Hospital Price Inflation

1 Selected Producer Price Indexes for the general medical and surgical hospitals industry,
December 1992-March 1996

Index Index
Dec. 1992 = 100 Dec. 1992 = 100
114 F 4114
412 | Private payers | 442
110 Medicaid = 110
108 }- | 108
106 j- -| 106
Medicare
104 |- ~] 104
wona
102 ~) 102
409 We — L L L n 1} 409
Dec. June Dec. June Dec. June Dec.
1992 1983 1983 1994 1994 1995 1995

Producer Price Indexes for medicare, medicaid, ond private payer Inpatient and outpatient hospital
services, December 1992-95

Index index
Dec. 1992 = 100 Dec. 1992 = 100
115 F
Outpatient
treatments
General medical
/ and sugical
110 F 7 hospitals 71
Inpatient
treatments
105 | >| 105
Other receipts
100 i 4 100
Dec. June Dec. June Dec. June Dec.
1962 1993 1983 1994 1994 1995 1995
SSS —

28 Monthly Labor Review July 1996



Appendix: Sampling strategy and results

Diagnosis related groups were randomly selected for collection, us-
ing selection probabilities proportional to total expenditures from all
payer sources in each group. As mentioned in the article, diagnosis
related group expenditures were estimated using Hospital Cost and
Utilization Project data’ and resource intensity data published in the
Federal Register?

Each hospital sampled for the Ppt was asked to provide a single
representative patient bill for each of the randomly assigned diagno-
sis related groups. This method of preselecting group categories
avoided a lengthy product selection process, thus reducing the bur-
den of cooperation and preventing judgmentally selected treatments
that may, taken together with other sample results, unfairly represent
hospital services relative to revenues.

Medicare inpatient data were not directly collected from the hos-
pitals, but were obtained from the Federal Register and indirectly
estimated by the Bureau of Labor Statistics.

‘The traditional sampling frame used in the PPI is the Unemploy-
ment Insurance file. This source offers establishment name, address,
and employment size (the default value used for probability propor-
tionate to size sampling), However, an alternative frame was avail-
able from the American Hospital Association, which closely moni-
tors the hospital industry. This source offered several potential size
measures including employment, revenue, expenses, number of beds,
and number of admissions. It also detailed each hospital
establishment's medical facilities, ownership, type of service ren-
dered, and key contacts.’

The number of annual patient admissions for each hospital was
chosen as the size measure for probability proportionate to size sam-
pling. If admissions figures were not available from the American
Hospital Association annual survey, an admissions figure was im-
puted using the number of annual admissions per bed and the total
number of beds,

Sample stratification is a process of drawing independent sam-
ples from subindustry level groups. These groups are created to en-
sure representative industry coverage. Specifically, if sample stratifi-
cation is appropriate, the individual hospitals in each homogeneous
group of service providers should demonstrate similar price trends.
Thus, properly accounting for the mix of these sample units provides

Footnotes to the appendix

IE Distribution of hospital establishments by sample
stata

Percent ot
Te sample
Hospital strata Bedsize | Estabilsh-| dustry | “Une
admis- | assigned
Inframe ‘sions
Total hospital
samp os 358
Large urban .. Greater than 250 | 20.3 553 198
Small urban .. No more than 250] 32.0 25.1 90
Large rural Greater than 60 18.9 14.5 52
‘Small rural (No more than 60 28.8 5.0 18
——

Comparisons of sampling frame accuracy and
cooperation results for the general medical and
surgical hospitals Industry and for the overall
Producer Price Index program, December 1992

[ta percent]

General medical Producer Price
‘Sample unit status and surgical Index
hospitals (average)

1 10

3 1

21 15

78 63

- —

a more precise measure of industry price trends. One study explored
a stratification approach that classified hospitals by number of beds
and location—urban, versus rural.‘ The study found that the frequency
ranking of diagnosis related groups was very different among the
four categories. This was further supported by the apparent facility
differences when comparing large urban hospitals with the smaller
rural community hospitals. The Ppt employed these same size classes
to define sample strata boundaries. Table A-1 displays the sampling
results by location and bedsize for sic 8062.

