Geographic Adjustment in Medicare Payment Phase II: Implications for Access, Quality, and Efficiency (2012) / Chapter Skim
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Appendix A-1: Technical Approach to Payment Simulations: IOM Committee Recommendations for Hospital Wage Index and Physician Geographic Adjustment Factors
Appendix A-1: Technical Approach to Payment Simulations: IOM Committee Recommendations for Hospital Wage Index and Physician Geographic Adjustment Factors
Pages 143-172
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From page 143... ...
a Fixed-Weight Index, 147 2.2 Addition of Benefits Index, 148 2.3 Redefined GPCI Payment Areas, 150 2.4 Smoothing, 150 2.5 County Indicators for Health Professional Shortage Areas, 152 2.5.1 Background, 152 2.5.2 Computation, 155 2.6 Payment Simulations, 155 2.6.1 Hospital Computations, 155 2.6.2 Physician Computations, 159 2.6.3 Payment Impact Computations, 160 2.7 Budget Neutrality, 161 3 Payment Impact Exhibits, 163 3.1 IPPS Hospital Estimates, 163 3.2 Part B Physician and Other Practitioner Estimates, 163 List of Exhibits A-1 Recommended Changes in Index Construction Incorporated into Payment Simulations, 145 A-2 Labor Markets in Source Data and Final Index Construction, 147 143
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144 GEOGRAPHIC ADJUSTMENT IN MEDICARE PAYMENT A-3 Percent difference in HWI values due to data change alone, plotted against number of hospitals in labor market, 148 A-4 Effects of Adjusting for Independent Area Variation in Benefits, 149 A-5 County Assignments by Region, Type of Payment Locality, and CBSA Market, 151 A-6 County Smoothing Adjustments, by Type of Index, 152 A-7 Commuter-based smoothing adjustments by RuralUrban Continuum Code, 153 A-8 IOM Committee's Recommended Smoothing Adjustments Compared to Current Outmigration Adjustments Under "Section 505" and Related Reclassifications, 154 A-9 Correlation of Adjusted ZIP Codeto-County Address Counts to Population and Beneficiary Statistics, 156 A-10 Distribution of estimated proportion of county population in primary care shortage areas, 156 A-11 Distribution of Counties, Part B Enrollees, and RVUs Billed by Primary Care Practitioners, by Revised HPSA County Status, 157 A-12 Budget Neutrality Factors Imposed on IOM Committee Indexes, 162 A-13 Distribution of payment impact across all IPPS hospitals, 163 A-14 Estimated Change in IPPS Payments, Isolated by Type of IOM Committee Recommendation, 164 A-15 Impact of IOM Committee Recommendations on IPPS Payment, by USDA Rural Urban Continuum Code, 165 A-16 Impact of IOM Committee Recommendations on IPPS Payment, by Census Division and Metropolitan Status, 165 A-17 Impact of IOM Committee Recommendations on IPPS Payment, by Hospital Reclassification Status, 166 A-18 Impact of IOM Committee Recommendations on IPPS Payment, by Special Rural Status, 166 A-19 Impact of IOM Committee Recommendations on IPPS Payment, by Teaching and DSH Status, 166 A-20 Impact of IOM Committee Recommendations on IPPS Payment, by Bed Size, 167 A-21 Distribution of physician payment impact across all counties, 167 A-22 Change in Aggregate Geographic Adjustment Factor, by Type of IOM Committee Recommendation, 168 A-23 County Analysis of the Isolated Payment Effects from Redefining the GPCI Payment Areas, 169 A-24 Physician Payment Impact of IOM Committee Recommendations, by USDA Rural Urban Continuum Code, 170 A-25 Physician Payment Impact of IOM Committee Recommendations, by Revised Health Professional Shortage Area Indicator, 170 A-26 Physician Payment Impact of IOM Committee Recommendations, by County Ranking in Median Family Income, 171 A-27 Physician Payment Impact of IOM Committee Recommendations, by County Ranking in Percent Non-White Population, 171 A-28 Physician Payment Impact of IOM Committee Recommendations, by Rural County Population Density, 171
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The recom EXHIBIT A-1 Recommended Changes in Index Construction Incorporated into Payment Simulations Regarding the Geographic Practice Regarding the Hospital Wage Type of Recommendation Cost Indexes Index Changes in Data · U se health care worker wages instead · R eplace hospital reported [Year 1 Recommendations 2-2 of all-employer wages average wages with BLSand 3-3] · Use BLS-constructed indexes from based index health care (Note: recommendations 5-4 and public and nonpublic data for all worker wages for hospital 5-7 were incorporated by CMS occupations reported for physician occupations into 2012 rates and therefore did offices surveys · Incorporate separate benefits not need to be simulated)
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2 TECHNICAL APPROACH 2.1 Use of BLS Data 2.1.1 New BLS-Constructed Indexes BLS base wage indexes for the hospital wage index (HWI) and the nonphysician wage component of the PE-GPCI were computed by BLS staff at RTI's request, in order to make use of data in small markets that were suppressed from the public use files due to privacy rules.
