Bureau of Labor Statistics > Producer Price Indexes > Methods > Industry Factsheets

Health Care Services in the Producer Price Index

Healthcare services Producer Price Indexes (PPIs) measure the average change over time in prices received by domestic health care providers. Prices collected by the PPI reflect the total amounts received by providers for rendering services to patients. Please see the PPI Overview for general information on the PPI.

Health care services are classified in the North American Industry Classification System (NAICS) sector 62, Health Care and Social Assistance. NAICS-based PPI Health care services indexes in tables 10-12 of the monthly PPI Detailed Report and are available online through the BLS website. Current PPI coverage of health care industries include:

The Importance of Health Care PPIs

Health care spending in the United States accounts for a significant shar of the country's economy. In 2020, the Centers for Medicare and Medicaid Services (CMS) measured total national health expenditures at $4.1 trillion, which equates to $12,530 per person and accounts for 19.7 percent of Gross Domestic Product.¹

Health care PPIs are used as estimates in various key economic statistics, including the health care service components in the Bureau of Economic Analysis’ Personal Consumption Expenditures (PCE) data.² Specifically, PCE utilizes PPI industry indexes for hospitals, physicians, nursing care facilities, dental services, home health care and medical laboratories. The PCE price index is one of the key indicators that the Federal Reserve uses to monitor inflation and determine the appropriate stance of monetary policy and interest rates.

Health Care Payer Types

There are several different ways that health care providers can be reimbursed for the services they perform. One common method is through private health insurance plans. In this case, the health insurance company pays the health care provider a negotiated rate for each treatment or service provided to the patient. Health care providers may also be reimbursed by government programs such as Medicare or Medicaid, which provide health coverage to older adults, people with disabilities, and low-income individuals and families. In these cases, the government sets the reimbursement rates for different treatments and services. Additionally, health care providers may also be reimbursed through a combination of private insurance and government programs, or through other payment arrangements such as out-of-pocket payments by the patient or direct payment from employers.

The PPI collects reimbursements paid to health care providers from all payer types. Alternatively, the Consumer Price Index (CPI) only collects direct payments from patients, private insurance companies, and Medicare parts B and C. The CPI does not collect Medicare Part A and Medicaid reimbursements because these services are paid for by the government, not directly by consumers.³ Other third-party payers are also not included in the CPI, including-but-not-limited-to the United States Department of Veterans Affairs, Children’s Health Insurance Program (CHIP), and workers’ compensation.

Table A. Health care payer types in the Consumer Price Index and the Producer Price Index

Source of Payment	CPI	PPI
Direct payments from patients	✓	✓
Privarte insurance	✓	✓
Medicare	Parts B & C	Parts A, B, C
Medicaid		✓
Other third-party payers		✓

What is Priced in Health Care PPIs?

Health care services are typically provided during an episode of care, visit, treatment, procedure, length of stay, or test. Some services are identifiable by standardized health care delivery coding systems, such as the Healthcare Common Procedure Coding System (HCPCS).

For example, a service included in the PPI for Offices of physicians, except mental health, could be a service performed during a physician visit, evaluation, surgery, interpretation, procedure, or treatment. Services provided by physicians are commonly identified by Current Procedural Terminology (CPT) codes which are a set of HCPCS codes that typically identify professional health care services or procedures. A service might include one or more CPT codes.

Services included in the PPI for General medical and surgical hospitals include both inpatient and outpatient visits and treatments provided in a hospital setting. Inpatient hospital services are reimbursed based on diagnosis-related group (DRG) case rates, while outpatient services are typically billed via CPT, HCPCS, or Ambulatory Payment Classification (APC) codes. In other cases, services might be reimbursed based on a per diem (per day) basis, on a non-specific per case basis or via a percent-of-billed-charges method, and payments may also be augmented for outlier cases where costs of care exceed predetermined thresholds.

Health care providers in other PPI health care industries may use HCPCS or other coding systems such as the Health Insurance Prospective Payment System (HIPPS) which are rate codes that represent specific sets of patient characteristics or case-mix groups, to identify their services. HIPPS codes are typically used by nursing homes and home health care agencies. Dentists use the Current Dental Terminology Code (CDT) for dental services. Blood banks are typically priced per unit.

Price determining characteristics for physician services include procedural codes and/or service descriptors combined with place of service, type of payer, and physician performing the procedure. Price determining characteristics for hospital services can include patient admission type, principal diagnosis or procedure code, type of payer, length of stay, and discharge status.

What is the “Price” in Health Care PPIs?

The health care PPIs measure changes in payer reimbursements for health care services. These reimbursements are usually the contracted “price” or allowed charge a healthcare provider receives from a payer. A list price or total billed charge is used to measure price changes only when it is the actual payment received for the service. The PPI measures changes in health insurance premiums in the PPI for Direct health and medical insurance carriers.

