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The Keckley Report

Is the April CPI report Good or Bad News for Healthcare?

By May 17, 2021March 1st, 2023No Comments

Last Thursday, the CDC announced relaxation of masking requirements. It came with a caveat: in the U.S., the pandemic is not in the rear-view mirror. As of yesterday, only 38% (123 million) of our population is fully vaccinated—far short of the 70% threshold sought by infectious disease professionals for herd immunity. But last week’s news cycle quickly pivoted from Covid-19 to the Colonial Pipeline and the vulnerability of the U.S. supply chain to cyberthreats. Gas lines replaced vaccine lines as videographers chronicled the public’s response.

Not getting attention was the release last Wednesday of the April Consumer Price Index that showed prices increased 0.8% after rising 0.6% in March. Over the last 12 months, the CPI increased 4.2% before seasonal adjustment—the largest 12-month increase since a 4.9% increase for the period ending September 2008. Highlights:

  • The index for used cars and trucks rose 10.0% in April– the largest 1-month increase since the series began in 1953 and 21% over the past 12 months.

  • The food index increased in April, rising 0.4% and 2.4% over the last 12 months as the indexes for food at home and food away from home both increased.

  • The energy index decreased slightly, as a decline in the index for gasoline in April more than offset increases in the indexes for electricity and natural gas. Over the last 12 months, it increased 25.1% including a 49.6% increase in gas prices and 37.3% increase in fuel oil.

  • The medical care commodities index which includes prescription drugs was up .6% in April and down 1.7% for the trailing 12 months. Prescription drugs rose .5% in April.

  • The medical care index which includes hospital and physician services for April rose 0.1% and up 2.2% for the last 12 months.

Relative to eye-popping CPI increases in energy and transportation, healthcare price increases appear reasonable, especially after taking a direct hit from the pandemic over the past year. But underneath this report are insights important to navigating post-pandemic price expectations in healthcare. Two stand out:

  • Consumer price increases hit rural and low-income populations hardest.

  • Price increases vary widely from state to state and market to market.

And most important, wage growth has not kept pace with price increases: per BLS, wage growth for the last 12 months across all income cohorts increased 3.9% vs. overall price increases of 4.2%. And this gap is expected to widen as white-collar earners benefit from a stronger economy (forecast of 6.5% GDP growth and 11% YTD increase in S&P 500) and producers nudge prices upward in coming months.


The CPI data provide a useful snapshot of how prices changed during the pandemic (last 12 months) and more recently how they changed in April as pent-up demand and post-pandemic spending aligned. They’re lagging indicators. Some- including the Federal Reserve- think price increases in the near term reflect ‘transitory inflation’, justifying current monetary policy of low interest rates. The fact remains that current unemployment still has not reverted to pre pandemic levels and there are obvious global supply issues across a variety of different markets. So it’s hard to bet against the Fed, especially when J Powell continues to stand behind his 2023 rate hike target. However, others still fear these pricing trends portend a more permanent inflationary environment, even in the interim.

The post-pandemic economy poses unique risk for traditional healthcare providers (hospitals, physicians, long-term care operators) and suppliers (technology, drugs, DME, et al): elasticity in pricing is likely to shrink, separating those that can operate with thinner margins from those that can’t survive. Clearly, operators will continue to pass through these price increases, especially those that are variable cost focused. And so long as any provider- be it a hospital, ASC or the like- continues to rely heavily on specialties like Ortho for their bottom line, the impact potentially could be felt across a variety of operating models.

As attention shifts from Covid-19 to post-pandemic normalcy, consumer prices will get heightened attention. Healthcare must be vigilant about its pricing and pro-active in scenario-planning reflecting potentially adverse changes in the economic environment.

The April CPI report is neither good nor bad news for the economy overall and healthcare specifically: it’s too soon to know.



Consumer Price Index

Federal Reserve- FOMC

Caitlin McCabe “Companies Are Flush With Cash—and Ready to Pad Shareholder Pockets”; May 15, 2021; Wall Street Journal


Economist Analysis: Global Deaths Due to Covid Understated

The Economist’ analysts model included 121 variables from recorded deaths to demography to estimate the global death rate. They concluded that covid-19 has claimed 7.1m-12.7m lives- over three times the official count from government agencies.

