- CMS may be underpaying some hospitals and overpaying others due to inaccurate or incomplete self-reported wage data, according to a new HHS Office of Inspector General report. In just five of its most recent reviews of hospital wage data, the government watchdog found an estimated $140.5 million in overpayments made to 272 hospitals between 2004 and 2017.
- The reimbursement snafus are due to "significant vulnerabilities" in the hospital wage index system, including provisions like the "rural floor," designed to keep rural hospitals from receiving higher payments than urban peers in the same state.
- OIG also recommended CMS eliminate its "hold-harmless" policy, which protects hospitals from having their wage indexes lowered due to the geographic reclassification of their peers. CMS disagreed with the recommendation.
OIG is not the only government body to take issue with the hospital wage index, which determines how much hospitals are reimbursed by Medicare based on a national average of self-reported wage data, adjusted for local market conditions like cost of living and clinician salaries. During a Senate Appropriations Committee hearing earlier this year, lawmakers called the wage index unfair and questioned why CMS has not fixed the problem.
CMS responded, in a way, in its final Inpatient Prospective Payment System rule, which preemptively allows the imputed wage index floor to expire for all-urban states. CMS Administrator Seema Verma told reporters on a call at the time that the agency is concerned with differentials in the wage index floor showing geographic disparities in payments that favor urban over rural hospitals.
After conducting 41 reviews of the wage data of individual acute-care hospitals from 2004 to 2017, OIG identified "material inaccuracies" in each. The government watchdog said it is concerned with CMS lacking the authority to penalize hospitals for submitting inaccurate wage data unless the data is purposefully falsified.
"CMS's ability to promote hospital accountability for submitting accurate and complete data is hampered by its lack of authority to penalize hospitals," the report reads, "which may result in less accurate wage indexes."
OIG recommended CMS create an "in-depth" data auditing system "focusing on hospitals whose wage data has a high level of influence on the wage index of their area." CMS concurred in its comments.