Review of Kaiser Foundation Hospital-Vallejo's Reported Fiscal Year 2005 Wage Data

Kaiser Foundation Hospital-Vallejo (the Hospital) overstated its wage data by $11.8 million and 252,882 hours in its fiscal year (FY) 2005 Medicare cost report. Correcting the Hospital's errors increased the average hourly wage rate from $49.75 to $50.17. Under the acute-care hospital inpatient prospective payment system, the Centers for Medicare & Medicaid Services (CMS) adjusts the Medicare base rate paid to participating hospitals by the wage index applicable to the area in which the hospitals are located. CMS updates the wage indexes annually based on hospitals' reported wage data.

We recommended that the Hospital submit a revised FY 2005 Medicare cost report to the fiscal intermediary to correct the wage data overstatements and strengthen review and reconciliation procedures to ensure that the wage data reported in future Medicare cost reports are accurate, supportable, and in compliance with Medicare requirements. In its written comments on our draft report, the Hospital provided information on actions taken to implement our recommendations.