Medicare Compliance & Reimbursement

New occupational-mix adjustment doesn't yield big changes to wage index.

Good news: Medicare will allow you to reclassify geographic assignments so you can receive payments using another area's wage index under the fiscal year 2007 inpatient prospective payment system (IPPS).

The Centers for Medicare & Medicaid Services (CMS) had completed the final rule for its FY 2007 IPPS back on Aug. 1 but called the payment rates "tentative." CMS had to calculate the rates using the final occupational mix adjusted wage indices, which the agency gathered from a collection of new occupational-mix survey data. CMS recently completed the survey-data collection, which the 2nd Circuit Court of Appeals ordered in the case Bellevue Hospital Center v. Leavitt on April 3, 2006.

"Consistent with the Court's order, the final rates announced for FY 2007 fully adjust the wage indices for occupational mix," CMS said in a recent fact sheet. The revised wage indices also affect other aspects of IPPS payments for FY 2007, including the diagnosis-related group (DRG) relative weights, geographic reclassification and the outlier threshold, CMS notes.

In the fact sheet, CMS itemized how the revised wage indices affected the final payment rates under the IPPS compared to the rates it released on Aug. 1. The adjusted wage indices had virtually no effect on DRG relative weights, the outlier threshold or the increase in operating and capital payments, CMS says.

But the "final IPPS standardized amounts will be approximately $4 less (0.1 percent) than those we announced on August 1," the agency explains.

You Have Flexibility With Geographic classifications In FY 2007

Also in the final IPPS rule for 2007, CMS is allowing hospitals to "reclassify in order to be paid using another area's wage index if they believe that they compete for labor with a different area than the one in which they are located," the agency says.

"Generally, hospitals that have multiple reclassification options can select the one they would like to use for the following fiscal year based on information that is in the IPPS proposed rule," CMS explains.

But because the revised wage-index information decision for FY 2007 was unavailable until CMS recently released the final IPPS rates, the agency had made "interim decisions on behalf of hospitals in the final notice. CMS' interim decisions gave hospitals the highest possible wage index among their reclassification options," the agency adds.

If a hospital wants to revise CMS' decision about its wage-index reclassifications, it will have until Oct. 30 to notify CMS.
 
The same deadline applies to hospitals that wish to reinstate a withdrawn reclassification that they want to extend into FY 2008, CMS says.

For more information, go to www.cms.hhs.gov/AcuteInpatientPPS/IPPS and click on "IPPS Regulations and Notices" and "CMS 1488-N."