TRAHAN H. WHITTEN

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• TRAHAN H. WHITTEN
• Principal
• Health Sciences Advisory Services Ernst Young
  LLP
• [phone]
• Trahan leads the Regulatory Reporting and
  Compliance Service Line of Ernst Young's Health
  Sciences Advisory Services (HSAS) practice in the
  United States, with a special focus on Medicare
  and Medicaid reimbursement, revenue management,
  risk mitigation, finance and compliance services.
  Trahan specializes in reimbursement strategy
  validation and implementation, mergers and
  acquisitions, and strategic financial management.

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What EY Has Learned About Working with
Associations

• Members are demanding more value added services
  from their associations
• Members are becoming more sophisticated in their
  use of consultants, vendors and advisors
  including those provided through associations
• The broad variety in size, market focus and
  strategy makes it difficult to serve all members
  with the same services
• There is a great deal of competition between
  associations, consultants and advisors all
  claiming to offer similar products, services and
  value
• Because of the rapidly changing environment we
  are all operating in (political, reimbursement,
  cost, quality etc) there are still numerous
  opportunities to help in areas that are of
  strategic importance to your members

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Value Added Ideas Wage Index Services

• Hospital management is becoming wage index
  educated
• Inconsistent wage data treatment by fiscal
  intermediaries
• Wage data source documentation key to an
  accurate average hourly wage and occupational mix
  adjustment
• Political involvement
• Focus on prospective strategies
• Different approaches in reviewing wage data
• MedPac recommendations to wage index if accepted
  will change strategies for everyone

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Value Added Ideas Wage Index Services

• How Can Your Association Assist Your Membership
• Achieve an accurate average hourly wage?
• Understand how the occupational mix survey data
  affects your wage index factor?
• Understand traditional and political wage index
  geographic reclassification opportunities?
• Understand the wage dynamics of the market if the
  wage index factor is on a roller coaster ride?
• Provide expert education on reimbursement through
  your association?

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Value Added Ideas Wage Index Services

• What Is In It For You?
• Deliver value to its members by introducing the
  service and organizing the areas (hospitals
  normally competitive)
• Deliver value to its members in the form of
  increased revenue by assisting to maintain or
  increase the average hourly wage (AHW)
• Collect association fees
• Partnership opportunity with your members that
  builds value and confidence

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Value Added Ideas Wage Index Services

• Wage Index Is Perfect For Value Added Services By
  Associations
• In almost all cases Hospitals cannot do it on
  their own
• Very difficult for consultants to get the
  threshold of participation necessary to deliver
  the best possible value
• Strategic for you and your membership
• If your membership is not participating in a
  regional approach to wage index they are likely
  losing ground to other markets.
• Wage Index is a budget neutral adjustment.
  Increases in some markets MUST be offset by
  mandated decreases in other markets
• Associations are in a unique position to take the
  necessary regional approach .

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Why a Regional Approach is Necessary. Example
Kern Core WIF 1.1042 AHW 29.36
Core WIF 1.1618 AHW 28.96
San Bernardino Core WIF 1.1042 AHW 30.88
Santa Barbara
Los Angeles Core WIF 1.1793 AHW 33.02
Ventura
Core WIF 1.1613 AHW 32.52
Riverside Core WIF 1.1042 AHW 30.88
Orange
Blended WIF 1.1296
Core WIF 1.1547 AHW 32.34
Imperial Core WIF 1.1042 AHW 25.11
San Diego Core WIF 1.1406 AHW 31.94
Key
Wage Index Factor (WIF) Average Hourly Wage (AHW)
Example uses Prior Year Information
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Wage Index Trends What You Need to Know

• The number and nature of wage data corrections
  during audit has increased from less than 15 of
  hospitals to almost 50

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Wage Index Multiple Approaches

• Many Hospitals, Systems, Associations and
  Consulting firms have used different approaches
  to address wage index.
• There are many different scopes of work that add
  different types of value to hospitals
• No one scope of work is for everyone
• No one scope works year after year
• We recommend a blended approach, varying scope
  over time
• No matter which one you choose for any given year
  the goal is the same
• Is it accurate?

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Wage Index Trends What You Need To Know
Question
If the average hourly wage is increasing at about
6 per year in your market why should you, or
your members, be concerned with the reporting
accuracy for wage index?
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Wage Index Study Results Suggests Systemic
Undervaluation. Small Changes Can Have a Huge
Effect
0.13 increase in the WIF translates into a net
increase in reimbursement of greater than 6M to
this CBSA
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Over 200M in Value Across the Country in Recent
Years - Examples
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What You Should Know

• What your members need to make their wage index
  audit a better experience
• Be proactive Develop explanations for
  significant year to year filed data variances
• Provide your Fiscal Intermediary with thorough
  narratives when requesting adjustments during the
  review period
• Dont inundate your Fiscal Intermediary with
  non-pertinent data. Save supporting data in your
  work papers
• Reserve your appeal rights

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What You Should Know

• Why You Should Re-build Your Wage Data
• Often times the data received from Decision
  Support, for example is for operational purposes,
  not wage index purposes
• Never enough time to do a thorough compilation
  during cost report preparation season
• Compliance is key during cost report preparation
  opportunities are lost when time is short

