Expect hospital supply cost pressures to continue

Inflation rates for hospital services, including inpatient and outpatient services, reached roughly 8 percent in 2009--an increase of 2 percent compared to 2008, according to the January 2010 Budget Impact Projections Report by Novation, an Irving, Texas-based healthcare contracting supply company. That means hospitals should anticipate higher supply costs. "We expect overall market prices to increase 2.9 percent in late 2010 through the first half of 2011," says Novation. (By comparison, Novation projects that its own contract pricing will grow by only 1.2 percent in that same time period.) However, a recovery in the global markets could minimize projected increases.

Price increases in several key sectors were modest in 2009. The cost of medical-surgical instruments increased 1.1 percent in 2009, down from 1.6 percent in 2008, and the cost of surgical supplies rose 0.6 percent last year vs. 2.2 percent in 2008. In addition, laboratory instruments and equipment saw modest price increases in both 2008 and 2009. However, the cost of intermediate finished goods (less food) increased 3.2 percent last year. In addition, while freight trucking costs decreased 1.4 percent in 2009, the price of gasoline increased 55.2 percent in 2009, and transportation costs likely will increase if the economic recovery continues.

Pricing for raw materials that could impact hospital supply costs include the following:

  • Centrifugal latex: Prices rose 32.5 percent in the last three months and have increased every month since June 2009.
  • Plastic resin: Prices have increased 4.8 percent in the last 12 months.
  • Cotton: Prices are up 15.2 percent in the last three months and 33.4 percent over the last 12 months.
  • Aluminum, copper, nickel: Aluminum prices increased 18.9 percent, copper increased 12.7 percent and nickel declined 2.3 percent in the last three months.

Novation bases its projections on Producer Price Index and Consumer Price Index data from the U.S. Bureau of Labor Statistics, as well as market data for raw materials and resources.

To learn more about supply chain pressures:
- read the Healthcare Finance News article
- check out the Novation study

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