Appendix F

Description of Three Optional Sources for Facility Wage Index Data

TABLE F-1 Description of Three Optional Sources for Facility Wage Index Data

(1)
CMS current: IPPS hospital average wage survey (S-3)
(2)
CMS option—electronically submitted payroll data, dollars, and hours by SOC
(3)

BLS option—OES wage surveys
(2A)

All-Part A providers
(2B)

Hospital providers only
(3A)
All-employer average wages
(3B)

Hospital average wages
Description and sources “CMS Hospital Wage Index,” computed from annual aggregate average hospital wages, adjusted to remove wages from non-IPPS subproviders and to add benefits and contract labor; further adjusted every 3 years to account for variation in nursing occupation mix. Average wage data are obtained from the annual Medicare cost reports; occupation mix adjustments are computed from a separate tri-annual hospital nursing survey “CMS Part A Wage Index,” computed for each type of provider, or for hospitals only. Annually submitted data would include total wages and total hours paid, aggregated at the SOC level, and will be submitted directly from annual payroll files. Average wages could be computed across all health care providers, or separately by type of reporting provider (e.g., hospitals, SNFs, HHAs) “BLS Part A Wage Index,” using BLS reported average wages for a set of health care occupation codes. Data can be captured by occupation code across all industries, across health care industries only, or by health care sector (e.g., hospitals, SNFs, HHAs)


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Appendix F Description of Three Optional Sources for Facility Wage Index Data TABLE F-1 Description of Three Optional Sources for Facility Wage Index Data (2) CMS option— (3) electronically submitted payroll data, dollars, and BLS option— hours by SOC OES wage surveys (2A) (2B) (3A) (3B) (1) All- CMS current: IPPS Hospital employer Hospital hospital average wage All-Part A providers average average survey (S-3) providers only wages wages Description “CMS Hospital Wage “CMS Part A Wage Index,” “BLS Part A Wage Index,” and sources Index,” computed from computed for each type of using BLS reported average annual aggregate average provider, or for hospitals wages for a set of health hospital wages, adjusted only. Annually submitted care occupation codes. to remove wages from data would include total Data can be captured by non-IPPS subproviders wages and total hours paid, occupation code across all and to add benefits and aggregated at the SOC industries, across health contract labor; further level, and will be submitted care industries only, or by adjusted every 3 years directly from annual payroll health care sector (e.g., to account for variation files. Average wages could hospitals, SNFs, HHAs) in nursing occupation be computed across all mix. Average wage data health care providers, are obtained from the or separately by type of annual Medicare cost reporting provider (e.g., reports; occupation hospitals, SNFs, HHAs) mix adjustments are computed from a separate tri-annual hospital nursing survey continued 181

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182 GEOGRAPHIC ADJUSTMENT IN MEDICARE PAYMENT TABLE F-1 Continued (2) CMS option— (3) electronically submitted payroll data, dollars, and BLS option— hours by SOC OES wage surveys (2A) (2B) (3A) (3B) (1) All- CMS current: IPPS Hospital employer Hospital hospital average wage All-Part A providers average average survey (S-3) providers only wages wages Calculation Relative wages are Relative wages would be Data are available by MSA computed from facility- computed from facility- and multiple “balance- level data aggregated by level data aggregated by of state” non-MSA areas; MSA and state non-MSA MSA and state non-MSA, facility-specific data are not or could be aggregated to available hospital-specific areas (e.g., nearest neighbor) Occupation Added as adjustment to Fixed weight (Laspeyres Fixed weight (Laspeyres weights hospital-level average type) based on submitted type) based on national wage data by facility type employment shares by industry sector Suggested “Scoring” on Specific Desirable Characteristics (2) CMS option— (3) electronically submitted payroll data, dollars, and BLS option— hours by SOC OES wage surveys (3A) (3B) (2B) (1) (2A) All- Characteristics CMS current: IPPS Hospital employer Hospital to consider hospital average wage All-Part A providers average average and compare survey (S-3) providers only wages wages Timeliness 4-year lag from reported Potentially as little as a Data are from 3 to 5 wage data to applied 1-year lag if facilities submit years old when applied to index payroll data at the end of index (due rolling sample the calendar year method) Volatility Data are unstable year Likely to be Some Found to be The sample to year due to large improved improvement less volatile sizes for numbers of one- and over S-3 over S-3 in testing; hospital-only two-hospital markets survey data, if data are likely due respondents because collected from to rolling are likely to be more all hospitals sample too small for providers are rather than method and stability contributing IPPS only, but all-employer data to any still suffers data given market from small numbers within many markets

