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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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