Department of Health and Human Services

Office of Inspector General -- AUDIT

"Review of Hospital Wage Data Used To Calculate Inpatient Prospective Payment System Wage Indexes," (A-01-05-00504)

February 26, 2007

The following is a PDF file Complete Text of Report is available in PDF format (839 kb). Copies can also be obtained by contacting the Office of Public Affairs at 202-619-1343.


Our objectives were to (1) consolidate the results of our reviews of 21 hospitals’ compliance with Medicare requirements for reporting wage data and (2) identify possible Centers for Medicare and Medicaid Services (CMS) remedies to address reporting errors. The hospitals reported inaccurate wage data totaling $377.9 million, which affected both the numerator and/or denominator of their wage rate calculations.

We recommended that CMS develop a corrective action plan to address hospitals’ errors in reporting wage data. As part of its action plan, CMS should consider: (1) ensuring that its fiscal year (FY) 2007 wage indexes were adjusted, and its FY 2008 wage indexes will be adjusted, as appropriate, to account for the inaccurate wage data identified in our individual reviews; (2) working with its fiscal intermediaries to encourage hospitals to implement review and reconciliation; (3) alerting its fiscal intermediaries to the results of our reviews and recommending that they consider those results in prioritizing areas to examine in future cost report reviews; and (4) working with its fiscal intermediaries to develop techniques for identifying hospitals at high risk of reporting inaccurate wage data and instructing the intermediaries to conduct more detailed reviews at those hospitals. CMS agreed.