Report On Business® Roundup: January Hospital PMI®

Following “the most typical December to be found,” as put by Nancy LeMaster, MBA, Chair of the Institute for Supply Management^® Hospital Business Survey Committee, January was less so, according to Hospital ISM^® Report On Business^® data released on Wednesday.

However, that wasn’t necessarily a bad thing. In a month that health-care facilities are usually strained by high levels of respiratory cases and must contend with insurance deductibles resetting and supply prices increasing, the Hospital PMI^® registered 61.5 percent, a decrease of just 1 percentage point compared to the previous month.

Of the four subindexes that directly factor into the composite index, three — Business Activity, New Orders and Supplier Deliveries — were above 60 percent, resulting in the second-highest PMI^® reading in January since the beginning of Hospital ISM^® Report On Business^® data collection in 2018. The only higher reading was in January 2022 (64.1 percent), in the wake of high COVID-19 cases due to the omicron variant surge.

ISM: hospital PMI shows fast expansion in Jan, only slightly slower than Dec, after a couple rocky months in '23; continued job growth reflects other survey data but increasing number of hospitals are planning staff reductions; climbing input costs continue eating into margins: pic.twitter.com/YlSxyQwbCz

— E.J. Antoni, Ph.D. (@RealEJAntoni) February 7, 2024

“There is typically a drop in volume in January,” LeMaster told a conference call of reporters. “But the volume was stronger this time. The mix was a little heavier on the respiratory side, but there was also a good mix of elective cases. Hopefully, it’s good momentum because February is usually a pretty soft month, and keeping up this level of volume will help hospitals. Also, there will likely be more supply chain disruptions.”

To be sure, the “level of frustration” LeMaster spoke of among hospital executives and supply managers at the start of 2024 continues. While Chicago-based health-care consultant Kaufman Hall’s operating margins index registered 2.3 percent at the end of last year, that was largely a product of facilities taking “necessary steps to adapt to this new environment,” one of the report’s authors said in a press release.

Margin pressures remain, and they were evident in the Hospital PMI^® data: The Prices, Prices: Pharmaceuticals and Prices: Supplies indexes were all above 60 percent. While facilities with contracts have some level of protection, companies and suppliers increasing prices is a new-year staple in health care.

Profit margins are especially challenging at rural hospitals, which often lack the negotiation power of larger facilities, don’t perform as much lucrative elective care and are more challenged to attract employees. Multiple respondent comments in January lamented the rural situation; one reported that two hospitals and 16 clinics would be closing.

“Some of those areas are still having trouble attracting the clinical talent,” LeMaster said. “And based on certain factors, they have had to do some right-sizing. Fortunately, it looks like staff was able to manage the volume.”

While COVID-19 and seasonal respiratory cases kept some facilities “hopping to treat patients,” as one Business Survey Committee respondent wrote, they evidently had the workforce to keep up: The Employment Index decreased 4 percentage points compared to December but remained in expansion.

Hospital #ISMPMI survey respondents: “Suppliers have more stock on hand, so there are fewer stockouts and back orders.” Also: “Manufacturer shortages from clipper blades to hand hygiene products to basic medical/surgical products.” https://t.co/xCjFF8N7cj #economy #healthcare

— Institute for Supply Management (@ism) February 7, 2024

The 7-percentage point increase in the Supplier Deliveries Index to above 60 percent and its highest reading since February 2022 (71 percent) reflected continuing disruptions in the Red Sea and the Panama Canal. The “atmospheric river” rainfall in California has raised fears of delays at West Coast ports, LeMaster said.

In other subindex news:

• The Inventories Index returned to contraction, where it spent the first 10 months of 2023, but that was largely due to planned reductions, LeMaster said. The Inventory Sentiment Index was close to 60 percent, so respondents generally felt their stock levels were too high.
• The Technology Spend Index increased 4 percentage points to 57 percent and has been in expansion territory for five straight months. “Hospitals seem to be continuing to invest strategically,” LeMaster said.
• The Touchless Orders Index barely remained in expansion at 50.5 percent, affirming supply chain sluggishness. Shortages and back orders continued with such products as needles and syringes and sterile water.

In case you missed the Report On Business^® Roundup on the release of the January 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 X, formerly known as Twitter.

(Photo credit: Getty Images/Gorodenkoff)