Federal Reports

Medicare acute-care hospitals must report wage data annually to the Centers for Medicare & Medicaid Services (CMS). Wage data include wages, associated hours, and wage-related costs. CMS uses the wage data to calculate acute-care hospital wage indexes, which measure geographic area labor market costs relative to a national average. Federal law requires CMS to annually adjust Medicare hospital payments to reflect local labor markets; CMS uses area wage indexes to do this. Federal law also requires that the area wage indexes applied to hospitals in urban areas of a State may not be less than the area wage index of hospitals located in rural areas in that State. This provision is known as the "rural floor." Section 3141 of the Affordable Care Act requires that CMS apply this rural floor in a manner that is budget neutral on a national level. Accordingly, to balance the increase in wage indexes for hospitals receiving the benefit of their States' rural floors, CMS must lower wage indexes nationally by applying a rural floor budget neutrality factor.

Jackson-Madison County General Hospital (the Hospital), located in Jackson, Tennessee, complied with Medicare billing requirements for 141 of the 200 inpatient claims that we reviewed. However, the Hospital did not fully comply with Medicare billing requirements for the remaining 59 claims, resulting in net overpayments of approximately $189,000 for the audit period. On the basis of our sample results, we estimated that the Hospital received overpayments of at least $1.4 million for the audit period. These errors occurred primarily because the Hospital did not have adequate controls to prevent the incorrect billing of Medicare claims within the selected risk areas that contained errors.