* For an overview of the content of this data base see, R. Coffey, and D.
Farley, HcuP-2 Project Overview, Publication No. (ptts) 88-3428 (Baltimore,
Mp, U.S. Department of Health and Human Services, July 1988), Hospital
Studies Program Research Note 10.

? Federal Register (Washington, Dc, Office of Federal Register, National
Archives and Records Administration, May 1990).

> The 1989 American Hospital Association Guide to the Health Care

Field (Chicago, 1., American Hospital Association, 1989) was chosen as the
sampling frame for sic 8062.

“N. Lemrow, D. Adams, R. Coffey, and D. Farley. The 50 Most Frequent
Diagnosis-Related Groups (DRGs), Diagnoses, and Procedures: Statistics
by Hospital Size and Location, Publication No. (Ps) 90-3465 (Baltimore,
Mp, U.S. Department of Health and Human Services, September 1990), pp.
106-7.

Monthly Labor Review July 1996 31



countered. Table 2 illustrates the mix
of price types initially collected in the

Selected Producer Price Indexes for general medical and surgical

hospitals, December 1992-95
PPI for hospitals. Note that 45 percent inpatients
of the collected data were list prices. Total Outpatients
This category includes patients that pay 'nd®x sc 6062 | Medicare] Medicaid | All other | Medicare] Medicaid | All other
the list price with or without insurance
assistance.

Another common type of price is a 100.0 100.0 100.0 100.0 100.0 100.0
list price less adjustments. This price 1000 1009 1018 1029 100.3 1013
type includes a myriad of contract 100.0 100.9 102.0 403.4 100.4 401.4
terms, all based on the list price minus 100.0 101.0 102.4 103.5 101s org
some negotiated discount. Preferred oo o3 es oa. 3 101.5 101.9
Provider Organizations and Health ioe 33 7088 ions tees teas
Maintenance Organizations often nego- 100.0 1028 1046 104.5 102.5 102.8
tiate these types of contracts. The most 100.0 104.0 104.6 104.6 102.3 102.6

found in th the dis 102.3 104.0 105.2 103.7 103.1 103.2
common found in the PPI are s- 102.3 104.0 105.3 104.3 101.4 103.5
count off total charges and the discount 102.3 104.8 105.3 104.2 101.3 103.5
for prompt payment. A discount off to-
‘ll typi 102.3 105.4 106.2 105.4 101.9 105.0
tal charges will typically range between 4023 405.2 106.4 4055 4024 408.2
4 percent and 10 percent of the total 102.3 105.2 106.3 105.5
A 102.3 105.9 106.5 105.9 401.2 105.6
charges on the bill. A prompt payment 102.3 405.8 108.5 106.0 101.2 106.4
discount is typically a smaller percent- 102.3 406.2 107.0 106.2 101.2 106.5
age off total charges and is given to an 102.3 108.1 108.4 107.7 105.2 107.8
: + 102.3 108.2 108.4 107.7 105.1 107.7
insurance company when payment is re- 102.3 108.1 108.5 107.2 405.1 107.8
ceived within a specified amount of jose. | tees | 3382 heed eet 133
time (generally 30 days). Price move- 103.6 108.9 109.5 108.9 105.1 108.5
ment in this price type can be caused
it es in the line i i 103.6 109.2 114 109.9 105.5 1126
either by chang; ne line Nem prices 1089 | 1036 109.5 110.9 110.1 105.81 126
charged by the hospital (they would 1091 | 1036 | 1097 | 111.0 1106 | 10581 13.0
appear on the patient’s bill) or 109.1 | 1036 109.9 111.0 111.0 105.8 113.2
ppear © Patient ) or by 109.2 | 1036 109.5 12 114 105.9 113.2
changes in the amount of the discount. 109.2 | 1036 109.4 112 112 1059 1138

The third type of price is a case rate 109.7 | 1036 108.7 114.9 111.8 14.

