Under the current wage index system, a hospital is not the sole dictator of the wage index factor in which it receives. Rather than receiving their individual wage index, hospitals receive a factor that is calculated based on the combined wages of all the hospitals within their Core-Based Statistical Area (CBSA). As a result, the salaries and hours of neighboring hospitals are equally as important as those in which the hospital reports each year. In February of 2013, the Office of Management and Budget (OMB) issued Bulletin No. 13-01 which contained revised delineations for the Statistical Areas used for Wage Index purposes. The implementation of these new delineations will have substantial financial impacts on a hospital’s reimbursement. This presentation analyzes how these changes affect hospitals in New Jersey and Pennsylvania (mainly Philadelphia) and identify what opportunities and challenges exist in these states and compare these impacts to overall impacts throughout the country. We discuss the newly released Medicare occupational mix data from the most recently filed survey (July 1, 2014) and how these amounts will impact hospitals. Finally, the issue of wage index reform and challenges for providers is discussed.

1. New Delineations, New Opportunities and
New Questions
Healthcare Financial Management Association
New Jersey Chapter
2014 Annual Institute

2. Copyright, Disclaimer and Terms of Use
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(such as, for example, removing the copyright notice or references to the
BESLER Consulting or other organizations).
• This presentation does not represent legal advice.
• The information herein is valid for the date of the presentation only

3. CMS Methodology
• Section 1886(d)(3)(E) of the Social Security Act requires the Secretary
to:
“Adjust standardized amounts for area differences in hospital wage
levels by a factor reflecting the relative hospital wage level in the
geographic area of the hospital compared to the national average
hospital wage level.
The wage index is the portion of a hospital’s payment that adjusts Medicare
reimbursement to account for geographic differences in wages paid to healthcare
workers.

4. OMB bulletin No. 13-01
• February 28th, 2013 OMB bulletin no. 13-01 is released.
The document revised delineations of Metropolitan Statistical Areas,
Micropolitan Statistical Areas, and Combined Statistical Areas (CSA).
• This document impacted the entire country and was ready to be used for FFY
2014 but CMS chose not to;
• Impact to New Jersey and surrounding states;
• Philadelphia and New York City labor markets;
• Massachusetts and Connecticut rural floors.

5. New Jersey (NEW DELINATIONS) (North)
• 21 counties in New Jersey, 14 are included in the New York CSA;
• 6 counties are in the New York-Jersey City White Plains, NY-NJ CBSA
(Bergen, Hudson, Middlesex, Monmouth, Ocean and Passaic)
• 6 counties are in the Newark, NJ CBSA (Essex, Hunterdon, Morris,
Somerset, Sussex and Union);
• 1 county (Warren) is in the Allentown-Bethlehem, PA CBSA
• 1 county (Mercer) is in the Trenton, NJ CBSA and reclasses into Newark

6. New Jersey (NEW DELINATIONS) (South)
• 21 counties in New Jersey, 7 are included in the Philadelphia CSA;
• 1 county (Atlantic) is in the Atlantic City, NJ CBSA
• 3 counties (Burlington, Camden and Gloucester) are in the Camden, NJ
CBSA
• 1 county (Cape May) is in the Ocean City, NJ CBSA;
• 1 county (Cumberland) is in the Vineland-Bridgeton, NJ CBSA
• 1 county (Salem) is in the Wilmington, DE-MD-NJ CBSA

7. FFY 2015 Transition Period
• Urban hospitals that experience a decrease in their FFY 2015 wage index as
a result of the new delineations;
• CMS will utilize a blended methodology to determine their wage index
amount;
• This blend will be the sum of 50 percent of their WI value under the new
FFY 2015 wage index delineations and 50 percent of their WI value under
the old wage index delineations that were used for the FFY 2014 wage
index;
• There are 39 hospitals in New Jersey that utilize this blending methodology.

8. New Jersey Hospitals (CMS Blend Impact)
CBSA # CBSA Description Impact to CBSA (NO BLEND)
10900 Allentown-Bethlehem-Easton, PA-NJ ($70,631)
12100 Atlantic City-Hammonton, NJ $0
15804 Camden, NJ ($203.347)
35084 Newark-Union, NJ-PA ($5,620,877)
35614 New York-Jersey City-White Plains, NY-NJ ($7,244,648)
36140 Ocean City, NJ ($56,948)
45940 Trenton-Ewing, NJ $0
47220 Vineland-Millville-Bridgeton, NJ $0
48864 Wilmington, DE-MD-NJ ($46,940)
TOTAL ESTIMATED IMPACT ($13,243,391)

9. New Jersey CSAs per February 28, 2013 OMB bulletin
New York Philadelphia
Bergen Morris Atlantic
Essex Ocean Burlington
Hudson Passaic Camden
Hunterdon Somerset Cape May
Mercer Sussex Cumberland
Middlesex Union Gloucester
Monmouth Warren Salem

