By Rebecca Mayo, J.D.
An HHS Office of Inspector General (OIG) review of Sierra Nevada Memorial Hospital found that errors in reporting wage data, resulted in an increased rural-floor calculation and a combined Medicare overpayment of $216,594 to 173 other hospitals in the state of California. The errors in reporting wage data occurred because the hospital did not follow the cost report requirements and did not have adequate review and reconciliation procedures in place to ensure data reported to CMS was accurate (OIG Report, No. A-09-16-02044, September 12, 2017).
Errors. The hospital inaccurately reported $32,174 in non-labor costs as patient-care contract labor costs, which resulted in an overstatement of wages by $32,258, overstating its average hourly wage by $0.0274. Additionally, hospital personnel made clerical errors by overstating its patient-care contract labor costs by $36,746 and hours by 108. This led to wages being overstated by $36,821 and hours by 108, overstating its average hourly wage by $0.0253. The combined effect of these errors was that the hospital overstated wages by $69,079 and hours by 108, which overstated its average hourly wage by $0.0527. These errors occurred because the hospital personnel calculating the data did not follow the requirements in the CMS Provider Reimbursement Manual (Manual). Further, the hospital did not have adequate review and reconciliation procedures to ensure that the Medicare wage data it reported to CMS were accurate, allowable, supportable, and in compliance with Medicare requirements.
Impact. The hospital’s wage data affected 173 hospitals in 16 California core-based statistical areas (CBSAs) that had the rural floor. The OIG estimated that Medicare overpaid those 173 hospitals a total of $216,594 for inpatient services in the first six months of federal fiscal year 2017 (October 1, 2016, through March 31, 2017). Because the Patient Protection and Affordable Care Act (ACA) (P.L. 111-148) requires CMS to apply rural-floor wage indexes in a manner that is budget neutral on a national level, the over payments to California hospitals caused underpayments to hospitals in other states. The extent of those underpayments could not be accurately calculated and the impact is unknown. Because these Medicare payments are paid prospectively, CMS does not have a mechanism to retroactively adjust payments made on the basis of inaccurate wage data.
Recommendations. The OIG recommended that the hospital ensure that all personnel involved in Medicare cost report preparation follow the requirements in the Manual and that the hospital strengthen its review and reconciliation procedures to ensure that accurate data is being reported. The hospital agreed with the OIG’s findings and provided plans the hospital will implement to address the OIG’s findings.
Companies: Sierra Nevada Memorial Hospital
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