Average Salary Expense in Rural and Urban Hospitals Before and During the Low Wage Index Policy, 2018–2022

This study describes hospital wage patterns for Critical Access Hospitals (CAHs), rural Prospective Payment System (PPS) hospitals, and urban PPS hospitals from 2018–2022. The Low Wage Index Policy (LWIP) in effect between 2020-22 aimed to increase the wage index for hospitals in the lowest quartile, effectively raising their Medicare payments. This was intended to help these hospitals increase their employee wages.

Key Findings:

• Hospital wages increased steadily across all hospital types between 2018 and 2022. Median average salary expense per full-time equivalent (FTE) employee rose each year for CAHs, rural PPS, and urban PPS hospitals, with the largest annual increases occurring in the later years of the study period.
• Urban hospitals consistently paid higher wages, and rural-urban wage differences remained stable. Despite rising wages overall, urban PPS hospitals maintained substantially and persistently higher wages than rural PPS hospitals and CAHs, with wage gaps remaining relatively unchanged across the five-year period examined.
• Multiple economic and policy pressures likely contributed to rising wages. Workforce shortages, increased reliance on contract labor, COVID-19-related disruptions, and policies such as the LWIP have created a complex operating environment; however, the study data do not allow for attribution of wage changes to specific causes.