10. Wage Index Exemptions
Providers are eligible to receive a wage index factor outside of their respective CBSA.
• Rural Floor – No hospital can receive a wage index less than its statewide rural wage index
• Out-Migration Adjustment – Increase to the wage index for hospitals in counties that have a
relatively high percentage of employees that reside in the county but work in a different
county with a higher wage index
• Geographic Reclassification – Increase to the wage index for hospitals (individual, county, or
statewide) by receiving a neighboring CBSA wage index factor (full wage index or blended,
“diluted”, wage index). Providers must apply and pass reclassification criteria to qualify
• Frontier States (Per Affordable Care Act) – No hospital in a county with less than six people
per square mile can receive a wage index less than 1.00 (Alaska and Hawaii excluded)

11. Rural Floor (NJ Imputed Rural Floor)
Since FFY 2005;
Reasoning was to allow the all-urban states to be treated the same as the other states
Initially there were 3 all-urban states (New Jersey, Massachusetts and Rhode Island)
Calculation:
• Calculate Low-to-High Average for each all-urban state;
• Combine all of the low-to-high averages
• State receives the greater of their average or the combined average
• Multiply low-to-high average X highest wage index value in state
FFY 2015 – now back to 3 all-urban states (Delaware, New Jersey and Rhode Island)

12. Imputed Rural Floor Impact
CBSA # CBSA Description Impact to CBSA
10900 Allentown-Bethlehem-Easton, PA-NJ $4.542,542
12100 Atlantic City-Hammonton, NJ $0
15804 Camden, NJ $15,189,520
35084 Newark-Union, NJ-PA $0
35614 New York-Jersey City-White Plains, NY-NJ $0
36140 Ocean City, NJ $795,498
45940 Trenton-Ewing, NJ $0
47220 Vineland-Millville-Bridgeton, NJ $0
48864 Wilmington, DE-MD-NJ $868,006
TOTAL ESTIMATED IMPACT (IP ONLY) $21,395,566

13. Out Migration Adjustment
Section 1886(d) (13) of the Act established a process to
make adjustments to the hospital wage index based on
commuting patterns of hospital employees
• Adjustment for hospitals in counties where hospital employees commute to
adjacent counties with a higher wage index;
• FFY 2015 – Nationwide, 568 hospitals in 336 counties are eligible only 286
hospitals in 194 counties receive this adjustment
• FFY 2015 – New Jersey, 23 hospitals in 5 counties are eligible only 12 hospitals in
3 counties benefit from this adjustment.

14. Impact of Out-Migration Adjustment
County Name Benefitting Hospitals - Adjustment Dollar Impact
Camden 3 Hospitals – 0.0026 $973,720
Mercer 4 Hospitals – 0.0227 $2,084,794
Middlesex 5 Hospitals – 0.0244 $5,410,971
TOTAL ESTIMATED IMPACT (IP ONLY) $8,469,785

15. Wage Index Exemptions – Individual Provider
Geographic Reclassification Criteria for an Individual Hospital per CFR
§412.230 –
• The pre-classified average hourly wage (AHW) of the desired CBSA is greater than the
hospital's AHW and the Standardized amount in the desired CBSA is greater than the
hospital's standardized CBSA;
• The hospital may not be re-designated to more than one area;
• The distance from the hospital to the desired CBSA is no more than a) 15 miles for urban
hospitals or b) 35 miles for rural hospitals OR at least 50% of the hospital's employee's
reside in the target CBSA.
• The hospital's 3 year AHW is a) for Rural hospitals, at least 106% of its current location's
3 year AHW b) for Urban hospitals at lease 108% of its current location's 3 year AHW
(CBSA);
• The hospital's 3 year AHW is a) for Rural hospitals, at least 86% of the desired location's 3
year AHW b) for Urban hospitals, at least 84% of the desired location's 3 year AHW
(CBSA).

16. Wage Index Exemptions – Group (County)
Geographic Reclassification Criteria for a Group/County per CFR
§412.234 –
• The county 3 year AHW (Wages/Hours) is at least 85% of the target CBSA 3 year
AHW (Rounding is not permitted);
• All hospitals in the county must apply for the reclass;
• The county must be adjacent to the target CBSA;
• Urban counties must be in the same Combined Statistical Area (CSA) as the
target CBSA;
• Rural counties (reclassifying to urban CBSAs) must demonstrate that the county
in which the hospitals are located meets the Metropolitan Test standards for
redesignation using Census Data.
• The pre-classified AHW of the target CBSA is greater than the county’s AHW.

17. New Jersey (FFY 2015 Reclasses)
• 68 New Jersey hospitals listed in FFY 2015 PUF;
• 13 New Jersey hospitals will reclassify for FFY 2015;
• 7 New Jersey hospitals are part of the Essex County reclass;
• 3 New Jersey hospitals are part of the Morris County reclass
• 3 New Jersey hospitals reclass as individual hospitals;
• 8 New Jersey hospitals withdrew their county reclasses into Newark and
New York respectively

18. Impact of Reclassifications
County Name Type of Reclassification Dollar Impact
Burlington Individual to Monmouth County $3,789,080
Camden Individual to Philadelphia County ($114,472)
Cumberland Individual to Atlantic County $1,520,329
Essex County to Hudson County $40,979,692
Morris County to Passaic County $29,239,054
TOTAL ESTIMATED IMPACT (IP ONLY) $75,642,627

