Published May 17, 2019

Proposed Wage Index Changes: What’s the Impact on Your Hospital?

In its 2020 Inpatient Prospective Payment System (IPPS) Proposed Rule, the Centers for Medicare & Medicaid Services (CMS) announced its intent to overhaul the wage index.  The provider-specific wage index has been a hot topic for years; CMS discussed changes and requested public comment on the subject in the 2009, 2010, and 2011 IPPS Final Rules without making significant changes.

Now, CMS proposes to reduce payment disparities in a budget-neutral way by increasing the wage index for IPPS hospitals in the lowest 25th percentile and by reducing the wage index for providers at and above the 75th percentile.  The 1,750 hospitals in the middle would not be impacted by this proposed change.  CMS proposes this will be a four-year project with a budget neutrality adjustment of 3.4%, and the maximum reduction to a provider-specific wage index capped at -5%.

In addition, CMS is proposing a change to the rural floor calculation.  Currently, the IPPS wage index value for an urban hospital cannot be less than the wage index value for hospitals located in rural areas in the state.  Concerned that some hospitals may be using urban-to-rural reclassifications to inappropriately influence the rural floor wage index value, CMS proposes removing urban-to-rural hospital reclassifications from the calculation of the rural floor wage index value.

PYA’s reimbursement team has studied the impact of these proposed changes on hospital reimbursement carefully.  To discuss how your hospital’s estimated Medicare reimbursement per discharge would be impacted by the FY 2020 IPPS Proposed Rule rates, contact a PYA executive below at (800) 270-9629.


© 2019 PYA
No portion of this article may be used or duplicated by any person or entity for any purpose without the express written permission of PYA.

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