CPI: Hospitals Under Pressure As Physician Prices Rise

November’s Consumer Price Index (CPI) indicates health prices are moderating, though still increasing higher than non-heath consumer goods. In the third piece of bad news for hospitals (from their perspective, at least, after the Quarterly Services Survey and the Producer Price Index), prices for hospital services actually dropped (See Table I).

However, physicians’ fees jumped significantly, by 1.1 percent on the month. Overall, the price increase for medical care services was in line with all services.

For goods, prescription drugs increased by 0.4 percent, still high relative to other goods, but moderating a little. Other medical goods actually declined in price. As noted previously, we expect this good news is due to patients having more direct control of health spending. However, one month does not make a trend!

Note: The Bureau of Labor Statistics will be changing how it calculates CPI for prescription drugs. Here is the announcement:

Change in formula for calculation of index for prescription drugs
Effective with release of data for January 2016, an arithmetic mean (Laspeyres) formula will replace the geometric mean formula in the calculation of the elementary indexes in the CPI-U, CPI-W, and C-CPI-U for prescription drugs. The Laspeyres formula at the elementary index level is more appropriate for use in categories in which substitution by the consumer in response to price change is difficult or unrealistic. A description of the 1999 adoption of the geometric mean formula for many elementary indexes is available at http://www.bls.gov/mlr/1998/10/art1full.pdf.

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