Report On Business® Roundup: October Hospital PMI®
More so than its Manufacturing and Services counterparts, the Hospital ISM® Report On Business® in October was impacted by the recent back-to-back hurricanes hitting the Southeast region of the country.
That’s no surprise, considering the segment of the economy the Hospital PMI® gauges. “If one word could be applied to the data, it was ‘weather,’ ” Nancy LeMaster, MBA, Chair of the Institute for Supply Management® Hospital Business Survey Committee, told a conference call of reporters on Thursday.
In late September, Hurricane Helene slammed into the Southeast U.S., causing a plant shutdown for a critical supplier of IV fluids. In early October, Hurricane Milton walloped Florida. The impact went beyond supply chains; many treatments were cancelled as patients evacuated from the storms’ paths or were unable to navigate to a health-care facility in the aftermath.
Hospital #ISMPMI survey respondent: “(S)tarting to experience (IV solutions) shortages. … Plus, the port workers’ strike impacts shipments of materials that our (U.S.) labs use to manufacture medicine and medical supplies.” https://t.co/ZVGceA04na #economy #healthcare
— Dan Zeiger (@ZeigerDan) November 7, 2024
The result: A Hospital PMI® reading of 51.9 percent in October, buoyed by the Supplier Deliveries Index registering above 60 percent (more on that later). The other three subindexes that directly factor into the composite figure — Business Activity, New Orders and Employment — tumbled a combined 22 percentage points, all landing in contraction territory.
While the Baxter International IV solutions plant in North Carolina has resumed limited production and the U.S. government is expediting importation of fluids, among other measures, shortages continue. LeMaster said some facilities had safety stock on hand, but IV solutions supplies have become more strained because of their increasing use during surgeries.
“As surgical procedures have moved toward laparoscopic and robot-assisted, IV fluid is used to drain or rinse the area so it can be visualized by the camera,” she said. “Some facilities learned lessons from the (coronavirus) pandemic and had extra inventory available, but a lot of hospitals had to cancel elective procedures.”
The plant shutdowns and disruptions elevated the Supplier Deliveries Index 9.5 percentage points and likely kept the PMI® in expansion territory. As the only ISM® Report On Business® index that is inversed, a Supplier Deliveries reading of above 50 percent indicates longer lead times, which is typical as the economy improves and demand increases. However, the October reading was not a product of demand, but rather storm disruptions.
It's likely the Business Activity, New Orders and Employment indexes will rebound (and perhaps be artificially inflated) in November as cancelled treatments are rescheduled and performed. That would be an especially positive development for the Employment Index, which dipped 8.5 percentage points in October.
“It’s something we’re going to have to watch,” LeMaster said. “There were few comments about employment from panelists, though we’ve periodically had comments about budget constraints and a slowdown in hiring among nonclinical staff. I think it probably was tied to the hurricanes. If you’re staffing to patient volume and your volume goes down because people can’t get in, that will impact your head count.”
.@ISM’s Nancy LeMaster: “Two hurricanes … reminded everyone of the fragility of the #healthcare supply chain. (IV solutions plants were damaged), supply deliveries interrupted, and there were widespread elective procedure cancellations.” https://t.co/wypyN7PSoZ #ISMPMI #economy
— Institute for Supply Management (@ism) November 7, 2024
The Prices: Pharmaceuticals Index made history in October, dropping 7.5 percentage points to land in contraction territory for the first time since Hospital ISM® Report On Business® data collection began in April 2018.
The index’s previous lowest reading was 52 percent in October 2023, and it fell to 52.5 percent in March and April of this year, so prices were trending down, LeMaster said. “But I’ve not seen comments or heard from anyone about a systemic change in pharmaceuticals pricing,” she said.
The Technology Spend Index expanded for a 14th straight month with a reading of 61 percent in October as the IT spending trend continued; LeMaster added that facilities seem to be investing more in outpatient- and remote-treatment infrastructure.
Finally, the U.S. presidential election result this week reignited concerns over increased tariffs on health-care supplies and Medicare and Medicaid cuts. While Donald Trump vowed not to touch Medicare during the campaign, each of his budget proposals during his previous term included cuts.
“You look at the federal budgeting process and how big of a slice Medicare is, and you know that’s always going to potentially be on the table,” LeMaster said. “In general, hospitals realize the importance of reducing costs and the cost of care because they’re not sustainable.”
In case you missed the Report On Business® Roundup on the release of the October 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/Bevan Goldswain)