MICHIGAN HOSPITAL ASSOCIATION
Federal Fiscal Year 2016-2018
Occupational Mix Adjustment Survey
April-May 2014
By
DALE E. BAKER
BAKER HEALTHCARE CONSULTING, INC.
CONTACTS

Michigan Hospital Association:
Vickie Kunz
Email – vkunz@mha.org
Telephone – 517-703-8608

Consultant:
Dale E. Baker
Baker Healthcare Consulting
Email – dbaker@baker-healthcare.com
Telephone – 317-631-3613
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MEDICARE WAGE INDEX
OCCUPATIONAL MIX ADJUSTMENT (OMA)


CMS used Bureau of Labor Statistics (BLS) data
Strategy is reverse logic!

We need to:
Minimize RN hours
 Maximize nursing aides, orderlies and attendants, and medical
assistants


Our comments:


For computing the OMA – Centers for Medicare & Medicaid
Services (CMS) uses the National Average Hourly Wages
(AHW). Local areas have little impact on National.
Our focus is on hours but we report salaries (excluding
fringes) including agency nursing fees (travelers, registry, per
diem & contract employees) as well as hours, including
vacation, holiday & sick hours and pay.
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OBJECTIVES OF OMA PROJECT
Carefully consider the classifications for the OMA
Survey – for calendar 2013 to be submitted by
7/1/14.
 Direct input from Nursing Administration
Executive(s) is needed – nursing model and roles
will vary from hospital to hospital.
 Prepare Nursing Administration Executive(s) to
respond to Medicare Administrative Contractor
(CMS auditors) questions if asked (along with
finance personnel).
 We do not seek uniformity – Nursing roles vary
hospital to hospital.

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THE WAGE INDEX
WHAT IT IS & WHY IT’S IMPORTANT


A wage index is computed for each metropolitan area and
statewide rural areas. The wage index adjusts the "Labor
Related Portion" or either 62% or 69% of the DRG
payment.
Computation of current Detroit-Livonia-Dearborn (FFY
2014) wage index:
AHW based on the acute care hospitals
in the Detroit area
Divide by National AHW FY 2014
Budget neutrality Factor
Computed Detroit natural wage index – FY 2014

$35.6582
÷38.3698
x .99015
.9201
The above average hourly wage includes certain fringe
benefits. CMS applies the OMA when computing the AHW
and the wage index. This adjustment is not transparent.
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WHAT WERE THEY THINKING?
Academics thought small rural hospitals had
lower skill mix level and a resulting reduced
average hourly wage. Congress wished to improve
the equity of the wage index by computing wage
indexes based on national average skill mix.
 But for FY 2015 OMA benefits 38 rural areas and
decreases payment to 20 rural areas.
 Why?
 When legislated, no one thought about minimum
staffing levels – that can result in higher skill mix
for small rurals compared to urban hospitals.
 OMA has never worked right.

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GOAL OF REVIEW
Review Functionality – not just job titles
 More accurately identify employee
classification in accordance with the
instructions
 Improve payment FFY 2016-2018
 Hours are the driver of the OMA, CMS uses
National AHWs and local hours.

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QUESTIONS
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