“There have been 7m-13m excess deaths worldwide during the pandemic”; May 15, 2021; The Economist

Vaccine Waiver a Symbol of U.S. Global Authority or Moral Dilemma: New York Times Editorial Board Calls Global Vaccine Production and Distribution a Moral Dilemma for the U.S.

Last week, the Biden administration announced it was waiving Covid-19 vaccine patent protections so low-income populations can be vaccinated. To date, 0.3% of the vaccine doses administered globally have been given in the 29 poorest countries, home to 9% of the world’s population. Each month, 400-500 million doses of the vaccines from Moderna, Pfizer and Johnson & Johnson are produced, but the world needs 11 billion shots to vaccinate 70% of the world’s population for herd immunity. While global production is difficult to measure, the analytics firm Airfinity estimates the total so far at 1.7 billion doses. A recent Harris poll found 63% of Americans (63%) think a waiver of vaccine intellectual property rights by U.S. vaccine manufacturers would accelerate global access.

Friday, the New York Times Editorial Board wrote “The United States is well on its way to protecting Americans from the coronavirus. It’s time to help the rest of the world. By marshaling this nation’s vast resources to produce and distribute enough vaccines to meet global demand, the United States would act in keeping with the nation’s best traditions and highest aspirations while advancing its geopolitical and economic interests.” The U.S. has joined the World Trade Organization (WTO) initiative (Covax) to encourage distribution, but the European Union opposes waivers and support only voluntary tech transfers, essentially taking the same position as the pharmaceutical industry. Companies like Pfizer ($26 billion in 2021) and Moderna ($19 billion in 2021) have logged billions of dollars in revenue by selling most of their doses to deep-pocketed governments in North America and Europe. Note: during the pandemic, Modern is#3 and Pfizer #7 on the Axios/Harris Top 100 Corporate Reputation poll.

Lev Facher, Nicholas Florko “How David beat Goliath: Advocacy groups seized a moment, and found allies, in bid to loosen vaccine patent rights”; May 7, 2021; STAT

Ed Silverman “The U.S. opened pandora’s box on IP waivers for Covid-19 vaccines. What happens now?”; May 6, 2021; STAT

“America is Failing Its Moral Test on Vaccines”; May 14,2021; New York Times

Peter Goodman et al “What Would It Take to Vaccinate the World Against Covid?”; May 15, 2021; New York Times

Studies: Hospitals Profit from Covid Tests

Kaiser Healthcare News sponsored two studies to examine hospital prices for Covid tests:

  • Hospital Pricing Specialists’ analysis: “As the pandemic enters its second year, no procedure has been more frequent than tests for the virus causing it. Gargantuan volume — 400 million tests and counting, for one type — combined with loose rules on prices have made the service a bonanza for hospitals and clinics…Lab companies have been booking record profits by charging $100 per test. Even in-network prices negotiated and paid by insurance companies often run much more than that and, according to one measure, have been rising on average in recent months. Hospitals are charging up to $650 for a simple, molecular COVID test that costs $50 or less to run. Charges by large health systems range from $20 to $1,419 per test, a new national survey by KFF shows. And some free-standing emergency rooms are charging more than $1,000 per test.

  • Castlight Health analyzed the costs of 1.1 million COVID tests billed to insurers from March 2020 through this February. The analysis found an average charge of $90, with less than 1% of bills passing any cost along to the patient. Since last March, the average cost has gone up from $63 to as high as $97 per test in December before declining to $89 in February, the most recent results available.

KHN also reported that World Health Organization cost assessment of running 5,000 COVID tests on Roche and Abbott analyzers — not including that initial equipment price, labor or shipping costs — came to $17 and $21 per test, respectively.

Jay Hancock, Hannah Norman “COVID Testing Has Turned into a Financial Windfall for Hospitals and Other Providers”; May 07, 2021; Kaiser Health News

White House will Spend $7.4B to Hire Public Health Workers

Thursday, the White House announced it will provide $7.4 billion to hire and train public health workers to respond to the COVID-19 pandemic and future health crises through the $1.9 trillion American Rescue Plan signed by President Joe Biden in March:

  • $3.4 billion will go toward hiring staff to work on vaccination outreach, testing, contact tracing and other tasks at “overstretched public health departments.”

