Novation predicts 2.9 percent hike in supply chain costs in 2013

Based on information examined in its Budget Impact Projections report and the National Economic Impact Survey, supply contracting company Novation predicts supply chain costs will increase by 2.9 percent in 2013.

The Summer-Fall 2012 Budget Impact Projections report incorporates information from a number of resources, including Novation contract information and category experts, suppliers, raw material resources, the U.S. Producer Price Index (PPI) and the U.S. Consumer Price Index (CPI) to examine economic indicators such as the CPI and PPI, commodities, global exchange rates, labor costs and the state of the global economy.

[See also: GPOs evolve to meet new demands]

“The Budget Impact Projections report highlights many of the environmental factors driving the rising cost of supplies,” said Larry McComber, Novation’s senior vice president of strategic services. “Fluctuations in the global economy play a large role.” 

The National Economic Impact Survey is an annual survey of materials management executives and chief financial officers from VHA Inc. and UHC member hospitals across the country.

Key study findings include:

• When asked about their level of financial recovery following the economic downturn, the results were a slight improvement over last year’s results. This year, 37 percent of respondents indicate that they have experienced significant financial improvement. The highest percentage of respondents, at 42 percent, indicates their financial situation has worsened, while the rest indicate they have seen no change.   
• Because of the challenging economic environment, 88 percent of respondents foresee either a decrease in staffing or no change at all. Only 12 percent predict an increase in staffing. Of that 12 percent, the majority expects to see a staff increase in nursing.
• All of the respondents indicate that they foresee increases in all specialties of physician employment with family practice as the highest increase according to 95 percent of respondents.
• 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.
• In light of financial demands, respondents are focusing their efforts to reduce costs in specific areas: 80 percent of respondents are focusing on standardization, 77 percent on process improvement, and 69 percent indicate they are reducing costs through their commitment to their GPO.

One particular area where Novation expects to see increased spending is health IT.

[See also: Supply chain costs in the crosshairs]

“We are seeing indications that large expenditures could be on the rise… I’m specifically thinking of investments in IT infrastructure,” said McComber. “In our member survey, 58 percent of the respondents foresee an increase in IT infrastructure purchases over the next year at their facilities, while only 10 percent foresee a decrease.”
 
According to McComber, these reports indicate that hospitals are still facing serious challenges.

“Our Budget Impact Projections report forecasts an increase in overall national market prices for healthcare supplies of 2.9 percent in 2013. This increase, coupled with reduced reimbursements and new government regulations linking cost and quality, means that financial pressures continue to loom for America’s hospitals,” he said.  

McComber expects these challenges to continue “for the most part.”

“Reimbursement cuts and the impact of healthcare reform changes will be felt in the healthcare industry for the next several years,” he said. “We will all need to adapt and adjust the way we approach supply chain and think of healthcare in terms of linking cost with quality.”
 

[See also: Banner Health cuts $41.5M from the supply chain]