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HHS OIG Issues Report on Vulnerabilities in the Hospital Wage Index System for Medicare Payments

November 30, 2018—The Department of Health and Human Services (HHS) Office of Inspector General (OIG) Nov. 28 issued a report on perceived vulnerabilities in the hospital wage index system for Medicare payments. The OIG conducted 41 reviews of hospitals’ wage data and found “significant vulnerabilities” in the system that may cause wage indexes to inaccurately reflect local labor prices, and thus impact adjustments to Medicare payments to hospitals. 

In its report, the OIG claimed that the Medicare Administrative Contractors’ (MACs’) limited reviews are insufficient in identifying inaccurate data and the Centers for Medicare and Medicaid Services (CMS) lacks the authority to penalize hospitals for inaccurate or incomplete wage data. According to the OIG, these issues decrease wage index accuracy impacting Medicare payments. As a result, the OIG recommended that CMS develop a program of audits targeting hospitals whose wage data have high levels of influence on the wage index of their area and seek authority to penalize hospitals for submission of inaccurate or incomplete wage data. 

In its written comments on the OIG’s report, CMS agreed that it should develop the targeted audits on hospitals whose wage data have high levels of influence on the wage index of their area. CMS also stated that it is still considering whether it will seek legislative authority to penalize hospitals that submit inaccurate or incomplete wage data in the absence of misrepresentation or outright falsification.


Andrew Amari
Hospital Policy and Regulatory Specialist
Telephone: 202-828-0554


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Washington Highlights, a weekly electronic newsletter, features brief updates on the latest legislative and regulatory activities affecting medical schools and teaching hospitals.

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Jason Kleinman
Senior Legislative Analyst, Govt. Relations
Telephone: 202-903-0806