Tag: "economic data"

PPI: Pharma Prices Are Dropping!

BLSDecember’s Producer Price Index rose 0.3 percent. However, prices for most health goods and services grew slowly, if at all. Fifteen of the 16 price indices for health goods and services grew slower than their benchmarks.*

The outlier was health and medical insurance for final demand, which increased by 0.2 percent, the same rate as final demand services (less trade, transportation, and warehousing.) The largest decline (relative to its benchmark) was for prices of new health care building construction, which declined twice as fast as prices of overall building construction did.

Prices of hospital outpatient care and nursing home care declined versus their final demand services (less trade, transportation, and warehousing) and also absolutely. Pharmaceutical prices decreased 0.1 percent, a 0.4 percent drop versus the price increase for final demand goods less food and energy.

See Table I below the fold:

Health Jobs Explode Versus Non-Health Jobs

blsHealth jobs exploded in this morning’s jobs report, growing more than three times faster than non-health jobs (0.28 percent versus 0.09 percent). With 43,000 jobs added, health services accounted for over one quarter of 156,000 new nonfarm civilian jobs.

The disproportionately high share of job growth in health services is a deliberate outcome of Obamacare. While this trend persists, it will become increasingly hard to carry out reforms that will improve productivity in the delivery of care.

Ambulatory sites added jobs at a much faster rate than hospitals (0.41 percent versus 0.21 percent). This was concentrated in offices of physicians, which alone added. Ambulatory sites added 30,000 jobs, versus 11,000 in hospitals. This is a good sign because hospitals are high-cost locations of care versus doctors’ offices and other ambulatory sites.

See Table I below the fold:

Drop in Health Facilities Construction Continues in November

Census2October’s construction trend continued in November. Overall, health facilities construction starts declined 0.1 percent, versus an increase of 0.9 percent for other construction. Health facilities construction accounted for almost 6 percent of non-residential construction starts. However, there was greater gap between health and non-health starts in private than public construction.

Construction of private health facilities dropped 0.2 percent, versus an increase of 1.0 percent for private non-health facilities. Private health facilities construction starts accounted for less than 4 percent of private nonresidential construction starts. Construction of public health facilities increased by 0.4 percent, while construction of public non-health facilities increased 0.8 percent. In other words, non-health facilities construction outpaced health construction by 1.2 percentage points in the private construction market, versus only 0.4 percentage points in the public construction market.

For the twelve months ending last October, there was a significant difference in trend between private and public construction. Non-health private construction increased 4.3 percent, but private health facilities construction dropped 1.5 percent. On the other hand, non-health facilities public construction increased 2.6 percent, while public health facilities construction increased by 2.9 percent.

This suggests private investors are nervous about future revenue growth in hospitals and other facilities.

See Table I below the fold:

GDP: Health Spending Almost Flat

BEAFor those (like me) concerned about how much health spending continues to increase after Obamacare, the third report of third quarter Gross Domestic Product confirmed good news. Although GDP growth was revised up $14.5 billion from the second report, spending on health services was revised downward. It is good to have a breather from the second quarter, which was dominated by growth in health services spending.

Overall, real GPD increased 3.5 percent on the quarter, while health services spending increased only 0.6 percent, and contributed only 2 percent of real GDP growth. Growth in health services spending was also significantly lower than other services spending and personal consumption expenditures (PCE). However, the annualized change in the health services price index increased by 1.8 percent, lower than the price increase of 2.8 percent in non-health services, slightly more than the 1.4 percent price increase in non-health PCE, and non-health GDP.

(See Table I below the fold.)

CPI: Dramatic Drop In Prescription Drug Prices

blsThe Consumer Price Index rose 0.2 percent in November. Remarkably, medical prices were flat overall. This is the third month in a row we have enjoyed medical price relief. Prices of prescription drugs dropped by 0.6 percent. Even the prices of health insurance and hospitalization dropped a smidgeon!

Prices for physician services rose the most, by 0.6 percent, followed closely by other medical professionals (0.5 percent).

Over the last 12 months, however, medical prices have increased 2.7 times faster than non-medical prices: 1.5 percent versus 4.0 percent. Price changes for medical care contributed 20 percent (one fifth) of the overall increase in CPI.

