The greatest influence on reimbursement rates is the Employment Cost Index released quarterly by the Bureau of Labor Statistics. The data point is lagged through the use of a four quarter moving average. As a result, reimbursement tends to improve after the worst of labor inflation is past peak creating margin expansion opportunities. This effect is evident after the acceleration of labor demand during the ACA implementation period.
What makes they next 12 months interesting is the resistance so far of the ECI to return to normal levels - reflecting the dramatic and sudden rise in labor demand in the 2021-23 period. AN update will be out on Tuesday of next week.
More on the effects of inflation on reimbursement and margins Wednesday morning when we cover 4Q 2023 Health Care Themes.
Emily Evans
Managing Director – Health Policy
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