Also, in areas where input costs to health care are higher (e.g., the area wage index
for hospitals), capitated plans may attract more risk-averse enrollees concerned about the risk of large out-of-pocket copayments in the FFS coverage.
Following execution of a letter agreement between the hospital and RRI, it made a last minute application on behalf of the hospital to reinstate the more favorable Fort Pierce area wage index
. That application was ultimately approved by the Medicare Board resulting in payment to the hospital of several million dollars more than it would have received under the rural classification, and about a million dollars more than it would have recovered had it been classified under a moderately favorable Orlando area designation.
The hospital area wage index
is used by CMS to adjust prospectively set Medicare payment rates for regional variation in labor costs.
The bill, Area Wage and Base Payment Improvement Act, establish a floor on the area wage index
, which is used to adjust Medicare payments.
HHS might implement the process upon completion of the data collection necessary to calculate an area wage index
for SNF workers.
Central to that agenda are measures already introduced to help ensure that rural hospitals can recruit and retain the highly qualified staff they need by establishing a "floor" on the Medicare area wage index
and increasing Medicare base payments for rural and also urban hospitals.
Under the PPS, reimbursement rates are determined by using factors that include (1) the average standardized amount of allowable individual hospital inpatient operating costs, and (2) the area wage index
applicable to the hospital.
The cost measure [C.sub.ht] is deflated by the HCFA Area Wage Index
and the Consumer Price Index (CPI) and transformed into log values.
The area wage index
is based on several calculations: The labor market area average hourly wage is determined by summing total hospital wages and dividing by total hours, and the area wage index
value is determined by dividing the area average hourly wage by the national average hourly wage.
To adjust for area input costs, we use the HCFA area wage index
. This index is intended to measure the average wage level for hospital workers in metropolitan statistical areas (MSAs) and non-MSA parts of each State relative to the national average.