Nantucket hospital jeopardizes Massachusetts Medicare funds, state facilities could lose $160 million

Consultants hired by the health system that owns Nantucket Cottage Hospital in Massachusetts made several errors that led to lower wages being reported to Medicare for the hospital, which could potentially lead to a $160 million drop in federal Medicare payments over the next fiscal year for facilities across the state.

Medicare reimburses a state's urban hospitals for employee wages at least as much as it reimburses its rural hospitals, meaning Nantucket -- the only hospital in Massachusetts considered rural -- establishes the baseline for state hospitals' wage reimbursements. Due to the area's high cost of living, Nantucket's wages are high, which has benefitted other Massachusetts hospitals.

The consultants hired by Partners HealthCare System, which owns the Nantucket hospital, effectively reduced the hourly rate by overestimating hours. They also did not include enough higher-paid physician hours and overtime pay, said Tim Gens, executive vice president of the Massachusetts Hospital Association, in an email.

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The rates would affect the next fiscal year, which begins in October.

Partners submitted a corrected set of data, but due to the timing of the errors' discovery, the corrections were submitted past the deadline imposed by the Centers for Medicare and Medicaid Services, which means the federal agency must decide whether it will accept the amended data.

"Partners stands to lose more than $18 million," said Partners spokesman Rich Copp. "That would represent between 10 to 20 percent of our annual operating margin. It's a significant loss to us."

He said the corrected data was submitted past deadline because the errors were only identified in late March.

"In mid-February, the Massachusetts Hospital Association noticed a problem with the rural floor. ... It was lower than people thought it should be," said Copp. "As they dug into it to try to figure out why it was lower, over several weeks, around mid- to late-March we identified the specific error that had been made, and on April 5, we submitted corrected data to the federal government."

Copp said Partners is working with a congressional delegation to urge the federal government to use the new, corrected data, adding that it was the government's responsibility to use the amended figures "to make sure Massachusetts hospitals are adequately reimbursed for delivering care to seniors."

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Copp declined to identify the consultants who had made the error, and did not comment on how the situation has affected Partners' relationship with them.

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"Massachusetts Hospital Association supports the position that CMS base the Area Wage Index on the best, most accurate data, especially when an error would so seriously affect so many hospitals across the state," said Gens in his email. "Massachusetts in some years has been a beneficiary under the Area Wage Index, and in other years has experienced losses under the AWI. But in both situations, we've consistently maintained that CMS should use the most accurate data available, and we believe this is both sensible and fair."

The MHA fears that job losses could accompany the steep drops in Medicare funding if the amended data is rejected.

Twitter: @JELagasse