Inpatient Prospective Payment System (IPPP) Wage Index Cost Report Audits

Under section 1886(d)(3)(E) of the Social Security Act, as part of the methodology for determining prospective payments to hospitals, the Secretary must adjust the proportion of hospital costs attributable to wages and wage-related costs for area differences in hospital wage levels. This adjustment factor, the wage index, reflects the relative hospital wage level in the geographic area of the hospital compared to the national average hospital wage level. The wage index is updated annually. Section 1886(d)(3)(E) of the Act also provides for the collection of data, at least once every 3 years, on the occupational mix of employees for short-term, acute care hospitals participating in the Medicare program, in order to construct an occupational mix adjustment to the wage index. In order for CMS to comply with statutory and regulatory requirements pertaining to the wage index, CMS requires its Medicare Administrative Contractors (MACs) to review and verify hospitals' wage index data before the data are used to calculate the wage index. These data are submitted on Form CMS-2552-10, Worksheet S-3, Parts II and III of the hospital cost report, and CMS-10079 (2010), Medicare Wage Index Occupational Mix Survey. The wage index desk review program is designed to assist the MACs in checking the clerical and mathematical accuracy of hospitals' data that are reported on Form CMS-2552-10, Worksheet S-3, Parts II and III, and CMS-10079 (2010), Medicare Wage Index Occupational Mix Survey, which are used to calculate the wage index. Each year, the desk review program is updated to reflect current wage index policies and trends in wage levels. Between December and February of each federal fiscal year (FY), MACs perform a desk review of hospitals' wage and occupational mix data that will be used for the following federal fiscal year, and note any hospitals that have data that fails to meet specified edit thresholds.