Can a hospital be reclassified to more than one area?

No. A hospital may not be redesignated to more than one area, with an exception for an urban hospital that has been redesignated as rural and receives an additional reclassification from the Board.

Does the hospital have to be near the area it wants to join?

Generally yes. It must be within 15 miles (urban) or 35 miles (rural), or have at least half its employees living in the area. Sole community hospitals and rural referral centers are exempt from the proximity test.

Is rounding allowed when testing the wage percentages?

No. The regulation says rounding to meet a mileage or qualifying percentage standard is not permitted.

What happens if a hospital applies again for the same area in year two or three?

If a hospital is already reclassified to an area for a three-year period and applies to the same area for the second or third year, that application will not be approved.

Guide

How does MGCRB wage index reclassification work?

Short answer

The Medicare Geographic Classification Review Board (MGCRB) can let a hospital use another area's wage index. A hospital must show it is close to that area, that its wages are at least 106 percent (rural) or 108 percent (urban) of its own area's, and at least 82 or 84 percent of the target area's. Applications are due September 1, and an approved change lasts three years.

Last reviewed October 19, 2026

What the Board decides

For fiscal year 2005 and later, an individual hospital may be redesignated from one urban area to another, from one rural area to another, or from a rural area to an urban area, in order to use the other area's wage index value (42 CFR 412.230(a)). The MGCRB may affirm or change a hospital's geographic designation, based on the evidence of record (412.274(a)).

There are three routes. An individual hospital applies under section 412.230. All hospitals in a rural county seeking urban redesignation must apply as a group under section 412.232, and all hospitals in an urban county seeking another urban area must apply as a group under section 412.234. A hospital may not be redesignated to more than one area, with one exception for urban hospitals that have been redesignated as rural.

A hospital also cannot be redesignated to an area whose pre-reclassified average hourly wage is lower than that of the area where the hospital is located.

The proximity test

A hospital demonstrates close proximity to the target area if either of two conditions applies: the distance from the hospital to the area is no more than 15 miles for an urban hospital and no more than 35 miles for a rural hospital, or at least 50 percent of the hospital's employees reside in the area (412.230(b)).

The hospital submits the evidence: a nationally recognized electronic mapping service's shortest route from the hospital's front entrance to the county line of the requested area, or current payroll records that establish employees' home addresses by zip code (412.230(c)). Hospitals approved as sole community hospitals or rural referral centers do not have to demonstrate proximity (412.230(a)(3)).

The wage tests

There are two. First, for fiscal year 2006 and later, the hospital's average hourly wage must be at least 106 percent (rural hospital) or 108 percent (urban hospital) of the average hourly wage of all other hospitals in the area where it is located. Second, for fiscal year 2011 and later, the hospital's average hourly wage must be at least 82 percent (rural) or 84 percent (urban) of the average hourly wage of hospitals in the area it wants to join (412.230(d)(1)).

The wages compared are a weighted three-year average of average hourly wages, from the CMS hospital wage survey data used to construct the wage index (412.230(d)(2)). CMS publishes the three-year averages each year. The regulation does not allow rounding to meet a mileage or percentage standard, so a hospital at 107.9 percent does not meet a 108 percent test (412.230(a)(4)).

A hospital that was ever approved as a rural referral center does not have to meet the first wage test and need meet only the rural version of the second (412.230(d)(3)).

The deadline and the term

A complete application must be received by the MGCRB not later than the first day of the 13-month period preceding the federal fiscal year for which reclassification is requested (412.256(a)(2)). In practice that is September 1: an application received by September 1, 2027 is for federal fiscal year 2029, which begins October 1, 2028.

A wage index reclassification is effective for three years (412.274(b)(2)). A hospital already reclassified to an area for a three-year period cannot be approved for a new application to the same area in the second or third year (412.230(a)(5)(iii)).

Deciding whether to apply

The regulation tests eligibility; it does not say whether filing is worth it. One way to decide is to estimate the payment effect: the difference between the target area's wage index and the hospital's current one, applied to the part of its Medicare inpatient payments that the wage index adjusts, over the three-year term, less the cost of applying, and weighted for the chance that the Board approves. Our MGCRB tool runs that comparison for up to eight target areas at once. Confirm the current thresholds and deadlines with CMS and the MGCRB before you file.

Worked example: an urban hospital, three tests

Illustrative figures, not a real hospital. The own-area and target-area tests use the urban percentages (108 and 84).

Hospital $34.00 vs its area $31.00: 109.7% of its area (needs 108% or more): Passes
Hospital $34.00 vs target area $38.00: 89.5% of the target (needs 84% or more): Passes
Hospital $33.40 vs its area $31.00: 107.7% of its area (needs 108% or more): Fails; no rounding

Frequently asked questions

Who decides an MGCRB application?: The Medicare Geographic Classification Review Board. It may affirm or change a hospital's geographic designation, based on the evidence of record, which includes the hospital's application.
Can a hospital be reclassified to more than one area?: No. A hospital may not be redesignated to more than one area, with an exception for an urban hospital that has been redesignated as rural and receives an additional reclassification from the Board.
Does the hospital have to be near the area it wants to join?: Generally yes. It must be within 15 miles (urban) or 35 miles (rural), or have at least half its employees living in the area. Sole community hospitals and rural referral centers are exempt from the proximity test.
Is rounding allowed when testing the wage percentages?: No. The regulation says rounding to meet a mileage or qualifying percentage standard is not permitted.
What happens if a hospital applies again for the same area in year two or three?: If a hospital is already reclassified to an area for a three-year period and applies to the same area for the second or third year, that application will not be approved.

Sources

42 CFR 412.230: Criteria for an individual hospital seeking redesignationProximity and wage tests, the rounding rule, the exceptions, and the limitations
42 CFR 412.232 and 412.234: County group redesignationThe group routes for rural and urban counties
42 CFR 412.256: Application requirementsThe filing deadline
42 CFR 412.274: Scope and effect of an MGCRB decisionWhat the Board decides and the three-year term
CMS: Medicare Geographic Classification Review BoardCMS's own page on the Board and its procedures
CMS: Three Year MGCRB Reclassification DataThe three-year average hourly wage data CMS publishes for applications

This guide is general information drawn from the sources above, last reviewed October 19, 2026. It is not legal, reimbursement, or filing advice. Rules, figures, and file listings change; confirm against the source before relying on them.

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