1. Honesty, Integrity and Results…You Can Depend On! Wage Index FFY 2013 (06/30/2010) & Occupation Mix Survey: Is your hospital ready? Presented by: R-C Healthcare Management May 3, 2011 K. Michael Webdale, CPA – Senior Vice President Kenneth Webdale, CPA, FHFMA - President Daniel Silver, FACHE – Vice President

2. Honesty, Integrity and Results…You Can Depend On! Contact Information – HHC Stuart C. Einbinder, CPA Director New York City Health and Hospitals Corp Debt Finance/Corporate Reimbursement Services 160 Water Street, Room 1026 New York, NY 10038-4922 Phone: (646) 458-7710 E-Mail: stuart.einbinder@nychhc.org

3. Honesty, Integrity and Results…You Can Depend On! Agenda National Average Hourly Wage Wage Index –Projected –Medicaid Impact MedPac –Acumen Studies Pension Contracted Administrative & General –Line 22.01

4. Honesty, Integrity and Results…You Can Depend On! Agenda (continued) Affordable Care Act –Rural Floor Neutrality –Frontier States Process –Timetable –Hours Issues

5. Honesty, Integrity and Results…You Can Depend On! Agenda (continued) Occupational Mix General Overview –Occupational Mix Background –Importance of the Occupational Mix –Who has to participate in the Occupational Mix Survey? –Survey due dates Discuss the categories for data input –Gathering the data –Contract Labor How the occupational mix adjustment is calculated The impact on the wage index What’s Next

6. Honesty, Integrity and Results…You Can Depend On! National Average Hourly Wage Change

7. Honesty, Integrity and Results…You Can Depend On! Projected Wage Index for FY 2012 Based upon the April 19, 2011 Federal Register: The New York City Wage Index is 1.3190, an increase of.68 percentage points from the prior year’s wage index of 1.3122 A 3-year Wage Index history for all CBSAs and Rural Areas in the United States is provided at www.wageindex.com The Wage Index history is updated upon the release of each Public Use File in October 2011, February 2012 and May 2012

8. Honesty, Integrity and Results…You Can Depend On! Importance of the Wage Index Labor portion of the DRG is : 62% if the Wage Index is less than or equal to 1 68.8% if the Wage Index is greater than 1 Highest Wage Index – Santa Cruz-Watsonville, CA 1.6989 = reimbursement of $9,399.89 Lowest Wage Index – Rural Alabama.7286 = reimbursement of $4,964.28 Difference of $4,435.61

9. Honesty, Integrity and Results…You Can Depend On! Medicaid Impact of Wage Index As of 12/1/09, Medicaid reimbursement is now impacted by the Worksheet S-3, Part II data Every New York hospital’s AHW is compared to a state AHW, and each hospital receives a Wage Equalization Factor (WEF) New York State FY 2012 data (12/31/08, 6/30/09) State Average Hourly Wage = $42.95 HHC has significant Medicaid discharges so increasing your AHW maximizes your WEF

10. Honesty, Integrity and Results…You Can Depend On! MedPac Recommendation to Use the Bureau of Labor Statistics Data Acumen Study One-third of hospitals currently reclass. If BLS data is used, there is no guarantee that just as many exceptions will not develop BLS data is not available by industry, and it does not include fringe benefits, part-time workers or contract labor Acumen recommended “Blending” & “Smoothing” http://www.acumenllc.com/reports/cms

11. Honesty, Integrity and Results…You Can Depend On! Acumen Study - Open Door Forum Released April 12, 2011 Revising the Medicare Wage Index to Account for Commuting Patterns –Hospitals continue to file S-3 –Hospitals will be asked to provide zip code information on each employee –CMS calculates an AHW for each zip code –Multiply your percentage of employees in each zip code by the zip code AHW –Results are summed so each hospital has a unique wage index http://www.cms.gov/AcuteInpatientPPS/FFD/

12. Honesty, Integrity and Results…You Can Depend On! New York Metropolitan Commuter Transportation Mobility Tax This new payroll tax to fund the MTA’s operations took effect on March 1, 2009 Hospitals and businesses located within the Metropolitan Commuter Transportation District must pay.34% of their gross payroll expense for this tax The amount may be claimable since it is paid by the employer Where is this expense reported in wage-related costs?

