OIG Wage Index Recommendation Could Affect Hospice Payments

The U.S. Centers for Medicare & Medicaid Services (CMS) should revamp its use of the hospital wage index to determine payments for health care providers, according to a new report by the U.S. Department of Health and Human Services Office of the Inspector General. The agency uses the index among other information to calculate hospice per diems paid by Medicare. 

The proposed action was No. 3 on the OIG’s list of its Top 25 so-far unimplemented recommendations this year. Data from the hospital wage index data enables CME to adjust payments to hospices in different geographic regions based on estimated labor costs. 

“OIG identified significant vulnerabilities in the wage index system for Medicare payments. For instance, CMS lacks authority to penalize hospitals that submit inaccurate or incomplete wage data, and Medicare administrative contractor (MAC)-limited reviews do not always identify inaccurate wage data,” the report indicated. “Additionally, wage indexes may not always accurately reflect local labor prices, thus Medicare payments to hospitals and other providers may not be appropriately adjusted to reflect local labor prices.”


The potential impact for hospice providers is uncertain. Given the role of geography in payment calculations, some organizations could benefit while others could see payment reductions.

CMS would need congressional authorization before it could overhaul the hospital wage index system.

Though legislators haven’t acted on the recommendation, the White House’s proposed federal budget does contain provisions for extensively revising the index, but it remains to be seen whether those proposals will appear in the final, approved budget.


The OIG report also included updates on the implementation status of a number of previous recommendations pertaining to hospice made during the last two years. One such proposal was that CMS provide new information on the Hospice Compare website, including results of complaint surveys and deficiencies identified by accreditation bodies.

“CMS has published information from complaint surveys conducted by state agencies on its Quality, Certification, and Oversight Reports website. However, the information will not be posted on its Hospice Compare website,” OIG reported. “CMS currently requires statutory authority to make public information from accrediting organizations on its websites. We note that the President’s FY 2021 Budget includes a legislative proposal to allow CMS to make public survey results from accrediting organizations.”

Last year, OIG recommended that CMS take action to reduce what it sees as hospices receiving duplicate payments for prescription drugs. The inspector general’s office determined that some organizations were billing Medicare Part D for medications that should have been covered via the Medicare Hospice Benefit to the tune of a collective $160.8 million.

According to OIG, CMS has not yet taken action on this issue, saying that the agency believes that its current efforts would address the problem without disruption services to Medicare beneficiaries.