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Proposed Changes to the Wage Index

On April 23, 2019, the Centers for Medicare and Medicaid Services (CMS) released the Proposed Rule for the Hospital Inpatient Prospective Payment System (IPPS) for Acute Care Hospitals. The proposed rule includes several significant changes to the wage index calculation impacting the wage index factors and rural floor calculation. It is important to understand and prepare for these proposed changes to determine how they may impact your hospital’s reimbursement.

Based on feedback from hospitals, CMS is proposing changes to the wage index factors by increasing the factors for hospitals in the lower 25th quartile and decreasing the factors for hospitals in the upper 25th quartile. This would affect hospitals with a wage index lower than .8482 and higher than 1.0351. The increase to the lower 25th quartile would be applied on an individual hospital level after reclassification and outmigration adjustments.

In addition, CMS is proposing changes to the rural floor calculation. Based upon long-standing IPPS regulations, the wage index for urban hospitals cannot be lower than the rural wage index for their state. Currently, the rural floor can be increased by hospitals that reclassify from urban to rural. This was an unintended consequence of the Urban to Rural reclassification. CMS has proposed removing hospitals with an Urban to Rural reclassification from the rural floor calculation. However, data from these hospitals will continue to be included in the wage index for the rural hospital wage index.

Any negative transition to the proposed rules will be limited to 95 percent of the FFY 2019 wage index for FFY 2020 only. This will allow the effects to be phased in over two years.

If you have any questions about the proposed rule and how the changes affect your hospital, please contact one of the following people for more information:

Carolyn Chaplin at cchaplin@blueandco.com
Kyle Smith at kcsmith@blueandco.com

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