Quality Adjustment for Health Care PPIs

The PPI measures price changes for a sample of specific health care services each month. Because the goal of the PPI is to try and measure the same transaction each month, specific characteristics related to the exact terms of transaction of each health care service are collected and tracked while the transaction is in sample. Some of these characteristics may be price determining, such as the type of buyer, the intensity of the service performed, and any other contract terms. Any changes in the price-determining characteristics or price basis of the service would require a quality adjustment procedure to ensure the PPI reflects only the pure price change based on market factors.⁴

The following table lists the service descriptors or price-determining characteristics that are collected for various Health Care Services in the PPI.

Industry Code and Title	Service Descriptors
NAICS 621111, Offices of physicians, except mental health	· Practice specialty (e.g., General/family practice, internal medicine, multispecialty, etc.) · Payer type and payer Identification · Primary Diagnosis (i.e., ICD-10-CM Chapter) · Place of Service · Name of Physician Provider · Service Identification (which may include HCPCS/CPT code(s), capitated contract information or rate determinants, or any other price-determining factors) · Most common unit of measure is per visit.
NAICS 621210, Offices of dentists	· Dental procedure (e.g., Dental visit, dental surgical intervention service, dental non-surgical intervention service, and other) · Payer type and payer Identification · Practice specialty · Place of Service/ group practice · Service Identification (which may include CDT code(s), capitated contract information or rate determinants, or any other price-determining factors) · Most common unit of measure is per visit.
NAICS 621511, Medical Laboratories	· Type of service (e.g., Clinical chemistry, Clinical microbiology, Hematology, Molecular diagnostics or genetics, etc.) · Payer type and payer Identification · Primary Diagnosis (i.e., ICD-10-CM Chapter) · Facility information (e.g., facility name and address) · Service Identification (which may include HCPCS/CPT code(s), Average price time-basis, capitated contract information or rate determinants, or any other price-determining factors) · Most common unit(s) of measure is per test, per panel, or per profile
NAICS 621512, Diagnostic imaging centers	· Type of service (e.g., Radiography (X-Ray), Magnetic Resonance Imaging (MRI), Computed Tomography (CT or CAT), etc.) · Payer type and payer Identification · Primary Diagnosis (i.e., ICD-10-CM Chapter) · Place of Service (e.g., Freestanding diagnostic imaging center, Inpatient hospital-based diagnostic imaging center, etc.) · Facility information (e.g., facility name and address) · Service Identification (which may include HCPCS/CPT/APC code(s), capitated contract information or rate determinants, or any other price-determining factors) · Most common unit(s) of measure is per procedure or per test.
NAICS 621610, Home health care services	· Type of Service (e.g., home health care, home hospice care, home respiratory therapy, etc.) · Type of Care (e.g., skilled nursing care, physical therapy, occupational therapy, home health aide services, treatment code, i.e., HIPPS, CPT, HCPCS, other, etc.) · Payer type and payer Identification · Primary Diagnosis (i.e., ICD-10-CM Chapter) · Most common unit(s) of measure is per diem, per hour, per episode, or per visit.
NAICS 621991, Blood and organ banks	· Type of Service (e.g., human red blood and whole blood services, human blood plasma services, human blood platelet services, human organ, bone, tissue, and other bank services, etc.) · Service Identification and characteristics (which may include HCPCS code(s), Tests performed on donated blood, organ, bone, or tissue, donation type, bank services, or any other price-determining factors) · Most common unit(s) of measure is per unit, per organ, per tissue, or per vial.
NAICS 622110, General medical and surgical hospitals	· Payer type and payer Identification · Type of Care (i.e., Inpatient and Outpatient) · Primary Diagnosis (i.e., ICD-10-CM Chapter) · Diagnosis and procedure code(s) · Service Identification (which may include HCPCS/CPT/APC or DRG code(s), capitated contract information or rate determinants, or any other price-determining factors) · Most common unit(s) of measure is per entire stay, per treatment, or per visit.
NAICS 622210, Psychiatric and substance abuse hospitals	· Service Type (i.e., Psychiatric service and Substance abuse service) · Payer type and payer Identification · Type of Care (i.e., Inpatient and Outpatient) · Primary Diagnosis (i.e., ICD-10-CM Chapter) · Diagnosis and procedure code(s) · Service Identification (which may include HCPCS/CPT/APC or DRG code(s), length of stay, discharge status, capitated contract information or rate determinants, or any other price-determining factors) · Most common unit(s) of measure is per entire stay or per treatment.
NAICS 622310, Other specialty hospitals	· Hospital Type (e.g., Cancer hospital, Long-term acute care hospital, Rehabilitation hospital, Surgical hospital, etc.) · Payer type and payer Identification · Type of Care (i.e., Inpatient and Outpatient) · Primary Diagnosis (i.e., ICD-10-CM Chapter) · Diagnosis and procedure code(s) · Service Identification (which may include HCPCS/CPT/APC or DRG code(s), length of stay, discharge status, capitated contract information or rate determinants, or any other price-determining factors) · Most common unit(s) of measure is per entire stay or per treatment.
NAICS 623110, Nursing care facilities	· Type of Service/Facility (i.e., Inpatient nursing/rehabilitative care) · Payer type and payer Identification · Rate levels and services (e.g., activities of daily living, tube feeding, incontinent care, physical therapy, occupational therapy, respiratory therapist, etc.) · Facility Information (i.e., facility name and address) · Service Identification (which may include rate level, HIPPS code, level of care, revenue code, average price time-basis, or any other price-determining factors) · Most common unit(s) of measure is per diem, per stay, or per billing period.
NAICS 623210, Residential developmental disability homes	· Type of Facility (e.g., Community residential setting (6 or fewer beds), ICF/ID (7-15 beds), Group home (7-15 beds), Public institution (16+ beds), etc.) · Payer type and payer Identification · Facility Information (i.e., facility name and address) · Service Identification (which may include level of care, length of billing period, or any other price-determining factors) · Most common unit(s) of measure is per diem or per billing period.