  • $400 million “to recruit and build a new workforce ready to respond to the public health needs of the nation” in a new venture, Public Health AmeriCorps

  • $500 million to support hiring school nurses who can administer COVID-19 vaccines to younger people.

  • $3 billion will be funneled to modernizing the public health workforce.

“Fact Sheet: Biden-Harris Administration to Invest $7 Billion from American Rescue Plan to Hire and Train Public Health Workers in Response to COVID-19”; May 13, 2021; The White House


Lown Institute: Hospital Overuse Widespread; AHA Disputes Study

Lown researchers analyzed claims data for Medicare fee-for-service beneficiaries from January 1, 2015, to December 31, 2017, with a lookback of 1 year. Patients were from hospitals with the capacity (based on a claims filter developed for this study) to perform at least 7 of 12 investigated services in 2415 hospitals. Findings:

  • Head imaging for syncope was the most common low-value service administered (29.9%), followed by coronary artery stenting for stable coronary disease (15.8%)

  • Southern hospitals were most likely to administer low-value services, with a 0.06 higher mean overuse score than midwestern hospitals, and a 0.08 higher overuse score than both northeast hospitals and western hospitals.

  • For-profit hospitals were more likely to provide low-value services compared to non-profit hospitals, with a 0.03 difference in mean overuse scores.

  • Non-teaching hospitals were more likely to administer low-value services than their academic counterparts, with an average overuse score 0.10 greater than major teaching hospitals. Smaller teaching hospitals had an average score that was 0.07 greater than major teaching hospitals.

The authors concluded hospitals provide “widespread and persistent delivery of low-value care services” prompting criticism by the American Hospital Association which that the Lown study is based on “incomplete data and omits important clinical details…and attempts to make sweeping conclusions about hospital value based on data that are not only incomplete, but also not current.” The AHA assertion is based on Lown’s use of Medicare claims data as the basis for its analysis which misses clinical data and the majority of the working age population.

Health service overuse has been well- documented by RAND, Johns Hopkins and many others. This study misses important dimensions (limitations of claims data, liability, patient demand et al) necessary to the needed and intensifying discussion about hospital overuse.

Allison Oakes, Thomas Radomski “Reducing Low-Value Care and Improving Health Care Value”; April 8, 2021; JAMA Network

Chalmers et al “Assessment of Overuse of Medical Tests and Treatments at US Hospitals Using Medicare Claims”; April 27, 2021; JAMA Network

“Study Finds High Rates of Low-Value Care, But Hospitals Disagree”; May 11, 2021; RevCycle Intelligence

Ashley Thompson “Puzzling Hospital Ranking Report on Unnecessary Services: Based on Incomplete Data, Omits Important Clinical Details”; May 7, 2021; American Hospital Association

Study: Most Hospitals Non-Compliant with Price Transparency Requirement

The Centers for Medicare & Medicaid Services (CMS) ruling CMS-1694-F, effective on January 1, 2019, mandated that hospital chargemasters be publicly available in a machine-readable file. Herein, we assessed the compliance of hospitals with this CMS ruling 18 months after its effective date. Researchers analyzed websites for 5288 hospitals to determine compliance. Highlights:

  • A total of 2723 hospitals (51.5%) did not have an online chargemaster in a machine-readable format, including 305 hospitals (5.8%) with broken links or incorrectly linked files and 138 hospitals (2.6%) that only provided an online cost estimator. The median (interquartile range) number of clicks needed to reach the chargemaster from the institution website homepage was 3 (2-8).

  • In univariable and multivariable regression analyses, below average patient experience (vs at or above average patient experience) and private nonprofit ownership (vs local government ownership) were associated with greater compliance. In contrast, psychiatric hospitals (vs acute care hospitals) and religious ownership (vs local government ownership) were associated with lesser compliance.