13. Honesty, Integrity and Results…You Can Depend On! Pension Costs Pension costs were formerly reported according to GAAP Worksheet for last two years required Form 5500, Schedule B data New methodology uses three year average of actual funded amounts

14. Honesty, Integrity and Results…You Can Depend On! Contracted Administrative & General (Line 22.01) Need to verify the hours from invoices or contracts Nationally 59% of hospitals included salaries and hours with an AHW of $79.55 In New York City, 63% (52 of 82) hospitals included salaries and hours with an AHW of $138

15. Honesty, Integrity and Results…You Can Depend On! Contracted Administrative & General (Line 22.01) The New York City Wage Index was not impacted positively or negatively by Contracted A&G Contracted A&G costs increased the National AHW by $.10

16. Honesty, Integrity and Results…You Can Depend On! Impact of Affordable Care Act State level budget neutrality returned to national budget neutrality Budget neutrality adjustment is.993834. All wage index reduced by.0061 Imputed Rural Floor for NJ was not extended

17. Honesty, Integrity and Results…You Can Depend On! Impact on NJ Hospitals CBSAName FY 2011 FY 2012PP Change 10900Allentown-Bethlehem-Easton, PA-NJ 1.1246 0.9436 (18.1) 12100Atlantic City-Hammonton, NJ 1.1246 1.0884 (3.6) 15804Camden, NJ 1.1246 1.0125 (11.2) 20764Edison-New Brunswick, NJ 1.1246 1.0737 (5.1) 35084Newark-Union, NJ-PA 1.1292 1.1147 (1.5) 36140Ocean City, NJ 1.1246 1.0616 (6.3) 45940Trenton-Ewing, NJ 1.1246 0.9941 (13.1) 47220Vineland-Millville-Bridgeton, NJ 1.1246 1.0659 (5.9) 48864Wilmington, DE-MD-NJ 1.1246 1.0810 (4.4)

18. Honesty, Integrity and Results…You Can Depend On! Frontier States Floor Beginning in FY 2011 no hospital in a Frontier State can have a wage index less than 1.00 Five states qualify: Montana, Nevada, North Dakota, South Dakota and Wyoming 50 hospitals receive additional $90 million which is not budget neutral

19. Honesty, Integrity and Results…You Can Depend On! Process R-C Healthcare Management collects data Hospital coordinator and RCHMS determine if any revisions are necessary RCHMS prepares the revision letter Revisions submitted by early December Assist the hospitals during FI audits in January and February Verify revisions are included in all PUFs and follow-up if necessary

20. Honesty, Integrity and Results…You Can Depend On! Timetable Similar Dates Anticipated for this Year October 4, 2010 – Release of the first Public Use File, which will include the original, unaudited S-3s December 6, 2010 – Deadline to submit any wage data revisions February 22, 2011 – Release of the next Public Use File, which will include the revisions submitted in December

21. Honesty, Integrity and Results…You Can Depend On! Timetable May 6, 2011 – Release of the final Public Use File August 1, 2011 – Approximate date of publication of the FY 2012 Final Rule. The wage index includes the final wage index data corrections October 1, 2011 – Effective date of the FY 2012 Wage Index

22. Honesty, Integrity and Results…You Can Depend On! Hours Issues Eliminate on-call and stand-by hours Eliminate the hours associated with bonuses (Bonus pay includes award pay and pay in lieu of time off) Get the salaries and hours by pay code to eliminate differential hours

23. Honesty, Integrity and Results…You Can Depend On! Hours Issues Eliminate the overtime hours if they were recorded at 1.5 times the regular pay hours Analyze the credits to payroll accounts to ensure that the related hours were also removed Check to ensure that there were only 26 pay periods and not 27

24. Honesty, Integrity and Results…You Can Depend On! Worksheet S-3 Questions to Ask Is Line 1 greater than in the prior year’s filing? Do salaried physician lines compare to those in the prior year’s filing? Do Contract Labor and Physician AHWs seem reasonable? Are wage-related costs greater than in the prior year’s filing? Have applicable A&G costs been included on Line 22.01?