The third ty oe nc 110.0 | 1036 109.2 112.1 111.8 105.8 115.3
which is specified by a contract. Pay- 110.1 | 103.6 es 112.1 112.0 105.8 1149
ment for services is based t 11.2 | 107.8 12 112.3 111.9 106.1 115.2

. on the type 11.4 | 1078 110.2 125 1125 108.3 1159
of procedure provided or malady rem- m5 | 1078 «| 1104 | 1127 1124 108.1 1158
edied for the patient. This rate will nor-
mally cover all services required to sie elinaeltted labeled “All other” represent the prices charged ha pevate ayers, those patients
A a sistance insurance i .
treat the patient from the time of ad- Paying i ass p resol

mission to discharge. These rates are
usually negotiated between the hospital and the third party
Payer and are based on the premise that, on average, patients
with the same diagnosis will receive similar services.

Per diem rates are also a fairly common type of price. A
per diem rate is a daily rate paid to the hospital regardless of
what services are included in a patient’s stay. The daily rate is
simply multiplied by the patient’s length of stay to yield a
total reimbursement. A per diem rate can also be based on the
type of room or bed patients occupy during their stay.

The least common type of price encountered in the PPI is
the capitation rate. With this type of price, a fixed, per capita
amount is paid to a hospital, regardless of the actual services
provided or resources consumed by each patient.

Price index analysis

The general medical and surgical hospital industry has raised
its prices 11.5 percent over the December 1992 through De-
cember 1995 period. (See chart 1.) Inpatient treatments rose
10.9 percent, outpatient treatments rose 14.8 percent, and other
Teceipts rose a minimal 1.9 percent.

Public supported programs, such as medicare and medic-
aid, have experienced lower inflation. Medicare inpatient
Prices rose 7.8 percent from December 1992 to December
1995, compared with 10.4 percent for medicaid inpatients and
12.7 percent for all other inpatients.’ (See table 3 which pre-
sents indexes of inpatient and outpatient medicare and med-

Monthly Labor Review July 1996 27



ARGEERETT Speciat Fr tor private payer inpatients only by type of price closeltcation, ) tal disorders (3.9 percent); and female
December 1992-95 reproductive system disorders (4.9
List tees percent). Outpatient services to all
Case rate | adjust- st Capitation ) other payers climbed 15.8 percent.
ments A brief look at the price determin-
ing nature of different price types was
100.0 100.0 100.0 100.9 conducted. Chart 3 shows that from
101.2 102.0 101.0 100.1 December 1992 to December 1995,
101.3 102.4 101.2 100.1 ‘ ir
1013 1027 1015 100.1 type of price appeared to be an impor-
101.6 102.9 101.7 100.1 tant price trend-determining character-
01.6 103.3 02. 101.1 oti inpati
yrs 338 1338 4014 istic among inpatients. Of the four
104.3 104.4 103.5 101.1 price types, list less adjustments rose
104.4 105.1 103.8 101.1 ‘
1043 405.3 1041 4011 16.8 percent over the 3-year period.
104.6 105.9 149 101.1 By contrast, case rate prices rose only
104.8 106.0 105.1 101.1 ist ori
1046 108.0 105.0 1011 8.0 percent. List prices rose 12.3 per-
cent and per diem prices increased
4041 1076 105.7 4014 10.3 percent. (See table 4 which lists
103.8 407.7 105.9 104.4 the actual type of price indexes.)
+ 103.8 107.7 106.0 101.1
103.8 107.7 106.0 101.1 .
103.9 107.7 106.1 101.1
1039 1077 106.1 101.1 Summary of two measures
105.5 109.2 107.2 1014 of infiation
105.3 100.2 107.2 101.1
108.4 108.3 Z 101.1 is j i
1eE3 28 18 Hao It is interesting to note that over the
108.3 tS 108.8 101.1 1993-95 period, the CPI for hospitals,
105.3 m8 108.9 ao another BLS inflation measure, rose
1085 5 os 10 18.7 percent, versus an 11.5-percent
. 193: 1" 1.4
106.7 1138 1102 101.4 increase in the Ppt. This dramatic dif-
106.8 113.8 110.3 101.1 ference between the two measures
106.8 1145 110.3 101.1 i
4068 448 103 4044 may seem Puzzling. However, there
107.3 114.9 110.3 101.1 are four key distinctions in program
107.8 118.7 1S 101.1
108.0 1189 11.5 101.1 scope and methodology employed to
108.0 116.1 116 101.4 construct the two price indexes.
108.1 116.4 112.0 101.1 ‘rst. j
108.0 1167 123 101.1 _First, in terms of scope, the PPI sam-
108.0 116.8 1123 101.1 pling universe includes both rural and
urban hospitals, while the CPI restricts

