As far as inflationary periods go (e.g. mid to late-1980s) having a pandemic to underwrite some of the costs even while exacerbating them isn't the worse thing, I suppose. Beginning last month, Medicare's Fee-for-Service Prospective Payment System begins what is likely to be a 24 month process. Inflationary pressures that began in 2021 made their way into the PPS update for hospitals for FY2023 and will probably do some more in FY2024. Of course, some of that inflation, particularly as it relates to wages, was due to too many Provider Relief Funds chasing too few nurses.
The irony.
As a reminder, PPI measures the rate of change in payments to provider types by different sources. Medicare's updates beginning with the federal fiscal year went into effect in October, other payment silos will see increases in January.
It will not be true of every hospital in the U.S. - as we have pointed out many times the non-profit sector can be particularly clueless about their cost controls - but the ones with discipline are beginning to see some relief from higher reimbursement just as wage rates begin to abate. As commercial payers frequently use Medicare as a reference, it will send those rates rising as well.
It helps that we are in for a nasty flu season.
Emily Evans
Managing Director – Health Policy
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