25. Honesty, Integrity and Results…You Can Depend On! How the Wage Index is Calculated Total salaries and hours Adjust for overhead departments Adjust to a common period with an inflation factor Total salaries and hours at the CBSA level Total salaries and hours nationally Divide each CBSA’s AHW by the National AHW Each hospital has an Occupational Mix Adjustment, and each CBSA has a Rural Floor Budget Neutrality Factor (.993834)

26. Honesty, Integrity and Results…You Can Depend On! Occupational Mix Survey

27. Honesty, Integrity and Results…You Can Depend On! Occupational Mix Background Section 304(c) of Public Law 106-544 amend section 1886(d)(3)(E) of the Act requires Centers of Medicare and Medicaid (CMS) to collect data every 3 years on the occupational mix of employees for each short- term, acute care hospital participating in the Medicare program. Initial 3 month filing was only to be used at 10% implementation. Bellevue Hospital Center vs. Leavitt forced CMS to implement at 100% with a three year phase in. –Another 3 months of data was required in order to be more reliable.

28. Honesty, Integrity and Results…You Can Depend On! Occupational Mix Background The most recent survey was for periods from 7/1/2007 to 6/30/2008. Impacted FY 2010, 2011 and 2012 so final year of impact begins October 1, 2011

29. Honesty, Integrity and Results…You Can Depend On! Why is Occupational Mix important? The purpose of occupational mix is to control the effect of the hospitals’ employment choices on the wage index. The varying labor cost associated with these choices reflect hospital management decisions rather than geographical differences in the cost of labor. If you decide to staff with higher RN levels your wage index would be higher so Occupational Mix reduces the wage index.

30. Honesty, Integrity and Results…You Can Depend On! Why is Occupational Mix important? Markets with an expensive mix of employees and contract labor have their AHW adjusted downward; those with a cheaper mix of employees and contract labor have their AHW increased. The most important factor is RN hours to total nursing hours. The national percent from the previous survey was 71.4% –RN percentage greater than 71.4%, you received a negative occupational mix adjustment (OMA). –Less than 71.4%, then adjustment was positive.

31. Honesty, Integrity and Results…You Can Depend On! Three Year Impact The purpose of the data collection is to construct a OMAF that will be applied to the FFY 2013, 2014 and 2015 wage index.

32. Honesty, Integrity and Results…You Can Depend On! Salary Information on the Survey Salaries used to calculate each category AHW. AHW information in Occupational Mix Based on all hospitals - using national AHW within each covered occupation.

33. Honesty, Integrity and Results…You Can Depend On! Who has to participate in the survey? A ny hospital subject to the Inpatient Prospective Payment System (IPPS) or any hospital that would be subject to IPPS if not granted a waiver. –Excluded from the survey Critical Access Hospitals Any hospital which terminated participation in the Medicare program before the calendar year 2010 Non-Compliant Hospitals –No Penalty –Hospitals are assigned the average factor for the CBSA

34. Honesty, Integrity and Results…You Can Depend On! Important Dates This filing is calendar year 2010 (pay periods ending between January 1, 2010 and December 31, 2010). –They are looking for 26 pay periods without any accruals or other adjustments.

35. Honesty, Integrity and Results…You Can Depend On! Important Dates Occupational Mix Survey is due July 1, 2011 and will be applied to the FFY 2013. –Completed occupational mix survey must be submitted to your fiscal intermediaries, on the Excel reporting form. Form CMS – 10079 OMS –The Excel version of the occupational mix survey can be downloaded from CMS website www.cms.gov/AcuteInpatientPPS/WIFN/list.asp

36. Honesty, Integrity and Results…You Can Depend On! Occupational Categories The occupational categories derive directly from the BLS standard occupational categories. Include employees, directly hired and acquired under contract. –Registered Nurses –Licensed Practical Nurses and Surgical Technologists –Nursing Aids, Orderlies, and Attendants –Medical Assistants –All Other Occupations

37. Honesty, Integrity and Results…You Can Depend On! Occupational Categories

38. Honesty, Integrity and Results…You Can Depend On! Cost Centers to be used for Occupational Categories – from Worksheet A

39. Honesty, Integrity and Results…You Can Depend On! Gathering the Data Use Worksheet S-3 Rules Paid Salaries –Regular, overtime, vacation, holiday, sick, lunch, other paid time off, severance and bonuses. Paid Hours –Regular, overtime, vacation, paid holiday, sick, lunch, other paid time-off and severance hours. –Overtime hours paid at time and a half should be recorded as one hour. –Salaried employees paid a fixed rate should be 40 hours per week or hours actually worked. –Do not include non-paid lunch periods, and on-call hours in the total paid hours. –No hours are required for bonus pay.

