Secretary Recommends to Congress that Current Wage Index be Replaced with a “Commuting Based Wage Index”


On April 11, 2012, Kathleen Sebelius (Secretary) published a highly-anticipated Report to Congress entitled “Plan to Reform the Medicare Hospital Wage Index” (Plan). The Plan fulfills the Affordable Care Act’s mandate that the Secretary submit a plan that comprehensively reforms the wage index that is currently used to determine hospitals’ Medicare prospective payments. The Secretary hired Accumen, LLC to explore various options for reforming the wage index, and the Plan reflects Accumen’s advice regarding the best way to reform the wage index. In the Plan, the Secretary proposes to replace the current wage index methodology, which reimburses hospitals based on the hospital’s location in a particular geographic metropolitan statistical area (MSA), with the Commuting Based Wage Index (CBWI), which takes into account hospital hiring patterns and commuting data to establish a wage index value that is specific to each individual hospital. More specifically, the CBWI is derived from commuting flows, which are used to identify the areas from which a hospital hires its workers, and to determine the proportion of workers hired from each area...

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