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Hospital supply-chain costs are expected to rise by a moderate 2.9 percent in 2013. However, nine out of 10 healthcare providers plan to freeze hiring or cut staff next year.
Irving-based group purchasing agency Novation this week recently released a pair of annual reports: the Budget Impact Projects Report and the National Economic Impact Survey. Novation represents more than 65,000 members of VHA Inc..
“Economic information and effective cost management are more important than ever to the health care organizations we serve,” said Pete Allen, Senior Vice President, Sourcing Operations, Novation. “Financial pressures continue to squeeze hospital budgets, and our survey indicates that the top concerns facing today’s health care facilities continue to be reimbursement cuts, impact of health care reform, and reduced operating margins.”
Larry McComber, Novation’s senior vice president of strategic services, said this year’s reports did not reflect significant changes in either supply cost or hiring trends.
“We’ve seen a bit of an improvement from the financial side. Most hospitals are operating close to the vest because of coming reimbursement reductions. Many are managing supply expenses aggressively and many have had workforce reductions,” he said.
McComber credited rising commodity prices—specifically oil—for supply cost increases. He also said the nationwide drought also had an impact.
The cost of food, facilities, business products and orthopedic equipment are expected to increase by about 5 percent, the study said.
Among the studies’ highlights:
- Asked about their level of financial recovery following the economic downturn, 37 percent of respondents said they experienced significant financial improvement. However, 42 percent said their financial situation has worsened.
- About 88 percent of respondents said they foresee either a decrease in staffing or no change at all. Only 12 percent predict an increase in staffing. Of that 12 percent, most expect to see a staff increase in nursing and other clinicians.
- All of the respondents indicated that they foresee increases in physician employment, and 95 percent said family practitioners would represent the largest increase.
- The opinions regarding facilities improvement and capital projects spending are relatively evenly split. Thirty-two percent of the respondents foresee an increase in facilities improvement and capital projects over the next year, while 29 percent expect a decrease and 39 percent do not anticipate any change. However, more than 58 percent of hospitals said they would be investing in IT infrastructure improvements to comply with new healthcare IT standards and converting medical records from paper to digital.
McComber said IT would be a cost driver in the coming years because of government mandates.
“You can’t accomplish within the span of a year. That (spending) will continue for the next few years,” he said.
Steve Jacob is editor of D Healthcare Daily and author of the new book Health Care in 2020: Where Uncertain Reform, Bad Habits, Too Few Doctors and Skyrocketing Costs Are Taking Us. He can be reached at steve.jacob@dmagazine.com.