Report On Business® Roundup: May Hospital PMI®
The Hospital ISM® Report On Business® in May featured, for health-care executives and supply managers, perhaps the most encouraging findings in several months — patient volumes up, employment in expansion, technology spend and treatment innovations paying off.
What’s not to like, other than continuing growth in margin-eating prices, which has long been a fact of life for this subsector of the economy? Time will tell if conditions that translated to a Hospital PMI® reading of 58.4 percent in May were a matter of timing or the start of a trend.
Many #healthcare facilities in May boosted staff and resources while introducing new treatments, and patient traffic picked up — as did prices. Those details and more in the Hospital @ISM® Report On Business® for May; the PMI® was 58.4%. https://t.co/Uzt6Swuz6V #ISMPMI #economy
— Dan Zeiger (@ZeigerDan) June 7, 2024
“There was good volume and providers were able to process the demand, which was definitely helped by the Employment Index going back into the growing range,” Nancy LeMaster, MBA, Chair of the Institute for Supply Management® Hospital Business Survey Committee, told a conference call of reporters on Friday. “One of the panelists’ comments said their facility had a hit an all-time high for patients, but there was no mention of respiratory cases, indicating likely strong demand on the elective side.”
She added, “It’s consistent with patterns we’re seeing, with the first quarter of the year slow, and things start to pick up. If that strong volume continues, that will be a help to hospitals in terms of leveraging their expenses.”
The Business Activity and New Orders indexes increased a combined 11.5 percentage points in May to reside in robust expansion territory, and the Backlog of Orders Index (which for the Hospital index measures patients, not products) matched its April reading and remained in contraction, indicating facilities handled the traffic boost.
Health-care facilities continued hiring full-time clinical staff to replace more expensive “traveling” labor, and some patients scheduled procedures to take advantage of new technologies, particularly in the cardiovascular space. And some panelists’ comments mentioned physical-plant construction, a post-coronavirus pandemic first, LeMaster said.
“Of course, you don’t just suddenly decide to build clinics or expand staff,” she said, “but I do think that, as volumes have stabilized and then grown, that’s provided confidence. In some cases, it’s a technology cycle, with new products and treatments getting approval and starting to spread. Hopefully, the (resulting) volume is sustainable.”
The Technology Spend Index reached 60.5 percent, its highest level since November 2022; part of that is due to facilities’ response to not only the Change Healthcare cyberattack in February, but also a recent breach at Ascension, a St. Louis-based nonprofit network with 140 hospitals in 19 states.
Cybersecurity is perhaps the biggest reason the Days Payable Outstanding Index registered 57 percent in May, its highest level since August 2022. Facilities are taking their time to pay suppliers to preserve revenue and as claims and payments impacted by the Change Healthcare breach are resolved.
Hospital #ISMPMI survey respondents: “Holding payments. Preserving cash in light of the revenue impact of the Change #Healthcare cyberattack.” Also: “Back orders affect us at every turn. Now it’s syringes. How do you run a hospital without them?” https://t.co/yuc9R8YfGL #economy
— Institute for Supply Management (@ism) June 7, 2024
Finally, the sunny month for hospitals was not without clouds: After commodity inflation growth slowed in April, all three Hospital subindexes — Prices, Prices: Pharmaceuticals and Prices: Supplies — had healthy gains in May to land above 60 percent.
While Chicago-based health-care consultant Kaufman Hall reports that hospital margins have improved and stabilized, those gains being mitigated by elevated prices might be a “new normal.” According to Kaufman Hall, hospital expenses per calendar day increased 7 percent year over year in April, with costs for supplies up 16 percent and drugs 15 percent.
“Drug and supply spend is causing a significant challenge for hospitals,” LeMaster said. “The volume growth has been great because hospitals are very fixed-cost based, so higher volume helps in terms of increasing revenue and hanging on to those margins. But hospitals are really fighting headwinds with the costs.”
In case you missed the Report On Business® Roundup on the release of the May 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/Dusanpetrovic)