The deadline for submitting wage index data is quickly approaching and will be used to determine hospitals’ Medicare reimbursement.

Navigating health reform

Occupational Mix Survey Impacts Hospitals' Medicare Reimbursement

  • Jill Sigelman
  • 5/3/2017

The occupational mix survey deadline is rapidly approaching. Every three years, the Centers for Medicare and Medicaid Services (CMS) are required to collect data on the occupational mix of employees. This occupational mix data is one of the factors used to determine the wage index values for short-term, acute care hospitals paid under the inpatient prospective payment system (IPPS).

Understanding the occupational mix survey

The wage index is the mechanism used to adjust Medicare reimbursement between labor market areas (referred to as Core-Based Statistical Areas (CBSAs)) in a budget-neutral fashion. It compares the hospital wage level in a particular CBSA against the national average hospital wage level. The intent of the occupational mix adjustment is to remove some of the variability in wage index values due to hiring decisions of management, so that they reflect local labor cost differences.

The occupational mix survey follows similar reporting rules to the wage index, which is reported on the Medicare cost report Worksheet S-3, Parts II and III, with some exceptions. One significant difference is that only payroll and contracted dollars and hours are reported on the occupational mix survey, rather than also including wage-related costs.

The payroll and contract labor data needed to complete the upcoming occupational mix survey includes pay periods ending in calendar year 2016, regardless of fiscal year end. Calendar year 2016 occupational mix surveys must be submitted to the applicable Medicare Administrative Contractor by July 1, 2017. The audited calendar year 2016 occupational mix data will be used to set federal fiscal year (FFY) 2019, 2020, and 2021 wage index values.

The occupational mix survey is completed using an Excel form rather than the Medicare cost reporting forms. The Excel form that is utilized for occupational mix reporting purposes only includes final figures for each category of reporting. Therefore, much work has to be done outside the occupational mix form in order to arrive at the final figures to report.

Occupational mix categories

Employed and contracted dollars and hours recorded in the occupational mix survey must be segregated into the following categories:

  • Registered nurses
  • Licensed practical nurses
  • Surgical technologists
  • Nursing assistants
  • Orderlies
  • Medical assistants
  • All other occupations

The occupational mix survey uses the occupational categories and definitions as derived from the U.S. Bureau of Labor Statistics in its 2014 Occupational Employment Statistics survey. The survey instructions indicate that the individual is to be classified in the category that represents their highest skill level or where they spend the most time.

In order to ensure consistent reporting within the surveys and amongst hospitals, only nursing personnel in certain Medicare cost report cost centers are included in the applicable nursing categories. Nursing wages and hours for personnel working in other areas of the hospital that are reimbursable under the IPPS, or nurses performing solely administrative functions, are included in the “all other occupations” category.

Occupational mix trouble spots

Much manipulation is necessary to transform payroll and contracted labor data into the occupational mix survey for calendar year 2016. Here are areas that should be considered in the completion of the survey:

Paid salaries and hours:

  1. Obtain a payroll report for pay periods ending during calendar year 2016, which includes job and pay codes.
  2. When categorizing the payroll report, each job and pay code should be examined. Discuss the use of job and pay codes with payroll, department managers and human resources personnel to ensure proper reporting of salaries and hours by occupational mix category.

Contract labor:

  1. Contract labor should be tracked by vendor, transaction, type of service provided, labor amount, labor hours, and general ledger account recorded.
  2. Medicare may request invoices for contract labor. Therefore, it is important to have invoices available to support the amounts submitted. Unsupported amounts and other mistakes could be deemed errors by Medicare and extrapolated against the entire contract labor population.

Home office and related organizations:

  1. In most cases, the same steps should take place to determine categories of employees for home offices and related organizations as individual hospitals.
  2. Total costs (which should include payroll and contract labor dollars and hours) should be allocated to the appropriate components of the home office based upon a reasonable methodology, which may mimic cost allocations on the home office cost report.

Occupational mix impact

The occupational mix adjustment to the wage index is affected by the hours in each employment category. The percentage of hours in each nursing category in relation to the total nursing hours is multiplied by the national average hourly wage of its respective nursing category, which produces a facility and CBSA average hourly wage. That CBSA average hourly wage is compared to the overall national nursing average hourly wage. If the average hourly wage for the CBSA is greater than the national average hourly wage, there will be a negative occupational mix adjustment. If the average hourly wage for the CBSA is less than the national average hourly wage, there will be a positive occupational mix adjustment. Therefore, CMS rewards facilities for a higher proportion of lower skilled, average hourly wage workers. Ensuring that dollars and hours are reported in the appropriate category can have a significant impact on the facility wage index value.

How we can help

Because occupational mix data directly affects your Medicare reimbursement, proper reporting is essential. CLA can help complete or review occupational mix surveys so that your data is accurately and consistently reported. The audited calendar year 2016 occupational mix data will be used in the setting of federal fiscal years (FFYs) 2019, 2020, and 2021 wage index values.