icaid prices.) For outpatients, medicare prices rose 12.4 per-
cent from December 1992 to December 1995, while medicaid
prices rose 8.1 percent, and all other outpatient prices climbed.
15.8 percent.

Chart 2 shows a weighted average of inpatient and outpa-
tient data for each type of payer. Private payer data showed
the greatest rate of inflation, rising 13.5 percent during the 3
years of this study. Medicare prices rose 8.3 percent and med-
icaid increased 10.1 percent.

Within the all other payers group, prices for inpatient ser-
vices, which carried the largest impact on the overall category,
rose for circulatory system disorders (15.5 percent), respira-
tory disorders (17.5 percent), digestive system disorders (12.4
percent), and musculoskeletal disorders (11.1 percent). The
smallest increases over the 3-year period were indexes for in-
juries, poisonings and toxic effect of drugs (5.7 percent); men-

sampling to urban establishments.
Further, the PPI measures changes in all revenues received by
the hospital industry, including revenues from public programs
such as medicaid and revenues from secondary products such
as Cafeteria services. The CPI includes only payments made
by consumers for hospital services.

The rate of inflation for secondary and miscellaneous hos-
pital services (included in the Ppl) is drastically lower than
that of health care services revenue. In addition, public pay-
ers for health care had a lower rate of inflation than private
payers over this 3-year period. Both of these scope differ-
ences pulled the pp! inflation rate lower than that of the CPI.

There are two methodological differences. First, the PPI
measures price changes for the entire treatment path received
during a single hospital stay, while the CPI currently measures
price changes for discrete hospital services singly, not the com-
Piete treatment path.S Secondly, the PPI collects price data that

Monthly Labor Review July 1996 29



Hospital Price Inflation

Bran Catron
and
Bonnie Murphy

24 Monthly Labor Review

Hospital price inflation:
what does the new PPI tell us?

To expand coverage of Producer Price Indexes

in the services industry,
the Bureau has designed a survey

to study inflation in the hospital industry

ince 1983, health care spending has in-

creased dramatically in the United States.

According to the Health Care Financing
Administration, personal health care expenditures
made up 9.3 percent of gross domestic product
in 1983, but 10 years later, such expenditures
climbed to 12.3 percent of gross domestic prod-
uct.! This increasing share of gross domestic
product warrants a closer look into pricing and
inflation measures in the health care industry. To
accomplish this, the Bureau of Labor Statistics
analyzed the hospital care industry because it rep-
resents one-third of personal health care expen-
ditures—the largest expenditure category.

As part of an overall strategy designed to ex-
pand service industry coverage in the Producer
Price Index (Prt), the Bureau of Labor Statistics
began a survey design study for the hospital in-
dustry in 1989, Preliminary research included
extensive discussions with representatives from
more than 20 hospital establishments, the Health
Care Financing Administration, the BLS Con-
sumer Price Index (CP!) program, and the Ameri-
can Hospital Association. Sample collection be-
gan in January 1992, and by the following year,
the PPI for the hospital industry was published.
Other hospital industry price statistics have been
available for some time. In fact, BLS has published
the CPI for hospitals and related services since
1977, Also, the Health Care Financing Adminis-
tration publishes a quarterly input price index
to provide measures for Congress to adjust med-
icare program reimbursements to health care
providers,

July 1996

This article profiles the new PPI hospital in-
dustry price indexes. It highlights the survey
sample and design, analyzes hospital price infla-
tion as measured by the PPI, summarizes the re-
sults, and briefly compares the hospital industry
measures of the PPI with those of the CPI.

