Wage Index and Coinsurance

Hey everyone, I’ve been assisting in the research of Professor He and Professor Mellor for the past two weeks.  Part of my task has been to compile a database of Florida hospitals that includes formulas for calculating coinsurance amounts for  various procedures performed on Medicare patients. For those unfamiliar, coinsurance refers to to the amount of money a patient pays out of pocket for a given procedure. A procedure will cost ‘x’ dollars, and the coinsurance amount that is paid is Cost of procedure-amount paid by insurance plan. In this case, the insurance plan is Medicare.

For Medicare, coinsurance rates are a fraction of the payment that a hospital is reimbursed for when a specific procedure is performed on a patient. In turn, the reimbursement payment a hospital receives is influenced by their geographic location. A certain amount of the payment (60 %) that a hospital receives for a procedure is intended to be allocated for wages amongst the hospital employees. Since wages vary across the United States,  there is something called a ‘wage index’ that is used to adjust  how much a hospital receives in reimbursement funds. Unfortunately, it is quite a maze to find wage index data.

Wage indexes vary by CBSA’s. These are Core Based Statistical Areas that are a way to divide up regions.  Think of it as an alternative to zip codes. Of course, hospitals are  listed by zip codes, not CBSA’s. Thus, the first step in my process is to take the zip code of a hospital and link it to a CBSA code. Luckily, this information is available online. Then, using another website source,  I convert the CSBA code into the wage index for a given year. To add to the confusion,  I could not find CBSA codes for some hospitals, and some hospitals that had CBSA codes did not match my other source of CBSA listings. After digging around some, I realized that there are hospitals designated as ‘Rural’. For these hospitals, one general wage index is used , regardless of the location of the facility. After finding this last step, I was finally able to have wage index data for all the Florida hospitals in my database. Needless to say, the process of collecting data can be a puzzling process.