Report On Business® Roundup: July Hospital PMI®

If the U.S. hospital subsector were its own patient in July, its chart — the Hospital ISM^® Report On Business^® — would likely read as stable. What that means, however, depends on which health-care executive or supply chain practitioner you ask.

“If I had to pick one word from the data, it would be ‘mixed,’ ” Nancy LeMaster, MBA, Chair of the Institute for Supply Management^® Hospital Business Survey Committee, told a conference call of reporters on Friday, minutes after the Hospital PMI^® figure of 54.9 percent was released. “In almost every index, there were pros and cons.”

Among the mixed results:

• Each of the four subindexes (Business Activity, New Orders, Employment and Supplier Deliveries) that directly factor into the PMI^® were at 50 or above, but the composite number was down 3.1 percentage points from June.
• Business Survey Committee respondents noted that COVID-19 cases increased in many areas, but elective care typically was not impacted.
• The Supplier Deliveries Index decreased to below 60 percent, signaling slightly faster delivery times. However, with lead times still longer than before the pandemic, facilities must be mindful of expiration dates on personal protective equipment (PPE) and other supplies.
• The Technology Spend (53 percent) and Touchless Orders (51.5 percent) were in expansion, indicating an ability to invest capital and more order-placement ease. However, facilities too longer to pay their bills in July, as the Days Payable Outstanding Index increased 7.5 percentage points, to 57 percent.
• The Employment Index stayed out of contraction, and the federal jobs report on Friday significantly exceeded expectations. However, Hospital PMI^® survey respondents commented on their continuing inability to keep up with employee turnover, particularly among such nonclinical personnel as inventory management and accounts payable.

Add it all up, and “you could characterize the overall picture as good news and bad news: There was growth, but it was slower,” LeMaster said. “As you look through all the data and comments, you would like to think that there is one issue or situation that is causing the fluctuation, but that’s not happening here. I think there are multiple issues at play.”

Employment, as has been indicated in ISM’s Manufacturing and Services reports, is a fulcrum — and that is especially true in health care. The U.S. Bureau of Labor Statistics (BLS) reported a health-care employment increase of 70,000 in July, including gains of 13,000 jobs in hospitals, 47,000 in ambulatory services and 9,000 in nursing and residential care facilities.

However, the BLS noted that health-care employment remains 78,000 jobs below the pre-pandemic level, one of the largest deficits among business sectors. The Days Payable Outstanding Index increase was due in part to accounts payable labor shortages, and some survey respondents noted delays in delays in moving supplies from receiving docks.

LeMaster said a pandemic-long reality has been facilities reducing nonclinical jobs to devote more resources to patient care, and — amid continuing elevated prices and lower profit margins — her concerns have been heightened: “I fear it could get worse,” she said. “Hospitals don’t have an easy mechanism to pass along price increases because they’re paid fixed amounts from Medicare and Medicaid or have managed care contracts, so they have to look for ways to reduce costs.

“Unfortunately, one of the first things that happens is they start looking at all the nonclinical labor. They’re going to be much slower to fill those positions in comparison to patient staff,” which is understandable, she added, but still impacts overall facility performance.

An additional mixed data result: The Prices Index remained north of 70 percent but decreased 5.5-percentage points. (In July, all three ISM^® Report On Business^® Prices Index readings were down significantly, with a combined 31.8-percentage point decrease, fueling sentiment that inflation might finally be peaking.)

“It’s a glimmer of hope,” LeMaster said, noting a double-digit increase in the Prices: Pharmaceuticals Index, which has been in increasing territory for all 52 months of Hospital ISM^® Report On Business^® data collection.

In case you missed the Report On Business^® Roundup on the release of the July Manufacturing PMI^®, you can read it here. The Roundup on the release of the 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.