Proposed FY 2020 IPPS May Have an Incorrect Area Wage Index Value

The Centers for Medicare and Medicaid Services’ (CMS) proposed FY 2020 Inpatient Prospective Payment System (IPPS) rule may have an incorrect value regarding the area wage index (AWI). This involves the proposed reduction calculation for wage areas at and above the 75th percentile. CMS has proposed to reduce all high wage index hospitals so that the estimated decreased aggregate payments to high wage index hospitals would offset the estimated proposed increased aggregate payments to low wage index hospitals. In the proposal, CMS estimated this factor at 3.4 percent for FY 2020. It is now believed that the 3.4 percent number is in error. The correct amount is 4.3 percent. See today’s first Financial Feature for an example.

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