1. WAGE INDEX PRESENTATION for the Center for Rural Health & Long Term Care Facilities Annual Summer Meeting By R-C Healthcare Management August 26, 2005

2. Presented by: Kenneth M. Webdale Senior Vice President R-C Healthcare Management Services 11801 N. Tatum Boulevard, Suite #132 Phoenix, AZ 85028 (800) 862-5368 or (602) 995-9420 kwebdale@rcmgmt.com

3. Wage Index History PPS 15PPS 16PPS 17PPS 18PPS 19PPS 20 22.309623.229524.707226.362428.003729.68 CBSACBSA NamePercentage Point Change 10500Albany, GA1.06401.05941.08631.1277.8634(26.43).93447.10 12020Athens-Clarke Co..98421.0211.98181.0173.9826(3.47).9818(.08) 12060 1 Atlanta-Sandy Springs-Marietta 1.0058.99911.0130.9960.9782(1.78)1.00172.35 12260Augusta-Richmond County.99701.0264.9625.9156.97515.95.9664(.87) 15260Brunswick.85951.1958.9331(26.27) 16860Chattanooga.9369.8976.9086.9208.9089(1.19).8859(2.30) 17980Columbus.8440.8374.8694.8691.8562(1.29).8170(3.92) 19140Dalton.8595.9546.9067(4.79).94583.91 23580Gainesville.8595.9572.8888(6.84).8954.66 25980Hinesville-Ft. Stewart.8595.7752.7679(0.73).78611.82 31420Macon.8971.9520.8975.9922.9475(4.47).9132(3.43) 40660Rome.8595.8909.94054.96.95741.69 42340Savannah.9243.9376.9488.9464 0.9323(1.41) 46660Valdosta.8595.8334.88645.30 47580Warner Robbins.8975.8496.86531.57.7701(9.52) 11Rural Georgia.8295.8230.8595.7752.7679(0.73).7701.22

4. Wage Index Chart

5. Calculation of Wage Index Impact Labor Portion of the DRG Wage Index Non-Labor Portion of the DRG Case Mix Index Medicare Discharges XYZ Hospital 2,933.52x1.1277=3,308.13 + 1,797.95=5,106.08x1.2917=6,595.52x2,164$14,272,714 2,933.52x1.1377=3,337.47+1,797.95=5,135.42x1.2917=6,633.42x2,164$14,354,713 Impact of a 1 Percentage Point Change in the Wage Index for XYZ Hospital $ 81,999

6. Impact of One Percentage Point on Each CBSA CBSAImpact of 1 Percentage Point 10500Albany$ 404,065 12020Athens-Clarke County 462,099 12060Atlanta-Sandy Springs-Marietta 6,281,071 12260Augusta-Richmond County 1,067,179 15260Brunswick 192,079 16860Chattanooga 121,177 17980Columbus 597,398 19140Dalton 182,145 23580Gainesville 399,607 25980Hinesville-Fort Stewart 16,166 31420Macon 845,672 40660Rome 485,556 42340Savannah 865,060 46660Valdosta 265,482 47580Warner Robbins 150,828 11Rural Georgia 2,272,729 Georgia Totals$ 14,608,313

7. Worksheet S-3, Parts II & III Line Salaries 1Total Salaries (see instructions)From Worksheet A 2Non-Physician Anesthetist - Part ARemoved - Salaries and Hours already included in Line 1 3Non-Physician Anesthetist - Part BRemoved - Salaries and Hours already included in Line 1 4Physician - Part APart A Administration - INFORMATIONAL ONLY - Salaries & Hours already included in Line 1 4.01Teaching Physician SalariesRemoved - Salaries and Hours already included in Line 1 5Physician - Part BRemoved - Salaries and Hours already included in Line 1 5.01Non-Physician - Part BRemoved - Salaries and Hours already included in Line 1 6Interns & Residents (in an approved program) Removed - Salaries and Hours already included in Line 1 6.01Contract Services - I&R (see instructions) Removed - Salaries and Hours not included in Line 1 – Needs to be added to Line 9 7Home Office PersonnelRemoved - Salaries and Hours already included in Line 1 8SNFRemoved - Salaries and Hours already included in Line 1 8.01Excluded Area Salaries (see instructions) Removed - Salaries and Hours already included in Line 1

