Hospitals in western Pennsylvania face the same financial pressures as most other U.S. providers: lower Medicare reimbursements, overnight hospital stays insurers pay at outpatient observation rates and an increasing number of patients with high deductible plans. But Pittsburgh-area hospitals have an additional financial burden that some do not — their Medicare Wage Index, reports the Pittsburgh Post-Gazette.
Part of the methodology for determining prospective payments to hospitals is an adjustment for market conditions, or the area wage index. "The AWI is intended to measure differences in hospital wage rates among labor markets; it compares the average hourly wage for hospitals works in each metropolitan statistical area or statewide rural are to the national average," according to the American Hospital Association.
Hospitals and physicians in areas where the ratio is 1:1 are reimbursed close to the national average. In regions with higher average wages, hospitals and physicians get larger reimbursements, and regions with lower wages are reimbursed at lower rates.
Below are three things to know about Pittsburgh's index ranking.
1. Pittsburgh-area hospitals currently have a rating of 0.850 on the Medicare Wage Index. The national average is 1.0. This means Pittsburgh-area hospitals receive 15 cents less on the dollar for the wage component of Medicare's reimbursement than a hospital with a 1.0 wage.
2. Pittsburgh's index ranking has cost area hospitals an estimated $2 billion during the last 15 years, Denis Lukes, CFO for the Healthcare Council of Western Pennsylvania in Warrendale, told Pittsburgh Post-Gazette.
3. Because hospitals and physicians are reimbursed less, many fear the low index ranking has negatively impacted healthcare recruiting in the area. The ranking "hurts in recruiting physicians to southwestern Pennsylvania, and the low ranking is suppressing healthcare workers pay, which affects the broader regional economy as well," Allegheny County Medical Society executive director John Krah told Pittsburgh Post-Gazette.
The report in full can be accessed here.