19. New Jersey (Potential Reclasses)
• 9 counties are adjacent to the New York-Jersey City White Plains, NY-NJ
CBSA (Atlantic, Burlington, Essex, Mercer, Morris, Somerset,
Sussex, Union and Warren);
• 6 counties have the potential to reclassify as a County (Group) (Essex,
Mercer, Morris, Somerset, Sussex and Union)
• 2 counties (Essex and Morris) meet all of the criteria to reclassify;

20. New Jersey (Potential Reclasses) (cont’d)
• 5 counties are adjacent to Atlantic City, NJ CBSA (Burlington, Camden,
Cape May, Cumberland and Gloucester);
• 3 counties (Camden, Cumberland and Cape May meet all of the
criteria to reclassify into Atlantic City)
• 4 counties (Burlington, Camden, Gloucester and Salem) are adjacent
to the Philadelphia, PA CBSA;
• All 4 meet all of the criteria to reclassify into the Philadelphia, PA
CBSA

21. Reclassification Implications
• Reclassified hospital cannot negatively impact geographically located
hospitals
• Reclassified hospitals can create a positive or negative dilutive effect
(also called “blend’)
• If the addition of the reclassified wages and hours result in a decrease
of 1.00% or greater, reclassified hospitals receive that amount
• All hospitals (geographic and reclassed) benefit from positive blend
• Only reclassed hospitals are impacted by negative blend
• Only 1 hospital creates a positive blend and it does not benefit a NJ
CBSA

22. New Jersey Hospitals (post reclassification)
Table 2
CBSA # CBSA Description
FFY 2014 After Reclass
# of Hospitals
FFY 2015 After Reclass
# of Hospitals
10900 Allentown-Bethlehem-Easton, PA-NJ 2 2
12100 Atlantic City-Hammonton, NJ 4 5
15804 Camden, NJ 6 6
20764 Edison-New Brunswick, NJ 12 n/a
35084 Newark-Union, NJ-PA 11 8
35644 New York-White Plains-Wayne, NY-NJ 28 n/a
35614 New York-Jersey City-White Plains, NY-NJ n/a 39
36140 Ocean City, NJ 1 1
37964 Philadelphia, PA 1 1
45940 Trenton-Ewing, NJ 0 4
47220 Vineland-Millville-Bridgeton, NJ 1 0
48864 Wilmington, DE-MD-NJ 2 2

23. Philadelphia, PA CBSA
• Prior to FFY 2015, included 42+ hospital in five counties (Bucks,
Chester, Delaware, Montgomery and Philadelphia);
• OMB bulletin 13-01 reduced the Philadelphia, PA and created the
Montgomery-Bucks-Chester, PA CBSA;
• Beginning in FFY 2015 only 19 hospitals will be included in the
Philadelphia, PA CBSA (only those hospitals in Delaware and
Philadelphia counties);
• FFY 2015 wage index (WI) value for “new” Philadelphia 1.1108;
• Philadelphia WI is increased by Cooper reclassifying into it – 1.1108
with Cooper and 1.1059 without.

24. Montgomery-Bucks-Chester, PA
• Prior to FFY 2015, included in Philadelphia, PA Core-Based Statistical Area
(CBSA);
• Beginning in FFY 2015 all Bucks County providers will be included in the
Montgomery-Bucks-Chester, PA CBSA #33874;
• Includes 7 hospitals and potential multi-campus hospital;
• Unlike Chester and Montgomery counties, Bucks County does not receive
an out-migration adjustment;
• FFY 2015 Blended WI values for Chester and Montgomery counties are
1.0555 and 1.0821 respectively;
• FFY 2015 Blended WI value for Bucks County providers is 1.0332;
• Bucks County hospitals’ WI value without reclassification, blending and
out-migration is 0.9996

25. Philadelphia-Adjacent Counties
• In PA:
• Bucks – meets all criteria; no hospital can reclassify as an individual
• Chester – meets all criteria; 1 hospital can reclassify as an individual
• Montgomery– meets all criteria; 2 hospitals can reclassify as individual hospitals
• In NJ:
• Burlington – meets all criteria; 1 hospital reclassifies into NYC
• Camden – meets all criteria; 1 hospital reclassifies as an individual
• Gloucester – meets all criteria (only 1 hospital); may reclassify in FFY 2016
• In DE:
• New Castle – meets all criteria; currently 2 hospitals in New Castle are projected to
receive a higher WI value (1.0933) – in previous year hospitals in Delaware County,
PA reclassified into Wilmington, DE CBSA (creating positive blend similar to Cooper)

26. What should Hospitals be doing?
• Submit accurate Wage Index data on Medicare Cost Reports;
• Monitor the Wage Index Timetable deadlines;
• Identify potential reclassification opportunities under new
delineations:
• Where does the greatest benefit lie?
• Re-evaluate the benefit of current reclassifications under new
delineations (if already reclassified);
• Compare reclass WI value to Geographic WI value;
• Understand the driving factors of your Wage Index

27. Contact Information
Dave Verbaro, Senior Consultant
dverbaro@besler.com
Scott Besler, Senior Manager
sbesler@besler.com