Report On Business® Roundup: April Hospital PMI®

In recent months, those who crunch the Hospital ISM^® Report On Business^® numbers have done so with a critical, big-picture question in mind: In a post-coronavirus pandemic world, has there been a fundamental shift in Americans’ demand for health care?

Since data collection began in 2018, the Hospital PMI^® data has already documented a seasonal shift in peak demand from the summer months, when children are out of school, to the winter months, when insurance deductibles reset at the end of the year. Pharmacy clinics (though with mixed success), telemedicine and at-home care are growing alternatives. And the COVID-19 era might have recalibrated people’s gauges of when they need medical attention.

One month does not make a trend on demand, but the Report On Business^® figures for April were encouraging — faster business activity and new orders growth helped raise the Hospital PMI^® to 53.5 percent, a 1.2-percentage point increase that reversed three straight months of index declines.

ISM: hospital PMI in Apr picked up slightly; positive report overall but it showed employment contracting; this is just latest indicator showing cracks in the labor market spreading; given that healthcare has been disproportionate source of job growth, this is very worrisome: pic.twitter.com/upI406kHnI

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

“We continue to look for patient volumes changing after the pandemic,” Nancy LeMaster, MBA, Chair of the Institute for Supply Management^® Hospital Business Survey Committee, told a conference call of reporters. “It’s too soon to tell. Because we started in 2018, we don’t have a lot of data before COVID-19, but in 2019, the numbers were healthy.

“We’ll have to keep an eye on it, but what we’re hearing from providers is that they’re still optimistic that demand is there for (traditional) hospital services.”

The Business Activity Index was up 5 percentage points compared to March to move into strong expansion territory, and the New Orders Index remained in expansion with a 2.5-point increase. That uptick in demand might have been a product of the calendar, with Easter and spring break for many schools falling in March, LeMaster said.

“That might have shifted some volume to April,” LeMaster said, citing a former Missouri hospital system president who often called spring break “wellness week” because fewer people were in town to check in at a facility.

The Case Mix Index fell into contraction at 49 percent, down 2 percentage points compared to March. However, that is a lagging indicator since it is calculated upon patient discharge, so it is expected to rise in May to reflect the April boost in demand.

Increased patient traffic did not strain staffing resources, Hospital Business Survey Committee respondents indicated, despite the Employment Index dropping 4 percentage points to land in contraction territory. “There’s nothing in the market that suggests employment and hiring is going to get any easier,” LeMaster said. “The demographics are against us.”

The issues with hospital employment range from troubling to daunting. Burnout among clinical staff is still rampant, particularly among females. Recruitment efforts have yet to truly gain steam, and immigration-reform delays aren’t helping. And continuing concerns about profit margins have limited hospitals’ ability to fill nonclinical positions like IT and custodial staff.

“With hospitals trying to get their margins up, employment is the biggest cost and lever to try and pull back,” LeMaster said. “With volumes up, I wasn’t sure it would go into contraction again, but it’s one data point we’ll need to keep an eye on. I won’t be surprised if that index moves between 48 percent and 52 percent as various factors challenge recruiting and retaining clinical positions, while hospitals push nonclinical head count down as a mechanism to improve their margins.”

Hospital #ISMPMI survey respondents: “For medical supplies, there remain a few items that are hard to get delivered on time.” Also: “We are still experiencing delayed order deliveries and stockouts due to manufacturer challenges.” https://t.co/vIQ03cPrjc #economy #healthcare

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

In other subindex news:

• The Days Payable Outstanding Index increased 3 percentage points to 52.5 percent. Some facilities slowed payments to suppliers to preserve cash flow amid revenue challenges stemming from the February cyberattack on Change Healthcare, the UnitedHealth Group (UHG)-owned subsidiary that led to widespread outages of systems that handle billing and insurance claims.
• While the Prices Index increased notably in both ISM’s Manufacturing and Services reports in April, there was some relief in the hospital subsector. The Prices and Prices: Supplies indexes both decreased 11 percentage points but remained in expansion (or “increasing”) territory. The Prices: Pharmaceuticals Index matched its March reading, staying in mild expansion.
• The Inventories Index dropped 3.5 percentage points into contraction as facilities continued burning pandemic stocks and reducing safety-stock levels. The Inventory Sentiment Index, however, remained around 60 percent, comfortably in “too high” territory.

In case you missed the Report On Business^® Roundup on the release of the April Manufacturing PMI^®, you can read it here. The Roundup on the release of the Services PMI^® can be read here. Also, the Semiannual Economic Forecast for the manufacturing and services sectors will be released on May 15. 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/FangXiaNuo)