OIG Nabs AZ Hospital for Submitting Inaccurate Wage Index Data
Overstated wage index data from St. Joseph’s Hospital and Medical Center would have led to $11.6 million in underpayments to Arizona hospitals in FY 2019, OIG said.
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By - St. Joseph’s Hospital and Medical Center in Phoenix, Arizona, overstated wage index data by over $12.3 million, which would have significantly impacted Medicare reimbursement rates for hospitals in and around the state if the HHS Office of Inspector General (OIG) had not recommended changes.
In a report released on June 5, OIG stated that the inaccurate wage index data from the 595-bed, non-profit Dignity Health hospital would have raised the state’s rural wage index, which CMS uses to calculate reimbursement rates for inpatient services, resulting in $11.6 million in overpayments to 54 Arizona hospitals in fiscal year (FY) 2019.
And because of federal budget-neutrality rules, the overpayments to Arizona hospitals would have led to underpayments to hospitals in other states, the OIG added.
OIG selected St. Joseph’s Hospital and Medical Center to audit because the facility applied to be considered a rural hospital for wage index purposes and the hospital’s wage data contributed to the Arizona rural wage index for FY 2019. Therefore, the hospital’s wage index data affected Medicare reimbursement to hospitals in FY 2019.
The federal watchdog also conducting the investigation after finding that hospitals frequently report inaccurate hospital wage index data, which may have resulted in payment adjustments that do not accurately reflect local labor prices. For example, OIG reported in September 2017 that inaccurate wage index data from Sierra Nevada Memorial Hospital resulted in overpayments to hospitals in California.
Similar OIG reports of inaccurate hospital wage index data back to July 2008.
But the St. Joseph’s Hospital and Medical Center investigation is the first OIG report on inaccurate hospital wage index data to be released since CMS proposed to increase the wage index for rural hospitals.
Rural hospitals may receive lower Medicare reimbursement for inpatient services compared to their urban peers because of the wage index adjustment, CMS explained in the April 2019 announcement. For example, a hospital in a rural community could receive a Medicare payment of about $4,000 for treating a beneficiary admitted for pneumonia while another hospital in a high wage area may receive a Medicare payment of almost $6,000 for the same case.
The difference in Medicare reimbursement is exacerbating financial pressures already felt by rural hospitals. Twenty-one percent of rural hospitals are already at an elevated risk of closing because of their current financial situation, healthcare consulting firm Navigant recently reported.
Inaccurate wage index data is not helping rural hospitals overcome their disparities.
OIG reported that St. Joseph’s Hospital and Medical Center overstated wages and wage-related costs because the hospital transferred the assembly and reporting of wage data to a new staff group and did not have sufficient review procedures to ensure that the correct wages and hours worked were reported on the correct lines of the Medicare wage data worksheet.
The federal watchdog also found that the hospital did not have adequate quality control over the entry of contract labor data into its accounting system.
To ensure accurate hospital wage index data moving forward, OIG advised St. St. Joseph’s Hospital and Medical Center to:
- Verify that all personnel involved in submitting wage index data are fully trained to comply with Medicare wage data reporting requirements
- Annually review all software scripts and manual procedures to guarantee compliance with Medicare wage data reporting requirements
- Implement more effective quality controls over the entry of contract labor data into the accounting system
On behalf of the hospital, Dignity Health concurred with OIG’s findings and recommendations and gave steps the health system would take to ensure the St. Joseph’s Hospital and Medical Center submits accurate and compliant cost reports in the future.
