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Pages 1-14

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From page 1...
... The geographic adjustments to Medicare fee-for-service payments are the hospital wage index (HWI) and the three geographic practice cost indexes (GPCIs)
From page 2...
... In two public sessions, the committee heard testimony from critics of the existing geographic adjusters who identified a number of questions and concerns and who believe that the current adjusters are not treating them fairly. Among their stated concerns are problems and inconsistencies with the definitions of payment areas and labor markets, concerns about the relevance and accuracy of the source data for determining area wages and other input prices, questions about the occupational mix used to create the hospital wage and physician practice expense adjustments, and criticisms about the lack of transparency of index construction.
From page 3...
... (E) of Title XVIII of the Social Security Act and used to ensure that Medicare payment fees and rates reflect differences in input costs across geographic areas.
From page 4...
... The committee heard testimony from hospital administrators and clinical practitioners who believe that hospital cost reports or actual practice expense data are both more understandable and more transparent to the provider community and a more accurate reflection of their actual business costs than some of the proxy data sources currently proposed or in use. However, the committee generally concluded that independent data that reflect input prices faced by providers are conceptually more appropriate than are data on costs paid by the providers, given that actual costs also reflect local business decisions or requirements that do not necessarily reflect input prices across labor markets.
From page 5...
... In developing recommendations about data sources for the HWI and GPCIs, the committee members compared an independent source of wage data for all-industry, health care sector, and hospital-specific wages for several occupational categories and found a very high degree of correlation between health care sector wages and wages from the other data sources. As a result, the committee found a strong conceptual rationale for using health sector data rather than industry-wide data to help improve accuracy in adjustments and to respond to concerns expressed by stakeholders.
From page 6...
... The committee heard testimony from practitioners and policy makers who view geographic adjustments in fee-for-service Medicare payment as a way to help address provider shortages and achieve other policy goals. Throughout their deliberations, committee members also recognized that even the most accurate geographic adjustment factors will not resolve all problems associated with the fee-for-service payment system as they relate to issues such as access to care, provider shortages, and provider mix.
From page 7...
... The final section looks ahead to some broader trends in the health care industry that are already under way and could have an influence on the way in which the committee's recommendations are implemented over the next 3 to 5 years. RECOMMENDATIONS Chapter 2: Labor Markets and Payment Areas Recommendation 2-1: The same labor market definition should be used for both the hospital wage index and the physician geographic adjustment factor.
From page 8...
... After comparison of hospital-only, health care sector, and industry-wide wage data, the committee concluded that the health sector data from the Bureau of Labor Statistics would be the most accurate and conceptually appropriate data source for both of the indexes. Chapter 3: Hospital Wage Index Recommendation 3-1: The U.S.
From page 9...
... Chapter 4: Smoothing the Borders of Labor Markets and Payment Areas Recommendation 4-1: The committee recommends that wage indexes be adjusted by using formulas based on commuting patterns for health care workers who reside in a county located in one labor market but commute to work in a county located in another labor market. As described earlier, the current geographic adjustment system uses different labor market definitions and payment areas for hospitals and physicians.
From page 10...
... Therefore, the continued use of proxy data for rate-setting to avoid the circularity of using physician income data is appropriate. However, in keeping with its principles of accuracy, consistency, and transparency of data sources, the committee recommends that CMS empirically reevaluate the accuracy of the seven proxies it currently employs using the most current BLS Occupational Employment Statistics (OES)
From page 11...
... Recommendation 5-3: The Centers for Medicare and Medicaid Services (CMS) should consider an alternative method for setting the percentage of the work adjustment based on a systematic empirical process.
From page 12...
... Comparable to the analyses and recommendations about the Hospital Wage Index (HWI) , the committee concluded that independent data that reflect market prices faced by providers are more appropriate than provider data on costs paid, because actual costs also reflect business decisions that are not necessarily an accurate reflection of input prices.
From page 13...
... Department of Housing and Urban Development (HUD) residential data that are currently used in the practice expense geographic practice cost index.
From page 14...
... 14 GEOGRAPHIC ADJUSTMENT IN MEDICARE PAYMENT Any such transition should be managed strategically by phasing it in over time and communicating clearly with stakeholders at every step along the way. However, the advantages of long-term administrative simplification, reduced administrative burden, and improved consistency within the Medicare program outweigh the short-term disadvantages of moving forward with a change.


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