California hospital's reporting errors cause Medicare to overpay 173 other facilities

Sierra Nevada Memorial Hospital in Grass Valley, Calif., included wage data errors in its fiscal year 2014 Medicare cost report, which caused 173 other California hospitals to receive Medicare overpayments in the first six months of fiscal year 2017, according to a report from HHS' Office of Inspector General.

SNMH overstated contract labor wages by $69,079 and overstated hours by 108 when reporting its fiscal year 2014 wage data, which was used to calculate the rural floor wage index, according to the OIG.

Medicare payments to hospitals are adjusted annually based on a rural wage index that CMS calculates for each state using local hospital worker wages and labor costs. To calculate wage indexes, CMS uses hospital wage data collected four years prior to allow time for the collection of cost report data from all hospitals paid under the Inpatient Prospective Payment System and to give Medicare administrative contractors time to review the data.

Because errors in SNMH's fiscal year 2014 wage data increased the rural floor wage index for fiscal year 2017, Medicare overpaid 173 other California hospitals an estimated $216,594 for inpatient services in the first six months of the most recent fiscal year. The rural wage index is required to be budget neutral on a national level. Therefore, the overpayments to California hospitals caused underpayments to hospitals in other states, according to the OIG.

Based on its findings, the OIG recommended the hospital follow the requirements in CMS' Provider Reimbursement Manual and strengthen its review and reconciliation procedures to ensure Medicare wage data reported to CMS in the future are accurate and in compliance with Medicare requirements.

The hospital agreed with the OIG's findings and provided information on plans to address the OIG's concerns, including implementing review and reconciliation procedures. 

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