Reader Question: Geographical Location

Question: Will ambulatory payment classifications (APCs) be weighted geographically according to the cost of living?

Wisconsin Subscriber

Answer: The APC financial effect on individual hospitals will vary according to the hospitals cost-to-charge ratio. One of the major factors in determining this ratio is the cost of labor, which varies extensively throughout the country. Approximately 60 percent of the hospitals costs are assigned to labor costs.

Accordingly, for areas in which the Health Care Financing Administration (HCFA) determines labor costs to be lower than average, the Medicare reimbursement reductions will be greater. Conversely, for areas where labor costs are higher than the national average, the Medicare reimbursement reductions will be less.


- Published on 2000-05-01