Question-and-Answer Session
Operator
(Operator Instructions) Your first question comes from Whit Mayo - Stephens Inc.
Whit Mayo - Stephens Inc.
Can we go back to the pricing a little bit? Clearly a little bit stronger than I think we were looking for. And I hear that the MSDRGs has been a little bit more of a benefit than you had budgeted for. And typically we think of pricing being a little softer with the flu season, but your case mix was indeed up. So can you just go back and walk us through and help us understand a little bit more what drove the pricing in the quarter?
David Dill
Yes. From a commercial payer standpoint, Whit, our expectation is in the range of 6% to 8% from a pricing standpoint.
If you remember back to the fourth quarter, we pushed that up a little bit, our expectations, anyway, because we felt that we would see some softness on the Medicare in-patient side. So the range of 6% to 8% was a little more aggressive than what we'd seen in the past, not much, but a little bit more. And the good news is we're seeing in the midpoint of that range from a commercial side. So that was essentially in line.
Medicaid essentially in line. There was a little bit of a shift of volume between states that drove Medicaid pricing up a little bit. If you remember, we also closed down a couple of OB programs in the fourth quarter that helped us as well. But overall Medicaid and commercial essentially in line with what we expected.
Medicare, when you blend in-patient and out-patient together, we had all the expectations of the market basket increase that would affect the out-patient book of business that came into effect January 1, as we had expected. The real upside was driven from the MSDRG in-patient rates. We thought that we would lose most of that market basket increase. Early indications in the fourth quarter was it was getting a little bit better, but with the volume declines that we experienced in the fourth quarter, we were a little hesitant to bracket a number because of some unusual volume.
But now after six months and take the average of the two and look at it over the past six months, we feel very comfortable that about half of that market basket increase, we will see. It's showing up in cash collections. So Medicare pricing is up a little bit more than what we had anticipated.
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