Some stakeholders in the hospice space are seeking reforms to the hospice wage index.
The U.S. Centers for Medicare & Medicaid Services (CMS) adjusts daily hospice payments for each level of care to account for differences in wage rates among markets. Each level of care has a labor share and a non-labor share; those amounts differ across each level of care, reflecting the estimated proportion of costs that is attributable to wages, according to the Medicare Payment Advisory Commission.
The labor share of the base payment amount is adjusted by the hospice wage index for the location in which care is furnished and the result is added to the non-labor portion. To calculate the wage index, CMS uses the prior year’s wage data from acute care hospitals.
However, the use of this data source creates some problems, according to Hilary Loeffler, vice president of policy and regulatory affairs for the National Alliance for Care at Home.
“We’ve long had issues with [CMS] using hospital wage data, because it’s not really representative of what we’re having to pay our staff in the hospice and home health settings,” Loeffler told Hospice News. “So we’ve advocated for them to explore a reform to the wage index approach.”
CMS has made adjustments to how wage indices are calculated for different settings. In the 2025 final rule for end-stage renal disease, the agency began applying a wage index based on dialysis facility cost reports and wage rates from the Bureau of Labor Statistics (BLM), Loeffler said. The Alliance is currently analyzing what a similar approach could mean for hospice and home health agencies.
A second issue is that hospitals have greater flexibility than other providers when it comes to the wage index. Hospitals have the ability to reclassify into a different wage index area. For example, if a hospital in New Jersey can make the case that their labor costs are more aligned with those paid in New York City, they may be able to reclassify into that higher wage index area, according to Loeffler. Hospices and other post-acute providers do not have that option.
The end-result is that hospitals can in many cases pay higher wages to their employees, which can hurt hospices that are seeking to recruit from the same pool of clinicians.
“These policies can be used by hospitals to really put them in a better position for hiring some of the same staff that hospices and other providers need to hire as well,” Loeffler said. “So the competition is there, but they get kind of a leg up.”
CMS has given indications that it would mull changes to the hospice wage index. In 2025, the agency convened a technical expert panel to consider the issue. One point of discussion is the application of new data sources, including potential changes to hospice cost reports.
One proposal discussed within the panel would be to revise the hospice cost report to collect accurate information about costs related to full-time employees, Loeffler said. However, implementing something like this could be a lengthy process. CMS would have to propose changes to the cost report form through a process governed by the federal Paperwork Reduction Act. The agency would then have to develop and deploy the new form and would require time to gather and analyze the resulting data. This would likely take several years to complete.
To implement a new wage index methodology, CMS would also have to go through a proposed rulemaking process, including public notice and a comment period.
With any wage index changes, some hospices would “win” and others would “lose.” Some providers may see higher payments as a result, whereas others may see their rates go down.
Moreover, even rate increases could come with complications. A hospice that receives higher payments due to the wage index could reach their payment cap limits faster than one that gets lower rates.
“The Alliance as part of the feedback in this technical expert panel process, we very strongly said that if payments go up because of a new wage index, that hospices shouldn’t be unfairly penalized if they go over their cap,” Loeffler said. “Because if they go over their cap, they have to pay all that money back to Medicare that’s above the cap amount, but through no fault of their own.”
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