.cms.hhs.gov/acuteimpatientpps/wifn/list.asp#topofpagehttp://www.cms.hhs.gov/acuteimpatientpps/wifn/list.asp#topofpage Federal Register  http://www.gpoaccess.gov/fr/index.htmlhttp://www.gpoaccess.gov/fr/index.html

25. ???QUESTIONS??? R - C Healthcare Management Service Inc. 2226 W. Northern Avenue, Suite C-100 Phoenix, AZ 85021 Phone – 800-862-5368 www.rcmgmt.com Presented by: Kenneth Webdale – President K. Michael Webdale – Vice President