Wage Index: Defining It and Understanding Yours

Most everyone knows the saying, “Keep your friends close and your enemies closer.” In the world of health care, we don’t really have enemies per se, but we definitely have competitors. It is important to stay in touch with competitors for various reasons, such as:

  • You may benefit from understanding their perspective and/or ideas on a subject
  • You may need to work together someday
  • You may have shared interests if you dig deep enough

A practical application of this concept is the wage index. The index is an adjustment for differences in hospital wage rates among labor markets. It is computed using individual hospital data that is then compared to metropolitan statistical area (MSA) or statewide rural area to the nationwide average.

Since the inception of a Prospective Payment System (PPS) for Skilled Nursing Facilities (SNF), hospital wage data has been used to develop a wage index to be applied to SNFs. The SNF PPS wage index values for any fiscal year are calculated from the same data used to compute that fiscal year’s acute care hospital inpatient wage index data.

Tip #8:

Educate yourself on what your own wage index ratio is and how it compares to your marketplace, your state and the national average.

You should also consider establishing a task force among the hospitals and SNFs in your area to analyze how each other are reporting their wage data and if there are ways you can enact change that would result in an improved index.

Guidance is available on the Centers for Medicare and Medicaid Services (CMS) website:

Medicare Wage Index home page

Questions? Please contact Marie White at 612.253.6546 or mewhite@eidebailly.com.

 

 

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