  • To assess chargemaster usability, 2 nonmedical reviewers assessed 25 shoppable items in the chargemasters of the 100 largest hospitals by bed number. Across all items, 330 prices (13.2%) were identified by both reviewers, and prices were more frequently identified for medications and laboratory tests than for imaging. Agreement in abstracted prices ranged from 0% to 89% (Figure). Among 22 hospitals with chargemasters including Current Procedural Terminology (CPT) codes, 370 of 551 prices (67.2%) across all 25 items were identified by CPT codes. However, only 21 of 57 prices (36.8%) abstracted by either nonmedical reviewer was concordant with pricing identified using CPT codes.

“Our study found that most US hospitals remained noncompliant with the CMS-1694-F ruling, and compliance was associated with patient ratings, hospital type, and ownership. Even when publicly accessible, chargemasters were frequently buried within websites and difficult to use accurately. “

Hague et al “Transparency, Accessibility, and Variability of US Hospital Price Data”; May 14, 2021; JAMA Network

Tennessee Legislators Eliminate CON

Friday, Tennessee’s Legislature passed a bill (HB 948) that exempts more health providers from certificate-of-need requirements. Highlights:

  • Exemptions include mental health hospitals, and hospital-run outpatient treatment centers for opioid addiction,

  • Exemptions in counties deemed economically distressed that don’t already have an existing hospital which allows In counties that had a hospital close, a new buyer can come in to reopen without applying for a new CON. Home health agencies serving children and adolescents will also be exempt, as well as agencies operated by healthcare research institutions.

  • Existing hospitals can increase their number of beds, but not add new types of bed capacity for services not already performed. Hospitals also would be prohibited from adding additional beds at satellite locations.

  • Extends the prohibition on new beds through 2025, though 125 Medicare skilled nursing facility beds per year can be added. SNF CONs will be valid for three years, instead of two but makes it easier for these facilities to relocate beds and services to nearby locations.

  • CON requirements for ASCs and outpatient diagnostic centers stay in place.

35 states and the District of Columbia have certificate-of-need regulations.
Lisa Gillespie “Tennessee moves to change certificate-of-need law”; May 11, 2021; Modern Healthcare

Virtual Care Update

Forrester has revised its original predictions for virtual care visits for 2020:

  • Virtual care visits will soar to more than 1 billion this year, including 900 million visits related to COVID-19.

  • Time and resource constraints will create a supply crisis for virtual care during the pandemic, especially as only 24 % of US healthcare organizations (HCOs) had an existing virtual care program as of January 2020.

Per Morning Consult, Today, doctors’ offices remain the public’s favored site of care: 70% of adults who said they’d choose a doctors’ office for wellness checkups or physicals; 67% who said the same for blood work; 62% for diagnosing and treating common illnesses like the flu; and 56% for vaccinations.

“US Virtual Care Visits To Soar To More Than 1 Billion”; April 10, 2021; Forrester

Merritt Hawkins: Medical Residents Getting Fewer Recruiting Offers

Conducted periodically since 1991 by Merritt Hawkins, a national physician search firm and a company of AMN Healthcare, the survey examines the career choices, plans, and expectations of physicians in their final year of residency training. Key findings of the survey include:

  • Medical residents entering the job market are receiving fewer recruiting offers than in past years. Only 62% received 26 or more recruiting offers this year, compared to 82% in 2019, and 86% in 2017.

  • Despite this drop, 86% of residents received 11 or more recruiting offers during their training, indicating jobs are still available for most new physicians.

  • Female residents receive more recruiting offers than male residents. 70% of female residents said they received 26 or more recruiting offers during their training, compared to only 54% of male residents.

  • Relatively few residents are concerned about Covid-19 health risks as they enter their first practice; 45% said Covid-19 health risks are very or somewhat concerning, compared to 93% who said the ability to earn a good income was very or somewhat concerning.

  • 58% of residents said they sometimes, often or always experienced feelings of burnout during their training.

  • 21% said they would not choose medicine again if they had their education and training to do over.

  • Covid-19 has not caused most residents to rethink their choice of a career. Only 3% strongly agreed that Covid-19 had caused them to rethink their choice of a career, while 49% strongly disagreed.

Merritt Hawkins’ 2021 Survey of Final-Year Medical Residents