OIG: CMS should revisit hospital wage index system, citing $140M in overpayments

CMS' hospital wage index system has been systematically overpaying hospitals for over a decade, the HHS Office of Inspector General (OIG) found in a recent report. Between 2004 and 2017, the Medicare program overpaid at least 272 hospitals to the tune of $140.5 million. The OIG identified several vulnerabilities causing the inaccuracies and offered six recommendations to fix them—but to date CMS has only concurred with one. Primarily, OIG suggested that CMS reconsider comprehensively reforming the wage index system, which adjusts payments to hospitals to reflect local labor prices. As envisioned in the Affordable Care Act, CMS started that process by issuing a plan in 2012 to switch to a computing-based wage index (CBWI). While Congress declined to implement it that year, OIG continues to recommend it as a potential solution.