Publication Structures

The health care industry-based PPIs include services performed by health care providers classified in NAICS sector 62. PPI health care services industry indexes are typically structured by payer type, with two exceptions:

General medical and surgical hospital services are grouped by ICD-10 (International Statistical Classification of Diseases and Related Health Problems, version 10) Chapter under NAICS 622110 and also broken out by payer type under 62211A.⁵
Physician offices are grouped into single and multispecialty group practices; the single group practices are then furtherbroken out by physician specialty.

Additional information, along with a table of all current published industry indexes are available in Table 11 of the monthly PPI Detailed Report.

The PPI also publishes commodity (wherever-provided) group, 51, Health care services indexes. PPI health care services commodity indexes are broken out into three different categories: Outpatient care; Inpatient care; and Sales of blood and blood products, organs, and tissues. The outpatient and inpatient care indexes are further broken down into each health care service aggregate index, and then detailed by payer type. Additional information and a table of all current published commodity indexes are available in Table 9 of the monthly PPI Detailed Report.

The table below displays the relative importance values for the PPI Health care services commodity indexes as of December 2022.

Table B. Published health care PPI commodity indexes and their relative importance as of December 2022.

Index title	Relative Importance in Final Demand- Dec 2022 (in percent)	Relative Importance in Health Care services - Dec 2022 (in percent)
Health care services	16.6	100.0
Outpatient care	10.6	63.6
Physician care	4.0	23.7
Medical laboratory and diagnostic imaging center care	0.3	2.4
Home health and hospice care	0.9	5.3
Hospital outpatient care	4.3	25.4
Dental Care	1.1	6.7
Inpatient Care	6.0	35.8
Hospital inpatient care	4.5	26.9
Nursing home care	1.2	7.3
Intellectual and developmental disability center care	0.3	1.5
Sales of blood and blood products, organs, and tissues	0.1	0.6

Footnote:

(1) Relative importance percentages may not sum due to rounding.

(2) NAICS-based Industry relative importance data are available upon request. Please contact ppi-info@bls.gov.

Special higher level aggregate health care indexes by payer type are constructed using the detailed payer-type PPI commodity indexes for specific health care services listed in Table B. Additional information is available in Table 13 of the monthly PPI Detailed Report.

Health Insurance and Pharmaceuticals in the PPI

The PPIs for Direct health and medical insurance carriers, Pharmaceutical preparation manufacturing, and Pharmacies and drug retailers are not included in the PPI health care services indexes.

The PPI for Direct health and medical insurance carriers is a part of NAICS industry sector 524, Insurance Carriers and Related Activities. The PPI for this sector measures the average change in the total premiums (including employee and employer contribution) paid to insurers, plus the returns on the invested portion of the premiums. Please see the Producer Price Index for the Direct Health and Medical Insurance Carriers Industry – NAICS 524114 for more information.

The PPI for Pharmaceutical preparation manufacturing is included in NAICS industry sector 325 Chemical Manufacturing. The PPI for Pharmaceutical preparation manufacturing measures the average change in the net transaction prices that producers of pharmaceuticals and medicines receive for the sale of their products.

The PPI for Pharmacies and drug retailers is classified under NAICS industry subsector 456, Health and personal care retailers. The Pharmacies and drug retailers index track the average change in pharmacy and drug retailer margins (selling prices, less the acquisition price of products sold in pharmacies). For more information on margin indexes, please see Wholesale and retail Producer Price Indexes: margin prices.