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183 APPENDIX F TABLE F-1 Continued (2) CMS option— (3) electronically submitted payroll data, dollars, and BLS option— hours by SOC OES wage surveys (3A) (3B) (2B) (1) (2A) All- Characteristics CMS current: IPPS Hospital employer Hospital to consider hospital average wage All-Part A providers average average and compare survey (S-3) providers only wages wages Reporting Annual One-time burden on No added burden to burden (to S-3 and tri-annual providers to load OES hospitals providers) occupation mix surveys occupation categories; after have many exceptions, that reporting is a once/ and often require manual year electronic file with input individual employee hours and pay or summed by OES group Data All IPPS providers submit Assuming all providers Depends on the level completeness, data, and nearly all would be required to of detail for the chosen hourly wages submit the occupation submit data for complete occupation codes; many mix survey payroll areas show missing data in many SOC codes that will require imputation a hospital-specific version would have more missing data than all-industry Data accuracy, CMS reviews and sends Data would be tied to a Accurate for large “cells” hourly wages out data for extra payroll system which is but subject to sampling provider review, and already heavily reviewed error, with some large allows all providers and audited standard errors in smaller to see other provider markets and/or less submissions common occupations; hospital-specific estimates have larger standard errors than all-industry estimates. There is some concern over the inability to account for part-time versus full-time employment Data Survey has lines for Payroll tax-related Payroll tax-related completeness, adding benefits including benefits can be added as benefits can be added as other payroll taxes, health percentages and/or taxable percentages and/or taxable compensation benefits, and pension benefits reported to the benefits reported to the costs, but there is no IRS could be added, but IRS could be added, but requirement to use them; complete benefit data complete benefit data survey does not capture would still have to be would still have to be variations in paid time off provided through a residual provided through other S-3 survey, or coded as an BLS regional data or on a add-on to the annual file residual S-3 survey continued

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184 GEOGRAPHIC ADJUSTMENT IN MEDICARE PAYMENT TABLE F-1 Continued (2) CMS option— (3) electronically submitted payroll data, dollars, and BLS option— hours by SOC OES wage surveys (3A) (3B) (2B) (1) (2A) All- Characteristics CMS current: IPPS Hospital employer Hospital to consider hospital average wage All-Part A providers average average and compare survey (S-3) providers only wages wages Data accuracy, Survey has instructions Depends on alternative Depends on alternative other for adding other forms of source source compensation compensation; probably some difficulties in measuring pension costs; benefits may not be as accurate as hourly wages Data provider Data represent IPPS Data would Data still Data would Data still specificity hospitals only but are come from would not come from would not used for other hospitals, the specific reflect prices all-industry reflect prices SNFs, and HHAs (Note: industry, and for other Part wages, but for other Part surveys exist for other be weighted A providers could be A providers providers but are not by labor weighted used) shares for by labor that industry shares for each specific industry Representative Most health care Most health care Most all Most of the entire occupations occupations occupations health care labor market occupations Some non-health care Some non-health care occupations occupations Some non- health care occupations Contract Yes No, unless on additional No labor costs survey included? Adjustment Separate study required, Fixed occupation weights Fixed occupation weights for occupation and the survey covers can be derived from are available from NAICS- mix only nursing mix submitted data specific national data differences differences Minimizing A large number of labor Most A large All-industry Smaller labor circularity markets have only one areas have number of sampling markets will and sensitivity or two contributing multiple labor markets should still have few to individual providers providers of will still have eliminate contributing reporting some level only a few the problem, hospitals anomalies contributing except hospitals in very small labor markets

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185 APPENDIX F TABLE F-1 Continued (2) CMS option— (3) electronically submitted payroll data, dollars, and BLS option— hours by SOC OES wage surveys (3A) (3B) (2B) (1) (2A) All- Characteristics CMS current: IPPS Hospital employer Hospital to consider hospital average wage All-Part A providers average average and compare survey (S-3) providers only wages wages Auditability Subject to annual review Payroll data subject to Only by BLS staff (not by MACs and audit if review by multiple public available to stakeholders) requested by CMS agencies, and can be reviewed or audited by MAC if requested by CMS Transparency Average wage data Provider-level wages by Sampling is reviewed by by provider is made SOC code probably not BLS staff, but data cannot available to all providers considered public data, be audited by providers but average occupation- or by CMS; missing data adjusted wage by provider issues are also likely to could still be released for create confusion each year provider review Administrative Current surveys are time After a one-time investment No data collection or burden to consuming; reviews, in coding for fixed-weight auditing burden, and CMS audits and appeals are indices, the collection and a moderate amount of numerous review of data should be analysis depending on the manageable; depends in remaining exception and/or part on the remaining smoothing techniques exception processes and/or smoothing techniques Flexibility in Yes; access to firm-level Yes; access to firm-level Data only available at MSA/ defining and/ data data balance-of-state levels, or smoothing which provide limited wage markets opportunity for boundary smoothing NOTE: BLS = Bureau of Labor Statistics; CMS = Centers for Medicare and Medicaid Services; HHA = home health agency; IPPS = Inpatient Prospective Payment System; MAC = Medicare Administrative Contractor; MSA = metropolitan statisti- cal area; NAICS = North American Industry Classification System; OES = Occupational Employment Statistics; SNF = skilled nursing facility; SOC = Standard Occupational Classification.

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