Inflation rates for healthcare supplies to remain stable through 2010

Inflation rates for healthcare supplies should remain unchanged through 2010, according to the Premier healthcare alliance.

Premier released its semi-annual Economic Outlook and Inflation Estimates analysis on Thursday. The report offers estimates through 2010 and suggests annual market inflation rates will increase by zero to 15 percent across categories such as cardiovascular services, facilities, imaging and nursing.

The market price increases projected in the report are similar to the increases projected by Premier in a March 2009 report. Premier polled more than 500 of its contracted suppliers to obtain the current market inflation estimates.

Mike Alkire, president of Premier Purchasing Partners, said his organization's research indicates the economic recession continues to have a significant impact on hospital members. He said the Economic Outlook would aid hospitals in monitoring the forces that could drive price changes in the coming months.

"A majority of our hospitals are on a capital spend freeze, or at least a chill," he said. He added that hospitals need the data in the report to plan future expense levels.

Premier's analysis reveals that the industry may see pricing changes related to a number of factors.

For instance, fluctuating oil prices and distribution costs could drive price increases in medical materials such as bandages, syringes, vinyl gloves, catheters and medical film that contain synthetic rubber, plastics, resins and other oil-based materials.

"We are constantly keeping our eye on are products that are derivative of petroleum," Alkire said. "We have not seen substantial growth in pricing as of yet, however."

Still, Alkire noted that healthcare professionals could see an increase in all products containing rubber, such as gloves, airway tubes, stomach tubes, rubber sheeting, irrigating syringes and water bottles.

He also pointed to pharmaceuticals as an area of concern to hospitals. The Premier report notes that hospital pharmacy costs could decrease as generic versions of certain key drugs enter the market in the coming months.

"Our hospitals' pharmacy budgets have been pretty flat thus far," Alkire said. "We have about 50,000 non-acute facilities and a majority of those have seen flat growth in pharmaceuticals."

Other factors highlighted in the Economic Outlook and Inflation Estimates include:

• Isotope shortages – Premier says to expect continued price increases in this area, which has experienced double-digit increases over the past 18 months due to limited production capacity worldwide.
• New technology expenses – The report says products such as radio frequency identification-, or RFID-, enabled sponges and pacemakers with capabilities in place for home checkups will increase initial medical equipment expenses for hospitals, but will result in tremendous savings over the life of the products.

Alkire also said products related to pandemic disaster preparation, such as gloves, face masks and gowns, are in high demand as providers prepare for an influx of H1N1 influenza cases this fall.

"Some organizations are beginning to buy in advance of their normal supply needs for products like gloves and gowns," he said.

The good news for Premier members, Alkire said, is that existing contracts should increase only 0.83 percent in the next year – lower, the GPO says, than overall market increases, predicted to be 3 percent during the same timeframe.

Additional inflation estimates contained in the Premier analysis include clinical laboratory, food service, housekeeping, IT/telecommunications, pharmacy, support services, surgical services and women and children's.

Judson Boothe, marketing director at the Kimberly-Clark Corporation, said the inflation estimates underscore that the healthcare industry must focus on the "right product for the right task" to prevent misuse, overuse and, ultimately, unnecessary spending.

"As suppliers, we need to ensure our customers don't overbuy premium products when such use will not improve patient or caregiver outcomes," he said.