Skip to main content
Meeting of Doctors

Medicare Wage Index Alert

CMS has proposed a significant change to how it calculates the rural wage index in its recently released FY 2024 IPPS Proposed Rule. Read more. 
banner background

CMS has proposed a significant change to how it calculates the rural wage index in its recently released FY 2024 Inpatient Prospective Payment Systems (IPPS) Proposed Rule, which will affect both rural hospitals and urban area hospitals subject to the Rural Floor. Providers should immediately assess potential reimbursement implications as well as possible strategies to achieve a higher wage index in FY 2024 and beyond.

Currently, CMS determines the rural wage index based on the highest of three separate calculations using wage data from different combinations of geographically rural hospitals, urban hospitals redesignated to rural under §412.103 (also known as Section 401/hospitals), and hospitals reclassified from one state to another. CMS proposes to still use the highest of three separate calculations, but those three calculations will be completely revised beginning in FY 2024 if implemented by CMS.

Although the Rural Floor has been in place since the Balanced Budget Act of 1997 to assist hospitals in lower wage urban areas, CMS has faced frequent litigation since 2015 on the treatment of Section 401 hospitals and the resulting impact on Rural Floor determinations. CMS has made several changes in recent years in reaction to various court decisions, only to face new litigation challenging those changes. CMS indicates its proposal for FY 2024 results from their revisiting “the case law, prior public comments, and the relevant statutory language” in an apparent effort to bring closure and avoid further legal challenges. 

Because there is no one-size-fits-all approach, it is critical that hospitals immediately evaluate their own unique circumstances to ensure optimal reimbursement. Relevant factors may include MGCRB reclassification, Section 401 urban to rural redesignation, and Medicare special designations, with numerous critical deadlines.

Deadlines include:

  1. May 27, 2023 – Deadline to waive Lugar status and accept outmigration adjustment or reinstate Lugar status and cancel outmigration adjustment.
  2. June 2, 2023 – Deadline for hospitals to cancel Section 401 rural redesignation effective the following federal fiscal year.
  3. June 10, 2023 – Deadline for hospital to be treated as rural in the FY 2024 wage index and budget neutrality calculations.
  4. June 15, 2023 – Deadline to withdraw an application or terminate an approved three-year MGCRB reclassification.
  5. September 1, 2023 – Deadline for hospitals to request a new three-year MGCRB reclassification.

FORVIS can help with wage index analysis, special designations, and MGCRB options. Our reimbursement professionals have developed strategies to help your hospital receive its fair share of available reimbursement. Our team has extensive knowledge of the nuances and technical issues organizations face when reporting wage data, analyzing special designations and the resulting options for wage reclassifications and understanding regulatory changes.

If you have questions or need assistance, please reach out to a professional at FORVIS or use the Contact Us form below.

Related FORsights

Like what you see?
Subscribe to receive tailored insights directly to your inbox.