Many observers of medical prices decline to differentiate between nominal and real inflation. Because CPI is has been low until recently, even relatively moderate nominal price hikes for medical care are actually substantial real price hikes. More than six years after the Affordable Care Act was passed, consumers have not seen relief from high medical prices, which have increased over twice as much as the CPI less medical care since March 2010, the month President Obama signed the law.

(See Figure I and Table I below the fold.)

PPI: Most Health Prices Tame, Inflation Picks Up

blsNovember’s Producer Price Index rose 0.4 percent. However, prices for most health goods and services grew slowly, if at all. Nine of the 16 price indices for health goods and services grew slower than their benchmarks.*

The major exceptions were prices for pharmaceutical preparations, which increased 0.4 percentage points more than prices for final demand goods less food and energy; and nursing homes, for which prices increased 0.3 percentage points more than prices for final demand services less trade, transportation, and warehousing.

Prices of health goods for intermediate demand, were lower than their benchmark. Perhaps slow price increases for medicinal and botanical chemicals, and biological products will flow through to prices of pharmaceutical preparations but that has not previously been the case.

Over the last twelve months, prices of nine of the 16 health goods and services have increased slower than their benchmarks. Three stand out as having increased significantly more than their benchmarks: Pharmaceutical preparations (7.0 percentage points), biological products (1.8 percentage points), and dental care (1.7 percentage points).**

(See Table I below the fold.)

QSS: Health Services Revenue Slides; Hospital Profits Drop

This morning’s Quarterly Services Survey (QSS), published by the Census Bureau, showed a decline in revenues for most health services. Overall, revenue shrank 1.5 percent in the third quarter. However, growth versus Q3 2015 was a strong 5.4 percent and YTD growth is up 5.7 percent.Only outpatient care centers, home health services, other ambulatory services, and specialty hospitals reported growth. Revenue at psychiatric hospitals has grown 16.3 percent, Q3 2016 versus Q3 2015, a remarkable growth which I cannot explain. General hospitals’ revenues have finally begun to shrunk, suggesting they have maximized their Obamacare business opportunities.

See Table I below the fold:

Health Jobs Grow 1.5 Times Faster Than Non-Health Jobs

blsThis morning’s jobs report maintained the trend of high growth in health services, which grew 1.5 times faster than non-health jobs (0.18 percent versus 0.12 percent). With 28,000 jobs added, health services accounted for almost one in six of 178,000 new jobs.

The disproportionately high share of job growth in health services is a deliberate outcome of Obamacare. While this trend persists, it will become increasingly hard to carry out reforms that will improve productivity in the delivery of care.

Ambulatory sites added jobs at a much faster rate than hospitals. This was concentrated in offices of physicians and other practitioners, and outpatient care centers. Physicians’ offices alone added seven thousand jobs, more than the six thousand added by hospitals. This is a good sign because hospitals are high-cost locations of care versus doctors’ offices and other ambulatory sites.

See Table I below the fold.:

Significant Drop in Health Facilities Construction in October

Census2Construction of health facilities slowed in October, while other construction increased a little. Overall, health facilities construction starts declined 3.1 percent, versus an increase of 0.7 percent for other construction. Health facilities construction accounted for almost 6 percent of non-residential construction starts. However, while both private and public health facilities construction both declined, there was divergence between private and public non-health construction.

Construction of private health facilities dropped 3.3 percent, versus a drop of 2.1 percent for public health facilities. Private health facilities construction starts accounted for almost 8 percent of private nonresidential construction starts. Construction of private non-health facilities declined by 2.0 percent, while construction of public non-health facilities increased 2.9 percent. It looks like the government has finally pulled back spending on public and VA hospitals.

(See Table I below the fold.)

GDP: Tame Health Spending Confirmed In Strong Report

BEAFor those (like me) concerned about how much health spending continues to increase after Obamacare, the second report of third quarter Gross Domestic Product confirmed good news. Although GDP growth was revised up $10 billion, only a scratch was due to health spending. It is good to have a breather from the second quarter, which was dominated by growth in health services spending.

Overall, real GPD increased 3.1 percent on the quarter, while health services spending increased only 2.3 percent, and contributed only 9 percent of real GDP growth. Growth in health services spending was also in line with other services spending and personal consumption expenditures (PCE). However, the annualized change in the health services price index increased by 1.7 percent, lower than the price increase of 1.3 percent in non-health GDP but less than the 2.8 percent price increase for non-health services.

(See Table I below the fold.)