Special PPI indexes for Pharmaceuticals for human use, prescription (SI07003), and Pharmaceuticals for human use, non-prescription (SI07006), provide aggregates of the changes in the selling prices of pharmaceuticals typically used as pharmaceutical inputs to services performed by many health care providers in the PPI for Health Care Services. For more information on these indexes, see The pharmaceutical industry: and overview of CPI, PPI, and IPP methodology.⁶

Historical Index Movement and Common Interpretations

Medicare reimbursement rates are typically adjusted around the beginning of the fiscal or calendar year. CMS publishes new Medicare rates for inpatient hospital services, routine home and inpatient hospice services, and skilled nursing facilities’ services effective in October and new rates for outpatient hospital services, physician and imaging services, clinical laboratory services, and home health services in January.⁷ CMS may issue updates to hospital reimbursement rates throughout the year, but most significant changes to Medicare indexes occur in these months. Medicare reimbursement rates to health care providers can also be affected by automatic federal spending reductions, known as budget sequestration.⁸ Medicaid reimbursement rates are set at the individual state level and at different points in the year, so index movements are less predictable and subject to state budgetary decisions.

Private insurance rates are negotiated between insurance companies and health care service providers. These negotiations can take several months to complete, and the effective dates can vary between companies. For this reason, insurance indexes tend to move throughout the year with less predictability. The All other payer indexes also tend to move throughout the year and often at a similar rate to private insurance.

For more information on PPI health care services indexes, contact John Lucier at Lucier.John@bls.gov, Christina Daniel at Daniel.Christina@bls.gov, or Michael Farquharson at Farquharson.Michael@bls.gov. Links to specific PPI factsheets related to healthcare, as well as other general PPI health care services resources are available below:

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¹National Health Expenditures Fact Sheet, Centers for Medicare and Medicaid Services (CMS), https://www.cms.gov/data-research/statistics-trends-and-reports/national-health-expenditure-data/nhe-fact-sheet.

²Chapter 5: Personal Consumption Expenditures (Personal Consumption Expenditures), Bureau of Economic Analysis, Table 5.B Summary of Methodology Used to Prepare Estimates of PCE for Services, https://www.bea.gov/resources/methodologies/nipa-handbook/pdf/chapter-05.pdf.

³Medicare is composed of Part A, Part B, Medicare Advantage (Part C), Prescription Drug (Part D), and Medigap health insurance plans. Part A is hospital insurance, and Part B is supplementary medical insurance. Medicare Advantage (Part C) plans are health insurance plans offered by private companies that contract with Medicare to provide Part A and Part B benefits.

⁴Quality Adjustment in the Producer Price Index (PPI), https://www.bls.gov/ppi/quality-adjustment/.

⁵A separate General medical and surgical hospitals by patient type (62211A) index is broken down only by payer type and can be found in Table 11 of the monthly PPI Detailed Report.

⁶For more details on the special indexes for pharmaceuticals, please refer to this article: https://www.bls.gov/ppi/notices/2010/ppi-enhances-the-indexes-for-prescription-and-non-prescription-pharmaceuticals.htm.

⁷CMS releases its own impact analysis estimates for the change in inpatient and outpatient payment rates to hospitals each fiscal and calendar year. CMS’s impact analysis considers the composition and the quantity of procedures performed, therefore CMS’s estimated payment change reflects both price and spending effects. Since the PPI tracks the prices of fixed individual transactions over time and is seeking to measure pure price change, CMS’s estimated change in payment rates may not match the change in the corresponding PPI Medicare hospitals index in the month that hospital inpatient and outpatient Medicare reimbursement rates change. Please see the following for more information on Medicare’s prospective payment systems (PPS) and fee schedules: Acute Inpatient PPS, https://www.cms.gov/Center/Provider-Type/Hospice-Center; Hospice Center, https://www.cms.gov/Center/Provider-Type/Hospice-Center; Skilled Nursing Facility PPS, https://www.cms.gov/medicare/medicare-fee-for-service-payment/snfpps; Physician Fee Schedule (includes rates for diagnostic imaging and pathological services), https://www.cms.gov/medicare/medicare-fee-for-service-payment/physicianfeesched; Hospital Outpatient PPS, https://www.cms.gov/medicare/medicare-fee-for-service-payment/hospitaloutpatientpps; Clinical laboratory Fee Schedule, https://www.cms.gov/medicare/medicare-fee-for-service-payment/clinicallabfeesched; Home Health PPS, https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HomeHealthPPS.

⁸For more details on sequestration, please refer to Medicare and Budget Sequestration from the Congressional Research Service, https://sgp.fas.org/crs/misc/R45106.pdf.,

Last Modified Date: June 21, 2023