Scope of the survey and sample

Producer Price Indexes measure average changes
in prices received by domestic producers for their
output. The entire marketed output of domestic
producers is in scope for the Producer Price In-
dex. Traditionally, most of the price index data
published by the Producer Price Index is obtained
through probability sampling of mining and
manufacturing industries. However, over the last
6 years, data collection and price index publica-
tion has expanded to include more service indus-
tries.

Industry definition. According to the Standard
Industrial Classification Manual (SIC Manual),
inpatient medical care is provided in three sepa-
fate industries: SIC 8062, general medical and sur-
gical hospitals; sic 8063, psychiatric hospitals;
and SIC 8069, specialty hospitals, except psychi-
atric? The majority of the hospital service rev-
enues are accrued by general medical and surgi-
cal hospitals. Therefore, the remaining discussion
will focus exclusively on sic 8062. The PPI fol-
lows the SIc Manual definition for general medi-
cal and surgical hospitals (sic 8062): establish-
ments primarily engaged in providing general



Hospital Price Inflation

[EEEIIEN Producer Price indexes for hospital services fo private payer Inpatients, by type of price classifications,

December 1992-95

index inaex
Dec. 1992 = 100 Dec. 1992 = 100
120 120

List less
adjustments

4 118

110

105

Dec.
1992

June
1983

Dec.
1993

June

100
June
1994

Dec.
1995

Dec.

1904 1994

identifies discounts, surcharges, and price-setting mechanisms
other than line-item billing. In nearly all cases, the CPI cur-
rently collects list prices from each hospital’s master list of
published prices (often called a “chargemaster”).

IN CONCLUSION, the PPI for the hospital services industry indi-
cates that over the 1992-95 period, inflation was character-
ized by a:

Footnotes

© higher rate of increase for outpatient then for inpatient ser-
vices

© lower rate of increase for public payers, such as medicare
or medicaid, than for private insurance payers

lower rate of increase for nonhealth care-related economic
activities (other receipts) than for hospital services

@ higher rate of increase for list and list less adjustments price
types than for case rate and per diem price types for inpa-
tient services, o

* Katherine R. Levit, et al, “National Health Expenditures, 1993,” Health
Care Financing Review (Baltimore, Mb, U.S. Department of Health and Hu-
man Services, Health Care Financing Administration, 1993).

2 See Standard Industrial Classification Manual 1987 (Washington, Dc,
U.S. Office of Management and Budget, 1987).

> Diagnosis related groups are groupings of medical diagnosis and surgi-
cal procedures related by medical purpose or resource requirement.

* The Health Care Financing Administration created a metric that accu-
rately reflects relative hospital resource consumption by diagnosis related

30 Monthly Labor Review July 1996

group. These relative intensity values are key elements in determining reim-
bursements for medicare hospital services.

* “All other” indicates prices charged to private payers, those patients
paying their hospital bill with the assistance of private insurance or from
their own resources.

§ Beginning in January 1997, the cpt pricing methodology for hospitals
will be similar to the ppt. See pp. 32-42 of this issue for more information on
the CPI for hospital services.



medical, surgical, and other hospital services. Such services
range from providing room, board, and nursing services to
the provision of highly specialized diagnostic, surgical, and
therapeutic services. These establishments have an organized
medical staff, inpatient beds, and equipment and facilities for
providing complete health care. Convalescent homes with
extended care facilities, sometimes referred to as convales-
cent hospitals, are classified in industry 8051. Associations
or groups that limit their services to providing insurance cov-
erage against hospitalization or medical costs are classified
in insurance carriers (SIC major group 63).

