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Area Wage Index
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While a
number of variables contribute to a
hospital’s Medicare reimbursement, few are as vital as the Area Wage
Index (AWI). This index measures relative differences in the average
hourly wage for hospitals in each labor market area as compared to the
national average hourly wage rate. It is important to remember that the
AWI values are based on data reported annually by hospitals on
Worksheet S-3, Parts II & III of their Medicare cost reports.
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There are three
basic reasons why the AWI is important to hospital financial managers;
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The
AWI is a major factor in the calculation of Medicare reimbursement for
most all hospitals (and numerous other hospital related entities).
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Hospital
reported data is key to the creation of the AWI, thus a good
opportunity to impact your ultimate Medicare revenue. Failure to fully
and accurately provide the required data may produce diminished revenue
to your hospital.
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Each hospital and each separate labor
market area competes with all other hospitals and all other labor
market areas for a fixed pool of Medicare revenue. Improper reporting
of wage related data may well result in other hospitals receiving
Medicare reimbursement intended to be provided to your hospital.
SRG
can be of significant value to your hospital particularly with the
intricate tasks of properly accumulating and documenting relevant AWI
data. SRG is expert in the full accumulation of AWI data, having done
so for many hospitals across the country. In fact, more often than not,
SRG is engaged to analyze the relevant AWI data of all hospitals in a
given government defined local labor market area.
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