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What You Should Know

• Why You Should Re-build Your Wage Data
• Were you able to address the key areas during
  cost report preparation? Following are a few
  examples of often incorrectly reported data
• Home Office salaries benefits
• Exclude hours related to Missed Meal Breaks
• Exclude hours related to PTO Payout at
  Termination
• Purchased Services labor costs

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MedPacs Medicare Wage Index Proposal

• Proposed Approach
• Use Bureau of Labor Statistics (BLS) to calculate
  relative wages for each area
• Fixed occupational weight
• Data from all employers in an area, not just
  hospitals
• Use census county level data to further adjust
  within large areas

• Proposed
• All employers
• Three year average
• Automatically adjusts for occupational mix
• Eliminates reclassifications and exceptions
• Different provider types will have specific wage
  index factors

• Current
• Hospital specific data only
• One year of data
• Additional survey needed for occupational mix
• Many reclassifications and exceptions
• Same wage index factor applies to all provider
  types

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Value Added Policy and Regulatory Changes

• Government policies and reimbursement programs
  for healthcare providers will undergo major
  change in the coming years
• There is a greater need for CFOs as well as the
  entire C-Suite to understand federal and state
  reimbursement and policy issues as well as
  explore ways they can proactively measure the
  impact to their hospitals and the industry
• Conversely, government agencies are also facing
  increased pressure (and scrutiny) as they develop
  policies that can greatly impact (negatively or
  positively) the finances of the hospital provider
  sector industry
• Critical data is needed that will connect the
  dots for providers and government payers and
  develop a better understanding of how the two
  entities are impacted as policies are developed
  and/or amended
• Federal, State and local Governments, industry
  advocates and associations are in search of
  supportive data/analysis that will help
  strengthen their position and reinforce their
  message

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Policy and Regulatory Change Value Adds

• Ernst Youngs Health Sciences Advisory Services
  practice has expanded the breadth of its
  Regulatory Service offerings to include policy
  analyses, demonstration project evaluation, and
  data analytics on the strategic and financial
  impact of federal and state specific policy
  changes
• Our services provide data and analysis to help
  associations, providers, CMS and Medicaid
  programs understand how policy changes will
  impact their strategy, market position and,
  ultimately, their bottom line
• We will assist providers by identifying critical
  data to help them build a case for policy reforms
  --- even before they are proposed
• Our services target key Hospital Associations,
  providers federal and state agencies such as CMS,
  HHS, CDC, OIG, DOJ, VA and NIH. We are becoming
  a trusted advisor for these organizations,
  providing services and analyses that will assist
  them with critical healthcare reform changes.
  EYs analysis will help them understand the
  fiscal impact on the provider sector

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Policy and Regulatory Change Value Adds

• Our services directly assist the provider
  industry, federal and state government
  authorities, national and specific regional
  associations. The information we deliver will
  assist them in building strong positions as well
  as reinforce their messages for fair and
  equitable healthcare reform
• We can help your associations improve the
  timeliness, accuracy and cost effectiveness of
  providing this critical information to your
  members
• Value added services build confidence and
  perceived value in your association

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Financial Health Analysis - Value Add

• Many States and Associations are/have been
  involved in helping shape the understanding of
  the current financial shape of the healthcare
  delivery systems in their markets
• Due to our reputation, size and market
  penetration we are in a unique position to help
  you and your members evaluate, document and
  report on the current health of your delivery
  systems through
• Prospective financial information
• Bond financing
• Acquisitions
• Financing of major capital projects
• New ventures
• Capital Planning
• CONs
• Clinical Service Lines

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Financial Health Analysis - Value Add

• The major developments impacting hospital systems
  since 2000, in contrast to the 90s were largely
  internal to the industry and unfolded in a period
  of relative stability
• These developments introduced serious financial
  distress throughout the health system
• Also facing serious pressure from their nurses,
  including in some states mandated staffing ratios
• Legal and political pressure on Hospital billing
  issues for uninsured patients followed with, in
  some states publicly posting of charges

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Value Added Financial Health Analyses

• In Conclusion What Hospitals and policy makers
  want
• Not just a lot of detailed data (necessary but
  not complete)
• A comprehensive overview of the entire delivery
  system
• Faster access and availability of financial
  management tools like dashboards, permitting
  three-dimensional and nuanced understanding of
  fiscal health in a way that captures the enormous
  variations among your members
• Information must be presented in such a way as to
  allow large numbers of users, each with differing
  needs ease of access and understanding to the
  large amount of disseparate data available
• Many different approaches
• Sorting data by urban/rural
• Major system
• Academic Medical Centers (AMC)
• Utilization trends (qualitative and quantitative)
• Relationship between payment structures and rate
  trends
• Factors driving decision making for employers and
  employer groups
• Development of new employee benefit structures,
  payer and provider consolidation and regulatory
  influences
• The haves and the have nots (operating margin
  comparisons)
• Revenue and Expense trends
• DSH and non-DSH

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Thank You

• Questions?