Because the SIC Manual does not explicitly distinguish
between hospitals with respect to ownership or control, Fed-
eral hospitals, such as those associated with the military, Vet-
erans Administration, and the National Institutes of Health,
also are included in the hospital industry. However, these
establishments are excluded from the PPI sample of hospitals
because there are no measurable economic transactions be-
tween hospital and patient at these Federal hospitals— ser-
vices are rendered free to the patient from a budget allocated
to a Federal entity.

Identifying output and repriceable service. Two approaches
were considered before selecting a unit of output for the in-
dustry. The first was a very disaggregate point of view that
would monitor price changes for specific supply items or ser-
vices. For example, one might track price changes for a chest
x-tay. This approach places little burden on the reporter. How-
ever, given the thousands of different supplies and services
rendered in a hospital, achieving a representative price index
for the industry’s output may require a much larger sample
size. In addition, the list price of a supply item, for example,
valium, may be difficult to connect to an actual transaction
containing discount information so critical for accurate price
index measurement. Anecdotal evidence gathered during the
early stages of the PPt’s hospital index development suggested
“cost shifting” is a common occurrence in hospital industry
pricing. For example, the discrete service price of a chest x-
ray might not be based on the actual costs of performing chest
x-rays alone. The price also might contain a contribution to
help pay for the hospital’s new magnetic resonance imaging
machine.

The second approach, which PPI analysts selected, con-
tends that the consumption of health care services does not
occur in piecemeal fashion. Hospitals admit patients seeking
aid for real (or suspected) medical conditions. These estab-
lishments are not selling items such as Prescription drugs sepa-
rately. What is being sold is a combination of medical sup-
Plies, drugs, and ancillary services designed and administered
by a trained medical staff. For an inpatient, the duration of
these services coincides with the patient's length of stay. In
the case of an outpatient, nominal hospital output is the total

revenue realized for medical supplies, drugs, and ancillary
services accruing from a single hospital visit.

Next, analysts had to consider the custom nature of hospi-
tal services and its impact on data collection. While standard
protocols exist for patient groups suffering common mala-
dies, there really is no “cookbook approach;” each incident
of hospital care is different. Every patient represents a unique
combination of gender, age, life-style, sensitivity to drugs,
allergies, medical history, genetics, mental attitude, immu-
nity to infection, complicating secondary medical conditions,
and so forth. Adding to the complex nature of patient differ-
ences, there are also philosophical differences within the
medical community. Depending on the physician’s personal
experience, expertise, and preferences, many different com-
binations of inputs may be used to successfully treat seem-
ingly identically diagnosed patients.

Therefore, actual treatment bundles, as represented by ran-
domly selected patient bills, formed the model combinations
of services and supplies tracked each month. These treatments
may not be directly observed in subsequent months; how-
ever, the reporters constructed prices based on identical in-
puts. This technique removed any price variability resulting
from a direct comparison of different patient bills.

The data. As in all PP indexes, these hospital price indexes
employed fixed base-period weights using 1987 industry rev-
enue data from the U.S. Bureau of the Census. However, for
SIC 8062, the census data does not support the development
of value weights for the PPI taxonomy of hospital services. To
fill this gap, frequency counts of diagnosis related groups?
were combined with medicare resource intensity values’ to
distribute total industry revenue by diagnosis related group.
These group values were summed according to major diag-
nostic categories to yield the weights shown in the right-hand
column of table 1.

Although the vast majority of the revenue generated within
the walls of a hospital comes from medically related services,
there are some services provided (such as cafeteria services,
laundry services, resident housing, gift shops, and so forth)
that are not necessarily related to the well-being of the hospi-
tal patient. Price movements in this category are captured
under the index for “other receipts.” (See table 1.)

