Question-and-Answer Session
Operator
(Operator instructions) Your first question comes from the line of Darren Lehrich - Deutsche Bank.
Darren Lehrich - Deutsche Bank
I have a couple of questions here. I just wanted to dig a little bit deeper into the pricing number that you talked about, and we can see up a little over 4%, but I hear you rate that your case mix was up 1.1%, and if so, can you just flush out a little bit more for us where the pricing is coming from and what kind of rates are you seeing for your annual updates from commercial manage care payers.
Jeffrey L. Hinton
First of all, the single biggest component in the net revenue for adjusted admit increase is going to be charity care. As you recall, charity care goes above the line and it otherwise reduces your net revenue, so sequentially that improvement was $2.2 million. In terms of the managed care contract renewals that we are seeing, it is in the mid single digits, probably 5% to 7%, when they come up for renewal. A lot of the contracts are set for annual increases and those that have been preset will adjust at around 3% to 4%.
Darren Lehrich - Deutsche Bank
Where do you think your Medicare rates are coming out for the fiscal year?
Jeffrey L. Hinton
That would be around 2%.
Darren Lehrich - Deutsche Bank
I was wondering if you could just comment a little bit more with regard to your medical supply costs. I know you were trying to de-emphasize some research in one of your facilities, and I am just wondering if you were successful in accomplishing that, and maybe if you just talked a little bit more about the underlying trend itself?
Edwin French
Darren, the principal contributors to the supply costs this quarter were drug-eluting stents, up 17.7%, while bare metal was down 21.5% versus prior year and of the total being 51% versus 38% prior year, AICD is up 15% and pacer is 9%. These are all high cost items. Those are the major drivers for the supply costs. The other asset that we talked about where we have some research primarily are intraluminal grafts that portents an opportunity is something we are still working on and that has not been achieved yet. It is part of the transformation of Arizona Hospital, and that is where we do a lot of research, so we are working on that as a part of our improvement plan.
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