In its first year of operation, the federal government's new monitor of hospital prices confirmed what hospital executives have been saying for years: The long-standing Consumer Price Index overstates changes in hospital charges.
According to the new hospital Producer Price Index, unveiled last February by the Labor Department's Bureau of Labor Statistics, net charges by acute-care hospitals rose 4.2% last year. By comparison, the hospital service component of the CPI rose 7.6% last year. The government released year-end figures for the PPI and CPI last week.
"The index movement is in line with what the healthcare community was telling us," said Irwin Gerduk, chief of the bureau's services industry pricing branch. "They said the CPI exaggerated hospital price changes."
The CPI and its medical care components reflect changes in gross prices charged to urban consumers, while the hospital PPI reflects changes in net revenues per episode of care. Unlike the CPI, the hospital PPI includes data from rural areas and payments from Medicare and Medicaid.
Overall medical inflation of the CPI was 5.4% last year. That's substantially lower than medical inflation in 1992, which was 7.4%, but it was still running about twice as high as the general inflation rate, which was 2.7% last year. The overall inflation rate in 1992 was 3%.
Meanwhile, the PPI also confirmed something that hospital executives typically don't boast about-privately in-Continued on p. 6
Continued from p. 4sured patients are hit with higher price increases to cover alleged shortfalls from government payers. Charges for non-federally insured inpatients rose 5.4% last year, compared with 4.3% for all inpatients, including Medicare and Medicaid patients, according to the PPI.
Patients at psychiatric hospitals saw their charges increase at a substantially higher rate. Inpatient charges for psychiatric care provided to all patients rose 6.8%. Charges for outpatient psychiatric care increased only 4.8%, the government said. Specialty hospitals other than psychiatric facilities raised their rates by 3.4% for inpatient care and by 4.2% for outpatient care. Specialty hospitals include rehabilitation and children's hospitals.
Mr. Gerduk said the government will begin issuing monthly PPIs for physicians starting Feb. 11.-David Burda