By Eddie Phibbs
January 25, 2016
In an age when reimbursement is becoming more challenging and there is ongoing pressure on the bottom line, health systems and hospitals need to pay attention to every area where revenue may be slipping through the cracks. Medicare’s wage index survey may be one of them.
The wage index is Medicare’s formula for determining payment based on what the cost of hiring is in a specific geographical area (the area where your hospital is located). Salaries, benefits, contract labor—are all comingled to determine your average hourly wage (AHW). Medicare compares the AHW to the national average. If your hospital is below the national average, you’ll be paid less than average. This is revenue that you may be able to recoup by assessing your wage index and trying to increase it.
Medicare groups hospitals into Core-Based Statistical Areas (CBSAs). Depending on your location, you may be one of many hospitals in your CBSA, or you may be the only one in it. If there are multiple hospitals in your CBSA, all of the facilities’ wages and hours will be used to determine the overall average for the CBSA. In this instance, ensuring that your AHW is reported accurately helps to impact the CBSA’s payment rate. Collaborating with the other facilities in your CBSA to take a holistic approach can also help to improve your reimbursement.
If you are the only facility in your CBSA, you have a higher chance of raising the rate and we strongly recommend that you evaluate your wage index every year. Keep in mind that each year you have until the first week of September to report any adjustments in your wage index. So timing is important.
In our work with hospitals, we conduct wage index assessments to examine the following:
With careful analysis, you can discover opportunities to improve your wage index. This can have a positive impact on your Medicare reimbursement. Regularly evaluating your wage index can pay off in a big way and is one of the few ways a hospital can impact its future Medicare reimbursement.