Medicare Uncompensated Care Payment Adjustments Reported by Rural and Urban Prospective Payment System Hospitals between 2014-15 and 2023-24
Hospital wages are a major component of operating costs and play an important role in workforce recruitment, retention, and financial stability. Wage levels vary across hospital types and geographic areas, reflecting differences in labor markets, payment policy, and financial capacity. The NC Rural Health Resaerch Program, in it’s brief, Medicare Wage Index Trends in Rural and Urban Hospitals Before and During the Low Wage Index Policy, 2018–2022 , examines trends in average salary expense per full‑time equivalent (FTE) employee among Critical Access Hospitals (CAHs), rural Prospective Payment System (PPS) hospitals, and urban PPS hospitals from 2018 to 2022, encompassing the period before and during implementation of the Medicare Low Wage Index Policy (LWIP).
Using data from the Centers for Medicare & Medicaid Services’ Healthcare Cost Report Information System, median average salary expense per FTE was calculated for each hospital type by year. Salary expenses were aligned to wage index calendar years, and extreme values were excluded to limit the influence of outliers.
Across all hospital types, median average salary expense per FTE increased steadily between 2018 and 2022, with larger annual percentage increases occurring in the later years of the study period. Urban PPS hospitals consistently reported the highest wage levels, while CAHs and rural PPS hospitals exhibited similar, lower wages throughout the period. Despite overall wage growth, the difference between rural and urban hospitals remained relatively stable, indicating that longstanding wage differentials persisted.
Percentage increases in wages were observed across hospital types during the LWIP period; however, this analysis does not assess whether the policy directly influenced wage levels or growth. Broader labor market pressures—including workforce shortages, increased competition for clinical staff, greater reliance on contract labor, and disruptions associated with the COVID‑19 pandemic—likely contributed to rising salary expenses over time.
These findings indicate that while hospital wages increased steadily from 2018 to 2022, structural differences in wage levels between rural and urban hospitals remained largely unchanged. Ongoing monitoring of wage trends is important for understanding workforce stability, financial pressures, and the implications of Medicare payment policy changes for hospitals in low‑wage and rural areas.