HERC: Medicare Wage Index for VA Facilities
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Medicare Wage Index for VA Facilities

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Suggested Citation

Wagner T. HERC's Medicare Wage Index for VA Facilities. Health Economics Resource Center, U.S. Department of Veterans Affairs. July 2023. https://www.herc.research.va.gov/include/page.asp?id=guidebook-wage-index.

Disclaimers

 

The wage index file is saved as an Excel file. Download the file here.

Many URLs are not live because they are VA intranet-only. Researchers with VA intranet access can access these sites by copying and pasting the URLs into their browser.

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1. Overview

Medical facilities produce health care by combining labor and capital (e.g., supplies, equipment, and buildings). Labor prices vary considerably across the nation; certain markets, such as San Francisco and Boston, are known for having high labor costs. Researchers may need to adjust their cost analyses for these wage differentials. The best known method involves using the Medicare wage index. The Health Economics Resource Center (HERC) combines data from the Centers for Medicare and Medicaid Services (CMS), the VHA Support Service Center (VSSC), and the VA Planning System and Support Group (PSSG) to create a Medicare wage index for VA facilities.

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2. Methods

2.1. 2022 and Forward

We have updated the Wage Index for 2009-2022 and forward to use the new VSSC Planning Systems Support Group (PSSG) VAST file. This file includes new facilities that came on-line between 2016-2022, including new clinics, mobile units, and Vet centers. This new VAST file is only in long format.

We have added the following variables:

  • FIPS: County identifier
  • AREA: Text name of the Core Based Statistical Area (CBSA)
  • WAGE_3YRMA: The CMS 3-year moving hourly wage rate in the CBSA
  • AVG_HR_WAGE: The average hourly wage rate in the CBSA
  • YEAR: The 4-character fiscal year
  • MOBILE: Indicatator variable to show if facility is a mobile unit
  • RURALITY: Describes if the location is urban, rural, highly rural, or insular
  • OPERATIONAL: Indicates if the facility is active, temporarily deactivated, or permanently deactivated

We removed the variable ADDRESS2 (secondary address).

In the long format, be sure to use the variable YEAR in conjunction with other variables, especially WAGEINDEX, GAF, WAGE_3YRMA, and AVG_HR_WAGE.

2.1. 2016-Present

We downloaded the annual wage index from CMS. The files have information on wages at the “market level.” According to CMS, “A labor market area’s wage index value is the ratio of the area’s average hourly wage to the national average hourly wage.” Markets are defined by Core Based Statistical Areas (CBSA). Between 2000 and 2004, CMS reported the MSA. Starting in 2005, CMS switched and reported the CBSAs. See http://www.census.gov for up-to-date information on CBSAs. Rural areas have a missing CBSA, and we use the state code to identify their wage index.

VA hospitals are not included in the CMS wage index Impact files. We linked the CMS wage index data to VA facilities using data from the VSSC. The VSSC provides data at the VA substation (STA5A) level. This file has the latitude of the facility. We link the facility location to the CBSA. We are then able to merge the VA facility information to the CMS wage index. This merger is not perfect for a number of reasons. First, VA facilities change locations and new facilities are created over time. Second, we have encountered rare inconsistencies with the latitude and longitude listed in the VSSC file and have to correct these data. Finally, Census has changed the definition of CBSA as populations have changed. CMS and Census generally use the same CBSA definition, but not always.

2.2. 2015 and Prior Years

We downloaded the annual wage index data, which are part of CMS’ inpatient Impact files. We merged the data to a CMS file (nprm2008_xwalk_file; updated in 2008) that links Social Security Administration county code to the Federal Information Processing Standards (FIPS) county code and the Metropolitan Statistical Area (MSA). This linkage was not possible for some hospitals that only existing prior to 2005.

The Impact files have information on specific providers, but the wage index is determined at the market level. According to CMS, “A labor market area’s wage index value is the ratio of the area’s average hourly wage to the national average hourly wage.” Markets are defined by MSA and CBSA. Between 2000 and 2004, CMS reported the MSA. Starting in 2005, CMS switched and reported the CBSAs. See http://www.census.gov for up-to-date information on CBSAs. Rural areas have a missing CBSA, and we use the state code to identify their wage index.

VA hospitals are not included the CMS wage index Impact files. We linked the CMS wage index data to VA facilities using three datasets from the PSSG. PSSG provides data at the VA STA6A hospital level. Some variability in wage index enters when summarizing the CMS wage index at the CBSA level. According to CMS, this variability exists because hospitals that are part of a system are sometimes recoded to the parent CBSA. Typically this variability is small. Our wage index information reflects the average for the CBSA post reclassification.

