Wage index a federal tool

The federal government uses the Medicare wage index as a tool to adjust Medicare payments to hospitals, so they reflect regional variations in the cost of doing business.

Since the Balanced Budget Act of 1997, the federal government has generally kept the total amount of Medicare dollars the same, although changes in the index help redistribute that amount from year to year.

The index for a region is that region's average hospital wage, as a percentage of the national average.

Applying the index helps ensure Medicare reimbursements are proportional to hospitals' actual costs.

The Medicare wage index for the Altoona statistical area is 0.8821.

That number reflects the average hourly wage for hospital workers in the area, which is $29.6321 an hour, or 0.8821 percent of the average pay nationwide, said Ellen Griffith, spokeswoman for the Centers for Medicare and Medicaid Services.

Altoona Regional Health System's projected reimbursement from Medicare is $25.583 million for the current fiscal year, which ends Sept. 30, 2010.

If the hospital's index were as high as the state average of 0.8976, it would receive about $449,000 more this fiscal year, the hospital said. If the hospital's index were as high as the national average of 0.9771, it would receive about $2.75 million more.

Asked whether there's merit to complaints about alleged inequities in the Medicare wage index, Griffith said the Centers for Medicare and Medicaid calculates the index based on information submitted by the hospitals and reviewed and audited by CMS.

Hospitals can challenge their index numbers through a "uniform and comprehensive process," she said.

Medicare laws and regulations allow adjustments, under certain circumstances, when an area draws much of its work force from a neighboring area, she said. Hospitals also can apply to receive a neighboring area's index if they believe it more accurately reflects the wages they pay, she said.

The rules for becoming part of a neighboring index are highly restrictive, however, said Nancy Bell, Senior Managing Director for Healthcare Finance at Stevens & Lee in Reading, who has worked with the Hospital Council of Western Pennsylvania on the index issue.

Among the restrictions: A hospital can't become part of another area outside its own "core-based statistical area," she said. That keeps Altoona from sharing Harrisburg's better numbers, she said.

There's irony in hospitals arguing for a higher wage index, because in doing so, they're arguing to pay their workers more, essentially.

Hospitals in western Pennsylvania could raise their indexes - in three years, because there's a data lag - by paying workers like they do in Oakland, Calif., which has an index of 1.45, or 45 percent more higher than the national average, said Ken Webdale, president of R-C Healthcare Management Services Inc. in Phoenix.

They'd go bankrupt in a year, he predicted.

It's not clear whether there are factors that make the low index here unfair, but it is clear that hospitals in the region "are getting the benefit of not having to pay more for labor," he said. "[The index] is what it is because that's what you're paying," he said. "Is that unfair?"

Still, he's never gone into a hospital and told them they could get a higher wage index by doubling salaries, he said. "They'd fire me."

Mirror Staff Writer William Kibler is at 949-7038.