40. Honesty, Integrity and Results…You Can Depend On! Where to assign the Data Director of Nursing or anyone handling those functions should be in the “All Other” category. Transportation for surgery –Include in LPN’s and Surgical Technologists per the instructions. Techs reported in “All Other” Advanced Practice Nurses –Exclude if billed under Part B –“All Other” if included on S-3.

41. Honesty, Integrity and Results…You Can Depend On! Contract Labor Include all contract labor included on Worksheet S-3. –Lines 9, 22.01, 26.01 and 27.01 –Line 10 reported as “All Other” –Use amounts paid in Calendar Year 2010

42. Honesty, Integrity and Results…You Can Depend On! What is not included Employees in areas excluded from IPPS. –Skilled-nursing facilities, psychiatric, or rehabilitation units Worksheet S-3, Part II, Lines 8 and 8.01 –Part A Teaching Physician, Physician Part B, and CRNAs Worksheet S-3, Part II, Lines 3, 4.01, 5, & 5.01 –Interns and Residents Worksheet S-3, Part II, Lines 6

43. Honesty, Integrity and Results…You Can Depend On! Occupational Mix Adjustment Factor Calculating the OMAF –Step 1 - Determine % of each subcategory by hours –Step 2 - Multiply each subcategory by National AHW –Step 3 - Determines AHW by subcategory –Step 4 - Sum for Hospital Nursing AHW –Step 5 - Compare Hospital Nursing AHW to National –Step 6 - Calculates Nurse Occ Mix factor –Step 7 - Multiply this by Nursing % to total salaries –Step 8 - Add “All Other” % to total salaries –Equals Occupational Mix Adjustment

44. Honesty, Integrity and Results…You Can Depend On! Occupational Mix Adjustment Factor Or use CMS calculator at CMS Website –www.cms.gov/AcuteInpatientPPS/WIFN/list.aspwww.cms.gov/AcuteInpatientPPS/WIFN/list.asp –Then click on the FY 2011 Wage Index Home Page –Now look for FY 2011 Final Ruling AHW calculator

45. Honesty, Integrity and Results…You Can Depend On! OMA Calculator

46. Honesty, Integrity and Results…You Can Depend On! Occupational Mix Adjustment Factor OMA calculated and applied: –Hospitals with a nursing % lower than the national % will have a OMAF > 1 –Hospitals with a nursing % greater than the national % will have OMAF < 1

47. Honesty, Integrity and Results…You Can Depend On! Positive Occupational Mix Adjustment

48. Honesty, Integrity and Results…You Can Depend On! Negative Occupational Mix Adjustment

49. Honesty, Integrity and Results…You Can Depend On! Past Impact on Wage Index for New York City CBSA Hospitals New York City CBSA Wage Index increased by approximately 1.9 percentage points due to Occupational Mix. Approximately $44 million in reimbursement increase in New York City CBSA per year.

50. Honesty, Integrity and Results…You Can Depend On! What’s next? Start today – July 1, 2011 is 2 months away –Who is preparing the form? Collecting your data –Pay Periods ending between January 1, 2010 – December 31, 2010 –Contract labor hours –Home office –Related organization Have your survey reviewed before submitting to the FI

51. Honesty, Integrity and Results…You Can Depend On! Resources CMS Website to access Public Use Files: http://www.cms.hhs.gov/acuteinpatientpps/wifn/ Federal Register: http://www.gpoaccess.gov/fr/index.html Wage Index History and Estimate: http://www.wageindex.com

52. Honesty, Integrity and Results…You Can Depend On! Questions Kenneth Webdale, CPA, FHFMA - President K. Michael Webdale,CPA - Senior Vice President Daniel Silver, FACHE - Vice President R-C Healthcare Management Services, Inc. 2226 West Northern Avenue, Suite C-100 Phoenix, AZ 85021-4969 Phone: (800) 862-5368 E-Mail:(Ken) kwebdale@rcmgmt.com (Mike) mwebdale@rcmgmt.com (Dan) dsilver@rcmgmt.com