Wage Index Review

20.4 – Wage Index Review (Rev. 27, 12-19-03) Section 1886 (d)(s)(E) of the Social Security Act, “Adjusting for Different Area Wage Levels,” requires the Secretary to adjust the proportion of hospital costs attributable to wages and wage-related costs for area differences in hospital wage levels. This adjustment factor, the wage index, reflects the relative hospital wage level in the geographic area of the hospital compared to the national average hospital wage level. Wage Index reviews must be completed on all cost reports for short-term acute inpatient prospective payment system (IPPS) hospitals and hospitals that would otherwise be subject to IPPS if they did not have a waiver. Use the latest wage index desk review program released by CMS prior to the due date of the yearly wage index reviews. Wage index periods follow the federal fiscal period of October 1 – September 30. If a hospital has more than one cost report beginning during the wage index period (for example, a hospital has two short period cost reports beginning on or after October 1, through September 30 of a given year), conduct a desk review on only one of the reporting periods. Select the longest period. If there is more than one period of that length, select the latest period.