Wage Index

FY 2026 Geographic Reclassification Deadlines

Deadline to submit an application for a FY 2026 MGCRB reclassification and a request for cancellation of a withdrawal or termination (reinstatement): September 3, 2024.

Note: While the deadline listed in the FY 2026 IPPS/LTCH PPS Final Rule is not later than 13 months prior to the start of the fiscal year for which reclassification is sought (usually by September 1), the Board has historically allowed submission up to the first business day in September.

Date of FY 2026 Wage Index Reclassification Determinations Issued by the MGCRB: December 4, 2024

Deadline for Hospitals to appeal FY 2026 MGCRB Wage Index Reclassification Determinations: December 19, 2024 (Per 412.278, 15 days after Determinations Issued by the MGCRB)

Deadline to withdraw an application or terminate an approved 3-year MGCRB reclassification (must be received by the MGCRB with a copy to CMS at wageindex@cms.hhs.gov within 45 days from the date of public display of NPRM): TBD

Deadline to waive Lugar/accept out-migration adjustment or reinstate Lugar/cancel outmigration adjustment (must send written notification to CMS at wageindex@cms.hhs.gov within 45 days from the date of public display of NPRM): TBD

To ensure proper accounting, we request hospitals to include their CCN, and either “waive Lugar” or “reinstate Lugar”, in the subject line of these requests.

Deadline for hospital to be treated as rural in the FY 2026 wage index and budget neutrality calculations (412.103 lock in, 60 days after NPRM is displayed): TBD

Deadline for hospitals to cancel 412.103 rural reclassification by submitting a request to the CMS regional office, effective with next FFY: June 2, 2025 (not less than 120 days prior to the end of a Federal fiscal year and not less than 1 calendar year after the effective date of the rural reclassification).
 

Section 1886(d)(3)(E) of the Social Security Act requires that, as part of the methodology for determining prospective payments to hospitals, the Secretary must adjust the standardized amounts “for area differences in hospital wage levels by a factor (established by the Secretary) reflecting the relative hospital wage level in the geographic area of the hospital compared to the national average hospital wage level.”  This adjustment factor is the wage index.  We currently define hospital geographic areas (labor market areas) based on the definitions of Core-Based Statistical Areas (CBSAs) established by the Office of Management and Budget and announced in December 2003. The wage index also reflects the geographic reclassification of hospitals to another labor market area in accordance with sections 1886(d)(8)(B) and 1886(d)(10) of the Act.

The Act further requires that we update the wage index annually, based on a survey of wages and wage-related costs of short-term, acute care hospitals.  Data included in the wage index derive from the Medicare Cost Report, the Hospital Wage Index Occupational Mix Survey, hospitals' payroll records, contracts, and other wage-related documentation.  In computing the wage index, we derive an average hourly wage for each labor market area (total wage costs divided by total hours for all hospitals in the geographic area) and a national average hourly wage (total wage costs divided by total hours for all hospitals in the nation).  A labor market area's wage index value is the ratio of the area's average hourly wage to the national average hourly wage.  The wage index adjustment factor is applied only to the labor portion of the standardized amounts.