CEO Message

A Target on the Back of California’s Hospitals

This post has been archived and contains information that may be out of date.

A little more than a week ago, the Centers for Medicare & Medicaid Services (CMS) issued a proposed rule that would reconfigure the calculations for the Medicare area wage index.

The area wage index is essential to ensure that hospitals’ resources for patient care reflect geographic disparities in labor costs. This is a particular concern for California’s hospitals given our state’s high labor costs (as an example, California pays the highest nurse salaries in the nation).

If approved, this policy would be in place for four years and could reduce revenue to California’s hospitals by more than $100 million in Medicare hospital inpatient payments in the first year alone, a clear threat to your ability to provide care. The area wage index is used in the Medi-Cal fee-for-service payment system and will also impact Medicare hospital outpatient payments. Finally, some of the proposed changes will impact Medicare fee-for-service payments to skilled-nursing facilities, inpatient rehabilitation facilities, and inpatient psychiatric services.

Here’s our game-plan to respond:

  • First, we’re analyzing precisely how this proposal would affect California’s hospitals and the patients and communities you serve. We will need to present hard and credible evidence of the negative impact the rule would have on access, jobs, and patient care.
  • Second, we have scheduled a conference call to brief hospital leaders throughout the state, to answer your questions, and to gather input on how to craft our response to CMS. This will take place May 14 at 7:30 a.m. (PT); CEOs, CFOs and government relations leads have already received information on how to register.
  • Third, we met this week in Washington, D.C., with American Hospital Association leaders to review the potential loss to California and confirm our joint effort to fight this proposed change.
  • Fourth, we have already begun to engage with members of California’s congressional delegation to secure their support for hospitals, patients, communities, and the hard-working Californians employed by hospitals. We will be in touch with you to share appropriate messages and actions for your representatives.
  • Finally, in addition to direct advocacy via our congressional delegation, we will submit a formal response to CMS and make a draft available for member use. Comments are due June 24.

These changes to the area wage index are a critically important issue, one that would have a direct impact on your ability to meet your mission of care. As such, it is a top priority for your association, and we will keep you informed every step of the way.

Please reach out to me or Alyssa Keefe at if you have questions.

– Carmela