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3. Using the data

Beginning in 2022 we provide the wage index in a long format only. In the long version, a record represents a VA facility, defined by a station (STA5A), in a given year. It is necessary to consider how you want to merge these data to your data. You will need to use the STA3N or STA5A for the merge. If you are using the STA3N, you will want to capture the subset of records for this level of analysis (select records where STA3N=STA5A); this should drop the data for the outlying facilities and permit a 1:1 merge when you include calendar year. See Appendix 2 for example Stata code to merge the wage index to the VA PTF. (Note: In the past we produced a long version, where a record represents a VA facility, defined by STA5A, in a given year). See Appendix 1 for a list of all variables in the current wage index file.

In the long format, be sure to use the variable YEAR in conjunction with other variables, especially WAGEINDEX, GAF, WAGE_3YRMA, and AVG_HR_WAGE.

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4. Data Access

The wage index is saved as an Excel file and is available on the HERC website (download Excel file). Please contact HERC (herc@va.gov) if you have any questions..

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Appendix 1: Variable List

 

STA5A

  • Description: VA 5-character station identifier
  • Type: string (str3-str7)
  • Source: VSSC

 

VISNID

  • Description: VA VISN identifier
  • Type: numeric (byte)
  • Range: [1,23]
  • Source: VSSC

 

STA3N

  • Description: VA 3-character parent/main station identifier
  • Type: string (str3)
  • Source: VSSC

 

STATIONNAM

  • Description: Text field listing name of the station
  • Type: string (str80)
  • Warning: Variable has embedded links
  • Source: VSSC

 

ADDRESS

  • Description: Address of the VA station
  • Type: string (str61)
  • Source: VSSC

 

CITY

  • Description: City of the VA station
  • Type: string (str21)
  • Source: VSSC

 

STUSAB

  • Description: State abbreviation
  • Type: string (str2)
  • Source: VSSC

 

ZIP_CBSA

  • Description: Zip code of the VA station
  • Type: string (str5)
  • Source: VSSC

 

OPERATIONAL

  • Description: The 4-character fiscal year.
  • Type: string (str1)
  • Source: PSSG VAST
  • Values: Active (A), Temporarily Deactivated (T), Permanently Deactivated (D)

 

LATITUDE

  • Description: Latitude of the VA station
  • Type: numeric (float)
  • Source: VSSC

 

LONGITUDE

  • Description: Longitude of the VA station
  • Type: numeric (float)
  • Source: VSSC

 

CBSA

  • Description: Core Based Statistical Area
  • Type: string (str5)
  • Note: This represents the CBSA, which is what CMS uses to identify labor market.
  • Source: Census and CMS

 

FIPS

  • Description: County identifier
  • Type: numeric (float)
  • Source: VSSC

 

AREA

  • Description: Text name of the CBSA
  • Type: text
  • Source: Census and CMS

 

WAGEINDEX

  • Description: Medicare wage index for the market
  • Type: numeric (double)
  • Source: CMS

 

GAF

  • Description: Medicare geographic adjustment factor (GAF). The GAF is calculated as the weighted average of the three geographic price indexes (physician work, practice expense and malpractice).
  • Type: numeric (double)
  • Source: CMS

 

WAGE_3YRMA

  • Description: The CMS 3-year moving hourly wage rate in the CBSA.
  • Type: numeric (float)
  • Source: CMS

 

AVG_HR_WAGE

  • Description: The average hourly wage rate in the CBSA.
  • Type: numeric (float)
  • Source: CMS

 

MOBILE

  • Description: Indicatator variable to show if facility is a mobile unit (Yes/No). 
  • Type: string (str3)
  • Source: PSSG VAST
  • Values: Yes, No

 

YEAR

  • Description: The 4-character fiscal year.
  • Type: numeric (float)
  • Source: VSSC

 

RURALITY

  • Description: Describes if the location is urban, rural, highly rural, or insular.
  • Type: string (str1)
  • Source: PSSG VAST
  • Values: Urban (U), Rural (R), Highly Rural (H), Insular (I)

 

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Appendix 2: Example of Stata Code for Merging Wage Index to PTF Data

This example merges DSS discharge data from multiple years to the Medicare wage index.

*Load wage index file
use "vawage_09_19", clear
keep if sta3n==sta6a
ren sta3n sta3
gen double sta3n=real(sta3)
drop sta6a
sort sta3n year
save temp1, replace
 
*Load DSS data
use "dss_disch10", clear
append using dss_disch11
append using dss_disch12
append using dss_disch13
append using dss_disch14
append using dss_disch15
gen year=year(admitday)
sort sta3n year
 
*Merge DSS and wage index data
merge sta3n year using temp1, nokeep
Acknowledgements

Research reported in this guidebook was funded by the VA Health Systems Research Service (ECN 99-017).

Last Updated Date: July 26, 2023