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RTI found that the percent differences between the CMS occupation-mix adjusted hospital index and benefits-adjusted BLS-based index are relatively small in large markets where several hospitals contribute to the CMS hospital index, but the differences become quite large (whether EXHIBIT A-2 Labor Markets in Source Data and Final Index Construction BLS-Based Wage IOM Proposed GPCI IOM and CMS HWI Areas Labor Markets Labor Markets Nonmetropolitan 60 48 48 Metropolitan, CBSA-based 368 384 384 Metropolitan, NECTA-based 29 0 0 Subtotal Excluding Territories 457 432 432 Puerto Rico, Metropolitan* 8 8 0 Puerto Rico, Nonmetropolitan*
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2.2 Addition of Benefits Index For lack of better data at this time, the source for the independent benefits index applied to both the HWI and the work and practice expense GPCIs is the IPPS hospital cost report wage survey.3 Data from 2009, 2010, and 2011 were combined to provide additional stability to the index. Compensation-related benefits (including payroll taxes, insurance, and pension costs)
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It summarizes the distribution and regional mean values for the base wage index, the benefits index, and the resulting total compensation index, as computed for the revised HWI and for the new CBSA-based practice expense GPCI. Accounting for variation in benefits tends to raise index values in high-wage markets and lower them in low-wage markets, widening the gap slightly between the lowest and highest index values.
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In contrast, converting to CBSA markets reduces the GPCIs for 99 percent of nonmetropolitan counties. Exhibit A-5 provides additional detail on the countylevel impact of redefining the GPCI payment areas, broken down by region and by the type of current payment locality.
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For the simulations in the year 2 report, smoothing adjustments have been computed for the revised HWI, for the CBSA wage component of the practice expense GPCI and work GPCI, and for the payment locality-based GPCIs. Exhibit A-6 shows the distribution of smoothing factors applied to the new HWI and the CBSA GPCIs.
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Exhibit A-8 compares the size of commuter-based smoothing adjustments to the size of CMS' outmigration adjustments as well as reclassifications. 2.5 County Indicators for Health Professional Shortage Areas 2.5.1Background The Health Resource Services Administration (HRSA)
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Exhibit EXHIBIT A-7 Commuter-based smoothing A-7.epsby RuralUrban Continuum Code. adjustments NOTES: Smoothing adjustments computed for CBSA markets.
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* Additional hospitals were identified in the 2012 payment impact file as having reclassified wage index values that were lower than the non-reclassified values for their geographic labor market, which could be due to anomalies in the timing of provider requests.
