The Denominator: A Critical Factor in Calculating Average Hourly Wage

school conceptDo you remember learning about denominators in math class at school years ago? You’ll be glad you did for our topic today.

Wage Index is one of the key adjustments Medicare makes to your payments. They adjust your payments based on the cost of staffing in your geographic area. In addition, they determine an Average Hourly Wage (AHW) and then compare that to the National AHW to determine your payment factor. One of the most important components in calculating AHW is the hours used in the denominator. The misreporting of hours can have a significant impact on your Wage Index adjustment.

Tip #11:

Ensure hours for wage index are adjusted to reflect A-6 wage reclassifications (Pub 15-2, §4005.2).

Whenever you have a salary adjustment there should be a corresponding hours reclassification.

Further guidance on the types of dollars and hours that should be included on S-3, part II can be found on the Centers for Medicare and Medicaid Services (CMS) website:

Provider Reimbursement Manual 15-2

Questions? Please contact Marie White at 612.253.6546 or



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