CHA News Article

ACA Mandated Report on Wage Index Reform Issued

The Centers for Medicare & Medicaid Services (CMS) has published its Report to Congress: Plan to Reform the Medicare Wage Index, as required by the Affordable Care Act (ACA). As expected, the report details CMS’ proposal for a hospital-specific commuting-based wage index (CBWI) first articulated in an Acumen report released in 2011. This proposal varies significantly from a MedPAC 2007 proposal that suggested the use of Bureau of Labor Statistics data. The CMS CBWI proposes the use of commuting data of hospital employees to establish a labor market area and wage index for each hospital rather than relying on broader labor markets as defined by metropolitan statistical areas. The report raises several issues for consideration in implementing a CBWI system. 

First, accurate and up-to-date commuting data is currently not available and would need to be collected from hospitals. CMS discusses the potential for labor market distortions due to hospitals altering hiring patterns in direct response to changes in wage index methodology. In addition, CMS proposes that additional study is needed to determine its applicability to other payment systems and suggests the current need for hospital-specific exceptions should be revisited. Further, CMS recommends that a transition would be needed should this proposal be implemented in a budget-neutral manner. Finally, CMS notes that implementation of a CBWI may require both statutory and regulatory changes prior to implementation. CMS’s report is attached and available at