8. Worksheet S-3, Parts II & III Other Wages & Related Costs 9Contract Labor: (see instructions)Added to WI Calculation - (hands-on patient care) 9.01Pharmacy Services Under ContractNot in Calculation - Best to put on Line 9 9.02Laboratory Services Under ContractNot in Calculation - Best to put on Line 9 10Contract Labor: Physician-Part AAdded to WI Calculation - (Physician costs should have a high hourly wage) 10.01Teaching Physician Under ContractNot in Calculation - Added in Part III, Line 4 11Home Office Salaries & Wage-Related Costs Added to WI Calculation 12Home Office: Physician Part AAdded to WI Calculation 12.01Teaching Physician SalariesNot in Calculation

9. Worksheet S-3, Parts II & III Wage-Related Costs 13Wage-Related Costs (core)Added to WI Calculation 14Wage-Related Costs (other)Added to WI Calculation 15Excluded AreasNot in Calculation 16Non-Physician Anesthetist - Part ANot in Calculation 17Non-Physician Anesthetist - Part BNot in Calculation 18Physician - Part AAdded to WI Calculation 18.01Teaching Physician - Part ANot in Calculation 19Physician - Part BNot in Calculation 19.01Wage-Related Costs (RHC/FQHC)Not in Calculation 20Interns & Residents (in an approved program)Not in Calculation

10. Worksheet S-3, Parts II & III Overhead Costs – Direct Salaries 21Employee Benefits OVERHEAD COSTS PERTAINING TO EXCLUDED UNITS ARE REMOVED BASED UPON EXCLUDED HOURS/ADJUSTED TOTAL HOURS (The lower the Overhead Cost AHW, the higher the Wage Index) 22Administrative & General 23Maintenance & Repairs 24Operation of Plant 25Laundry & Linen Service 26Housekeeping 27Dietary 28Cafeteria 29Maintenance of Personnel 30Nursing Administration 31Central Services and Supply 32Pharmacy 33Medical Records & Med. Rec. Library 34Social Services 35Other General Service (specify)

11. AUDIT OF WAGE INDEX HOURS Audit of hours is important because of the significant impact that an overstatement of hours can have upon a hospital’s average hourly wage and consequently upon the area wage index. The following are the necessary steps to review your hours in order to properly report them: 1. From the payroll records obtain the paid hours that correspond to Line 1 -- Total Salaries. (Line 1 should tie in to Worksheet A, Part 1.) 2. Eliminate all standby and/or on-call hours. 3. Eliminate any hours associated with bonuses. (Bonus pay includes award pay and pay in lieu of time off.) 4. Eliminate the portion of overtime hours that are recorded as 1.5 times the regular pay. (This is rare but it does occur.) 5. Review payroll accruals. If ending hours are accrued, remove beginning hours. 6. Compare departmental hours with departmental salaries. Review any department where the AHW appears to be out of line. 7. Compare departmental averages with those of the prior year. 8. Analyze any credits to payroll accounts to ensure that related hours are also removed (i.e., capitalized labor, etc.). 9. Check to ensure that there are 26 payroll periods and not 27. (This occurs approximately every 5 th year.)

12. Wage-Related Costs Form 339, Exhibit 7

13. National Occupational Mix Survey

14. Year-to-Year Comparison PPS 19PPS 20 AHW28.003729.68 Change6.23%5.99% Ending BetweenSeptember 30, 2002 to August 31, 2003September 30, 2003 to August 31, 2004 Based uponFY 2002FY 2003 AffectsFY 2006FY 2007 StartingOctober 1, 2005October 1, 2006 Line 121.7722.55 5.4%5.1% Line 627.1628.86 7.0%6.3% WRC %24.4%26.8% 8.0%9.8%

15. For more information, please contact: Ken Webdale R-C Healthcare Management Services 11801 N. Tatum Boulevard, Suite #132 Phoenix, AZ 85028 (800) 862-5368 or (602) 995-9420 kwebdale@rcmgmt.com