With the September 2, 2025, deadline for hospitals to submit revision requests to their Worksheet S-3 wage data for the Federal Fiscal Year (FFY) 2027 Wage Index now passed, and November 14, 2025, being the final deadline for Medicare Administrative Contractors (MAC) to transmit revised wage data, hospitals are likely receiving wage index documentation request letters from their MAC. These letters typically contain multiple inquiries about the amounts reported on the wage index worksheets. Hospitals must be adequately prepared to respond promptly and thoroughly to these requests to ensure compliance and avoid disallowances.
Areas of Focus During Wage Index Documentation Request
The areas outlined below are typically subject to the most rigorous scrutiny during wage index documentation reviews. In many instances, supporting documentation for these components is sourced from external third parties rather than the hospital itself. Accordingly, such documentation must be requested well in advance of the wage index review. Hospitals should take proactive measures to ensure that all supporting materials for reported wage index amounts are both accurate and timely, so they are fully prepared should the MAC request additional documentation.
- Physician Part A (Salaried and Contracted): MACs may request supporting documentation, such as physician contracts, payroll reports, or time studies, to substantiate the amounts reported under Physician Part A, particularly for roles such as Medical Directors. Hospitals must maintain thorough and accurate records to validate these salary or contracted labor expenses claimed on the wage index worksheets.
- Contract Labor: MACs routinely request Attachment 10 for each contract labor category reported in the wage index. This attachment requires a detailed listing of vendors along with the corresponding invoice amounts for both dollars and hours claimed. Based on this listing, MACs may select specific vendor invoices for audit and verification purposes. To ensure compliance and readiness, it is recommended that all contract labor dollars and hours be supported by complete and accurate documentation, including vendor invoices and/or executed contracts.
- Wage-Related Costs: MACs may request detailed supporting documentation for specific wage-related costs reported in the wage index, along with the methodologies used to allocate those costs. For instance, in cases where a hospital is self-insured, MACs have frequently requested third-party administrator (TPA) reports to substantiate the health insurance expenses claimed. Hospitals must maintain comprehensive and well-organized documentation to support all wage-related costs.
If a hospital is unable to provide the requested documentation or if the supporting information does not reconcile with the amounts reported on the wage index worksheets, the MAC may disallow those amounts, resulting in adjustments that could negatively affect the hospital’s Average Hourly Wage (AHW). Changes to a hospital’s AHW can also affect the wage index factor for its Core-Based Statistical Area (CBSA), which can potentially impact the future Medicare reimbursement rates for all hospitals within that CBSA.
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Proactive preparation and thorough documentation are essential for successfully navigating the wage index review process. Hospitals should remain diligent in responding to MAC requests, ensuring that all reported data is well-supported and reconciled. If your hospital has faced significant challenges during the wage index review process, reach out to one of our experts to learn how we can help.
Kyle Smith, CPA, 340B ACE, Director
Austin Fisher, CPA, Senior Manager