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Exhibit A-11 identifies the number of metropolitan and nonmetropolitan counties in each of these five categories, as well as the share of Part B fee-for-service enrollees and Part B RVUs billed by primary care providers. 2.6 Payment Simulations 2.6.1 Hospital Computations Hospital payment estimates were made at the IPPS provider level, taking into account all current payment factors as identified in the most recent IPPS Impact Files and payment tables and published for IPPS final rules for FY 2012.9 Source documents needed to do this include the following: · C MS IPPS Impact Files for FY 2012, for data on providers' geographic market; number of transfer-adjusted discharges; transfer-adjusted case-mix index (CMI)
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; Section 505 outmigration adjustments; and final post-reclassification wage index. Data for Indian Health Service providers and providers in Puerto Rico and other territories are excluded from the computations.
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· CMS Wage Index Public Use Files, to identify pre- and postoccupation-mix-adjusted index values, pre- and post-reclassification index files; application of frontier floors; and applica tion of Section 505 outmigration adjustments. Smoothing adjustment factors were computed only after the revised BLS-based indexes were computed.
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Also see Section 2.7, below, for a discussion of how budget neutrality computations affect each of the indexes prior to final payment estimation. 10 The exponent 0.6847 is the coefficient derived from a regression of the natural log of average total costs per dis charge on the natural log of the wage index using 1988 data, estimated at the time that capital PPS payment was first implemented.
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; · the physician work index, equal to one-quarter of the index computed on BLS data for the XX proxy professions; o the malpractice index; o physician work, malpractice, and PE-RVUs; and o county payment locality assignment. RTI merged CBSA codes, and the IOM committee revised nonphysician wage index and the independent benefits index into this file.
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From page 160... ...
Smoothing adjustments were then also applied at the county level, creating slight differences in GPCIs within a given market. For each county, regardless of which GPCI is used or which payment area is used, aggregate physician payments are computed by multiplying each of the three types of RVUs by their respective GPCIs (after application of smoothing factors, if applicable)
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For physician payment impact: · Difference due to data changes isolates the effect of the move from publicly available BLS data to internally computed indexes, moving from wages reported by physician office employers to wages reported by all health care employers, and adding the independent benefits index. Payments are computed using the IOM committee's recommended benefits-adjusted BLS-based physician office wage index only (without market smooth ing)
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or it can be implemented at the end of the rate-setting process by altering the underlying national standardized rate or conversion factor. In keeping with CMS's current approach, we have imposed budget neutrality to current CMS payments using across-the-board adjustments to the index values.
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EXHIBIT A-13 Distribution of payment impact across all IPPS hospitals. SOURCE: RTI simulations.
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2.5% 0.01% 0.5% 2.1% Nonmetro. 2.0% 0.1% 2.3% 3.1% NOTES: BLS = Bureau of Labor Statistics; CMS = Centers for Medicare & Medicaid Services; HWI = hospital wage index; IOM = Institute of Medicine; IPPS = Inpatient Prospective Payment System.
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SOURCE: RTI Simulations. EXHIBIT A-16 Impact of IOM Committee Recommendations on IPPS Payment, by Census Division and Metropolitan Status Difference Under IOM Committee IPPS Recommendations Payments In Metropolitan In Nonmetropolitan Under Areas Areas Current Policy Number of % Number of % Location ($ Billions)
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$19.5 2 4.1% 606 1.8% "Lugar" Hospitals $0.5 0 -- 53 1.4% Section 505 Outmigration Adjustments $4.6 2 11.7% 268 0.5% Frontier Floors $0.0 46 7.4% N/A -Metropolitan Area Rural Floors $9.6 N/A -- 261 3.1% No Exceptions $73.2 22 0.5% 2158 1.0% NOTES: IOM = Institute of Medicine; IPPS = Inpatient Prospective Payment System; MGCRB = Medicare Geographic Classification Review Board. SOURCE: RTI Simulations.
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aNew hospitals; number of beds listed as "1" and data on bed days available are missing in 2012 impact file. SOURCE: RTI Simulations; Final IPPS Payment Impact Files for FY 2012.