The sample. Ultimately, 358 hospitals were selected to rep-
resent the hospital industry. The number of price quotes re-
quested of each sampled hospital ranged from 6 to 10, de-
pending on the urban or rural designation and size of the hos-
Pital. The total potential number of price quotations was 2,983.
(See appendix for sampling strategy and results. Table A-1
presents data by hospital location; urban or rural and by size.
The actual collection results from PPI sampled hospitals along
with the average for the overall PPI are presented in table A-

Monthly Labor Review July 1996 25



Hospital Price Inflation

— —- ——
PPI taxonomy for general medical and surgical hospitals, by Industry code and revenue generated

(Base year = December 1992]

industry Estimated o

title revent

product Index thousands)
8062 General medical and surgical hospitals, $171,144,879
8062P Primary services ... 168,404,165
80621 Inpationt treatments 131,049,280
8062131 Medicare patients 41,684,243
806213101 ‘All medical diagnosis related groups 2,198,315
806213103 All surgical dlagnosis related groups 19,485,928
8062151 Medicaid patients 13,445,457
8062171 All other patients . 75,913,580
806217101 Diseases and disorders of the nervous system 5,158,529
806217102 Diseases and disorders of the eye ... 349,449
806217103 Diseases and disorders of the ear, nose, mouth, and throat 1,347,874
806217104 Diseases and disorders of the respiratory 7,255,222
806217105 Diseases and disorders of the circulatory system 14,011,231
806217106 Diseases and disorders of the digestive system 8,669,657
806217107 Diseases and disorders of the hepatobiliary system and pancreas 3,194,960
806217108 Diseases and disorders of the musculoskeletal system and connective tissue 8,469,972
806217109 Diseases and disorders of the skin, subcutaneous tissue and breast 2,030,131
806217111 Endocrine, nutritional, and metabolic diseases and disorders 1,897,007
806217112 Diseases and disorders of the kidney and urinary tract 2,895,432
806217113 Diseases and disorders of the male reproductive system 1,048,346
206217114 Diseases and disorders of the female reproductive system 2,945,354
806217115, Pregnancy, childbirth, and puerperium... 4,326,508
806217116 Newboms and other neonates with conditions originating in the perinatal period 4,842,361
806217117 Diseases and disorders of the blood and blood forming organs and immunological disorders . 615,695
806217118 Myeloproliferative diseases and disorders and poorly differentiated neoplasms 1,264,672
806217119 Infectious and parasitic diseases (systemic or unspecified sites) 1,480,997
906217121 Mental diseases and disorders... 1,564,199
906217122 Alcohol/drug use and alcohol/drug induced organic mental disorders 66,562
806217123 Injuries, poisonings and toxic effect of drugs 1,480,997
806217124 Bums 232,968
806217125 Factors influencing health status and other contacts with health services . 765,459
80623 Outpatient treatments 935,380,885
9062311 Medicare patients .. 4,742,519
8062331 2,962,939
8062351 28,255,427
8062SM 4,740,714

2.) From the actual collection, PPI analysts also tabulated out-
of-business, out-of-scope, and misclassified categories which
were a result of errors in sampling frames. From these tabula-
tions, analysts were able to derive the rate of productive data
collection, which was somewhat higher for the hospitals in-
dex than for the PPI as a whole.

Types of prices

BLS consulted with industry representatives on possible pric-
ing approaches before, during, and after a test of the chosen
methodology. All sources agreed that tracking price change
accurately is not possible using list prices alone. List prices
frequently do not represent the actual payments received, that
is, the transaction price received, by health care providers for
services rendered. Of course, this is not to say “nobody pays
retail.” Paying the entire charged amount on the bill does oc-
cur. Thus, list prices are net transaction prices in some cases.

26 Monthly Labor Review July 1996

Where discounts, surcharges, or other price-setting mecha-
nisms affected the hospital bills randomly selected during data
collection visits, the PPI captured and monitored those “ad-
justments to price” through time. Consequently, many differ-
ent forms of reimbursement (that is, price types) were en-

Percent distribution of collected price data by
type of price

[Base year = Decamber 1992]

Price type Total Inpatients | Outpatients
Total 100.0 100.0 100.0

List 45.4 43.4 64.6

List less adjustments 19.4 18.6 27.3

Case rate 20.7 22.1 7A

Per diem 14.1 15.4 C)

Capitation 4 4 1.0

Nore: Total may not sum to 100.0 due to rounding.