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Appendix E Comparison of the Medicare Payment Advisory Commission (MedPAC) and Institute of Medicine (IOM) Proposals for Alternative Hospital Wage Indexes (HWIs) TABLE E-1 Comparison of the Medicare Payment Advisory Commission (MedPAC) and Institute of Medicine (IOM) Proposals for Alternative Hospital Wage Indexes (HWIs) IOM Recommendations MedPAC Recommendations (June 2007 Report) Recommendation 2-1: The same labor market MedPAC assumes continued use of the existing hospital payment localities—MSAs/non-MSAs. definition should be used for both the hospital wage Physician payment localities are not addressed. 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. R ecommendation 3-2: The Centers for Medicare MedPAC creates a compensation index which incorporates wage data from BLS and the Census & Medicaid Services (CMS) should establish an Bureau and data on benefits (such as health ongoing agreement with the Bureau of Labor insurance and pensions) and mandatory payroll Statistics (BLS) to use all necessary wage data from taxes from hospital, skilled nursing facility (SNF), the Occupational Employment Survey to compute and home health provider cost reports submitted the wage index. to CMS. Recommendation 3-3: The committee Recommendation 6B: The secretary should recommends using all occupations as inputs in the establish a hospital compensation index that uses hospital wage index, each with a fixed national wage data from all employers and industry-specific weight based on the hours of each occupation occupational weights. employed in hospitals nationwide. Recommendation 3-4: CMS should apply the Recommendation 6C: The secretary should use proposed hospital wage index to non–Inpatient the hospital compensation index described in Prospective Payment System facilities (non-IPPS recommendation 6B for the home health and skilled facilities), using nationwide occupation-specific nursing facility prospective payment systems and weights derived from data for each type of facility. evaluate its use in the other Medicare fee-for-service prospective payment systems. continued 179
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180 GEOGRAPHIC ADJUSTMENT IN MEDICARE PAYMENT TABLE E-1 Continued IOM Recommendations MedPAC Recommendations (June 2007 Report) Recommendation 5-1: The committee R ecommendation 6B: The secretary should recommends that wage indexes be adjusted using establish a hospital compensation index that is formulas based on commuting patterns for health adjusted at the county level and smooths large care workers who reside in a county located in one differences between counties. labor market but commute to work in a county located in another labor market. Recommendation 5-2: The committee’s Recommendation 6A: Congress should repeal recommendations are intended to replace the system the existing hospital wage index statute, including of geographic reclassification and exceptions that is reclassifications and exceptions, and give the currently in place for health care providers. secretary authority to establish new wage index systems.