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index floors) Compares payments using all IOM committee All (combined Compares recommended effects payments changes Compares of all IOM using adjusted including payments under committee BLS data but CBSA markets, current CMS recommendations- keeping payment compared policy, including payments localities, to payments frontier and under final to payments using all IOM Alaska floors, IOM committee under CMS committee compared to recommended GPCIs but recommended payments under GPCIs compared excluding changes except CMS GPCIs but to payments under frontier and the CBSA excluding all current CMS Alaska floors markets index floors policy)
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counties w/increase 66% 52% 56% Percent national RVUs 55% 52% 52% Median % increase +1.6% +2.0% +0.5% Aggregate average % increase +1.6% +2.1% +0.6% Nonmetropolitan Counties Only Number of counties w/pmt reduction 1,949 1,920 1,148 Percent counties w/reduction 99% 98% 58% Percent national RVUs 99.9% 99% 63% Median % reduction 2.5% 2.6% 0.4% Aggregate average % reduction 2.7% 0.2% 0.4% Number of counties w/pmt increase 18 48 819 Percent counties w/increase 1% 2% 42% Percent national RVUs 0.01% 1% 37% Median % increase +0.2% +0.6% +0.2% Aggregate average % increase +0.8% +0.5% +0.3% NOTES: CMS = Centers for Medicare & Medicaid Services; GPCI = geographic practice cost index; IOM = Institute of Medicine; pmt = payment; RVU = relative value unit.
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EXHIBIT A-25 Physician Payment Impact of IOM Committee Recommendations, by Revised Health Professional Shortage Area Indicator In Frontier States In All and Alaska Other States Total Part B County Shortage Indicator, Practitioner % % as Defined by Estimated Payments Proportion Change in Proportion Change in Population in Bonus Areas ($ Billions) Billed RVUs Payments Billed RVUs Payments In Metropolitan Counties Non-HPSA (0%)
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. EXHIBIT A-28 Physician Payment Impact of IOM Committee Recommendations, by Rural County Population Density In Frontier States In All and Alaska Other States Total Part B Counties by Rural/Urban Status Practitioner Proportion % Proportion % and Grouped by Persons per Payments Billed Change in Billed Change in Square Mile ($ Billions)
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EXHIBIT A-30 Effect of Level of Physician Work GPCI on Estimated IOM Committee Payment Differences, for Counties Grouped by Revised Health Professional Shortage Area Indicators Percent Difference in Part B Payments by Level of Physician Work Adjustmenta Counties Grouped by Estimated Share Current Range of Optional Policies Proportion of Their Population That Policy: Proportion Primary Is Located in CMS Bonus 25% of 0% of 100% of Part B Care Payment ZIP Codes Work GPCI Work GPCI Work GPCI Enrolleesb RVUsc Metropolitan Counties 0% 0.7% 0.3% 1.8% 0.365 0.384 20% 0.1% 0.0% 0.5% 0.369 0.437 20% to 80% 0.8% 0.3% 2.2% 0.011 0.008 80% to <100% 1.3% 0.4% 4.0% 0.012 0.005 100% 1.4% 0.0% 5.6% 0.004 0.003 Subtotal 0.4% 0.1% 1.1% 0.761 0.836 Nonmetropolitan Counties 0% 2.8% 1.0% 8.1% 0.089 0.063 20% 3.0% 1.1% 8.6% 0.096 0.075 20% to 80% 2.5% 1.2% 6.3% 0.010 0.005 80% to <100% 3.0% 1.2% 8.6% 0.032 0.013 100% 3.7% 2.0% 9.0% 0.012 0.006 Subtotal 2.9% 1.1% 8.4% 0.239 0.164 All Counties 0.0% 0.0% 0.0% 1.000 1.000 NOTES: CMS = Centers for Medicare & Medicaid Services; GPCI = geographic practice cost index; IOM = Institute of Medicine; RVU = relative value unit. aFor each choice of percent physician work adjustment, value is defined as difference between payments estimated with GPCIs computed using all of the IOM committee's recommendations, relative to payments estimated under current CMS policy including all floors.
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