Wage Index Data Review is Addressed in OIG 2015 Work Plan

By Janet Hodgdon, Healthcare Consulting Director
December 2014

The Office of Inspector General (OIG) recently released its 2015 Work Plan on October 31, 2014.  The OIG Work Plan outlines areas to be addressed during the year by various governmental agencies and includes projects begun in earlier years as well as new items of scrutiny.  Some projects described in the Work Plan are statutorily required, and others are not.  The 2015 Work Plan, as it relates to Medicare, primarily continues many of the projects and reviews begun in prior years.  However, one area that is designated as new and for which hospitals should take special notice is the project related to the controls over reporting of wage data and its use as it relates to the calculation of wage index amounts, an integral part of many Medicare payments.

The project summary from the Work Plan reads as follows:

“We will review hospital controls over the reporting of wage data used to calculate wage indexes for Medicare payments.  Prior OIG wage index work identified hundreds of millions of dollars in incorrectly reported wage data and resulted in policy changes by CMS with regard to how hospitals reported deferred compensation cost.  Hospitals must accurately report wage data to CMS annually to develop wage index rates (Social Security Act, ยง1886(d)(3) and 1886(d)(3)(E).) (OAS; W-00-14-35725; W-00-15-35725; various reviews; expected issue date: FY 2015).”

The OIG has long been interested in reviewing wage data and has successfully done so for years.  While this particular project is labelled as “new” in the Work Plan, providers that have been the focus of this attention in past years would likely argue it is anything but.  The reviews performed previously have been lengthy, arduous, time consuming for providers and often included findings and policy changes seen as unfavorable by providers (think about the recent changes to reporting of defined benefit pension cost).  It would appear that the OIG may be planning reviews of other areas where they believe cost savings can be achieved. 

In any event, the Medicare wage index remains a complex and extremely controversial component of many Medicare payments.  With OIG once again focusing on the underlying wage data and the controls over it, expect more policy changes to come. 

We would be happy to address how these changes may impact you.  If you have any questions, please contact Janet Hodgdon.

Disclaimer of Liability: This publication is intended to provide general information to our clients and friends. It does not constitute accounting, tax, or legal advice; nor is it intended to convey a thorough treatment of the subject matter.