Report On Business® Roundup: June Hospital PMI™

By Dan Zeiger

In June, the Hospital ISM® Report On Business® indicated a continuing path to normalcy for many U.S. health-care facilities — patient volumes and case mixes were at pre-coronavirus (COVID-19) pandemic levels, and personal protective equipment (PPE) availability improved.

Perhaps most encouraging, the Employment Index returned to expansion territory, which was the primary driver for a 1.8-percentage point gain in the Hospital PMI, to 63.1 percent. However, the virus continues to cause uncertainty regarding inventories and lead times, and the powerful delta variant that has been described as “COVID-19 on steroids” has led to an uptick in cases in 24 states over the past week. We’ll discuss if and how the delta variant could impact future Hospital PMI data in a moment.

The June numbers reiterated that pandemic challenges have become more manageable, especially as cases have declined overall in the U.S., Nancy LeMaster, MBA, Chair of the Institute for Supply Management® Hospital Business Survey Committee, told a conference call of reporters on Thursday. That dynamic is most evident with supplier deliveries and inventories, LeMaster said: “Deliveries are slow, but they were predictably slow again. That allows some planning by supply chain executives, who can build that into their forecasts and ordering.”

The Inventories Index was in contraction territory for a fifth straight month, suggesting that hospitals are continuing to dip into pandemic stockpiles, in part to combat against higher prices. The Prices: Supplies Index rose in June to remain comfortably above 50 percent, and while Survey Committee respondents noted greater ease in PPE sourcing, sentiment on pricing was mixed. “Supply is much better, but prices not yet declining,” a respondent wrote.

While the Inventories Index stayed in contraction, the Inventory Sentiment Index declined but remained strongly in “too high” territory. “The big question on inventories right now: When will hospitals think they have to start building them back up?” LeMaster said.

ISM’s Manufacturing and Services Employment indexes were in contraction territory in June, but the Hospital report’s number jumped above 50 percent. While some Survey Committee respondents reported position-filling challenges, LeMaster said the June reading could be a sign of labor stabilization in a profession that experienced the most COVID-19 worker burnout. “With the prevalence of the vaccines, many (facilities) are seeing more people applying and coming back to work,” she said. “Hopefully, that remains a good indicator.”

The Days Payable Outstanding Index has been on a wild ride in recent months, dipping to 44 percent in March, elevating to 57 percent in April and returning to contraction territory in June, at 46.5 percent. LeMaster said that there are no benchmarks for days payable outstanding (DPO) — how fast hospitals pay suppliers — in the health-care sector, but she inquired with credit-rating agencies and found that the average is 60 to 65 days.

Last year, with the pandemic raging for much of it, average DPO was 99 days. “As 2021 moves on, there should be a focus in the (health-care) community on bringing that DPO number down,” LeMaster said. “In fact, there were a couple of (Survey Committee respondent) comments in the report about facilities actively working to bring that number down.”

The delta variant, which has caused a state of emergency in Japan and thrown preparations for the Tokyo Olympics into further disarray, remains an X-factor in the U.S. Case increases in America have been mostly in rural areas, where vaccination rates are typically lagging. In Springfield, Missouri, hospitals have dealt with a shortage of ventilators and put out calls for traveling nurses and respiratory specialists. And some health experts are warning that the variant could result in another case surge in the fall.

A significant increase in COVID-19 patients would figure to impact Business Activity, Employment, Inventories and Case Mix, among other indexes. “If trends get worse, volumes stay high but the mix gets bad, and elective surgeries would need to be postponed again,” LeMaster said. “That impacts revenue, so other indexes like Technology Spend and Days Payable Outstanding would go down. And a lot of pressure would be put on the Employment Index number again. So, we’re not out of the woods.”

In case you missed the Report On Business® Roundup on the release of the June Manufacturing PMI®you can read it here. The Roundup on the release of the June Services PMI® can be read here. For the most up-to-date content on the three indexes in the ISM® Report On Business® family, use #ISMPMI on Twitter.

About the Author

Dan Zeiger

About the Author

Dan Zeiger is Senior Copy Editor/Writer for Inside Supply Management® magazine, covering topics, trends and issues relating to supply chain management.