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Committee on Geographic Adjustment Factors in Medicare Payment; Board on Health Care Services; Institute of Medicine; Edmunds M, Sloan FA, editors. Geographic Adjustment in Medicare Payment: Phase I: Improving Accuracy, Second Edition. Washington (DC): National Academies Press (US); 2011 Jun 1.

Cover of Geographic Adjustment in Medicare Payment

Geographic Adjustment in Medicare Payment: Phase I: Improving Accuracy, Second Edition.

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Appendix EComparison of the Medicare Payment Advisory Commission (MedPAC) and Institute of Medicine (IOM) Proposals for Alternative Hospital Wage Indexes (HWIs)

TABLE E-1Comparison of the Medicare Payment Advisory Commission (MedPAC) and Institute of Medicine (IOM) Proposals for Alternative Hospital Wage Indexes (HWIs)

IOM RecommendationsMedPAC Recommendations (June 2007 Report)
Recommendation 2-1: The same labor market definition should be used for both the hospital wage index and the physician geographic adjustment factor. Metropolitan statistical areas (MSAs) and statewide non-MSAs should serve as the basis for defining these labor markets.MedPAC assumes continued use of the existing hospital payment localities—MSAs/non-MSAs. Physician payment localities are not addressed.
Recommendation 3-2: The Centers for Medicare & Medicaid Services (CMS) should establish an ongoing agreement with the Bureau of Labor Statistics (BLS) to use all necessary wage data from the Occupational Employment Survey to compute the wage index.MedPAC creates a compensation index which incorporates wage data from BLS and the Census Bureau and data on benefits (such as health insurance and pensions) and mandatory payroll taxes from hospital, skilled nursing facility (SNF), and home health provider cost reports submitted to CMS.
Recommendation 3-3: The committee recommends using all occupations as inputs in the hospital wage index, each with a fixed national weight based on the hours of each occupation employed in hospitals nationwide.Recommendation 6B: The secretary should establish a hospital compensation index that uses wage data from all employers and industry-specific occupational weights.
Recommendation 3-4: CMS should apply the proposed hospital wage index to non–Inpatient Prospective Payment System facilities (non-IPPS facilities), using nationwide occupation-specific weights derived from data for each type of facility.Recommendation 6C: The secretary should use the hospital compensation index described in recommendation 6B for the home health and skilled nursing facility prospective payment systems and evaluate its use in the other Medicare fee-for-service prospective payment systems.
Recommendation 5-1: The committee recommends that wage indexes be adjusted using formulas based on commuting patterns for health care workers who reside in a county located in one labor market but commute to work in a county located in another labor market.Recommendation 6B: The secretary should establish a hospital compensation index that is adjusted at the county level and smooths large differences between counties.
Recommendation 5-2: The committee's recommendations are intended to replace the system of geographic reclassification and exceptions that is currently in place for health care providers.Recommendation 6A: Congress should repeal the existing hospital wage index statute, including reclassifications and exceptions, and give the secretary authority to establish new wage index systems.
Copyright 2012 by the National Academy of Sciences. All rights reserved.
Bookshelf ID: NBK190073
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