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Wage Index

Section 1888(e)(4)(G)(ii) of the Social Security Act requires that the Secretary adjust the Skilled Nursing Facility (SNF) Prospective Payment System (PPS) Federal rates to account for differences in area wage levels, using a wage index that we find appropriate. Since the inception of a PPS for SNFs, we have used hospital wage data in developing a wage index to be applied to SNFs. The SNF PPS wage index values for any fiscal year are calculated from the same data used to compute that fiscal year's acute care hospital inpatient wage index data. For example, both the FY 2008 SNF PPS wage index and the FY 2008 Acute Inpatient PPS wage index are generated from FY 2004 cost report data. However, the SNF PPS wage index does not take into account geographic reclassification under sections 1886(d)(8) and 1886(d)(10) of the Act and does not apply the "rural floor" under section 4410 of the Balanced Budget Act of 1997. Finally, the SNF PPS wage index does not include the hospital area wage index's occupational mix adjustment.