Hospital Purchasing in 2011
Chris Charland is the senior director of capital equipment at Novation. He spoke recently with Healthcare Finance News editor Richard Pizzi about healthcare supply chain management trends to expect in 2011.
What kind of impact did the recession have on supply chain in 2010?
Last year construction and capital was down significantly. The hardest hit area was imaging equipment, which was down 20 and 30 percent. That’s primarily due to the buy cycle – it takes a year to select and purchase a high dollar item. So in effect we’re experiencing a one-year lag in purchasing. But we do see that trend flattening out as we enter the New Year. The large imaging equipment manufacturers estimate a 5 percent growth in 2011. The medical device side has remained relatively flat, although orthopedic devices are still a growing market.
Where there any segments of the industry that weren’t hit as hard by the recession?
The market for movable capital equipment was relatively flat. It didn’t take the bit financial hit that imaging equipment did. Where hospitals had an opportunity to hold off on purchases, they would. An example of that would be in patient monitoring. That type of equipment is not revenue generating and can last up to 15 years. We’ve heard from a lot of our CFOs that equipment like that might not be replaced. CFOs have grown more focused on critical equipment that generates revenue, like a CT scanner or an MRI. We classified this market last year as being in a “deep freeze,” but this year we’re seeing a thaw.
Will the thaw in capital investment be across the board, or in certain categories more than others?
Based on the experience of our members, I’d say there was a significant amount of new construction that was put on hold in 2010, either “no build” or limited construction. This year there are several very large construction projects that are underway, primarily on the West coast. The West coast facilities will see construction increases because of the seismic retrofit requirements. Most hospitals that need to do retrofits are doing complete rebuilds. Stanford, UCSF, and San Francisco General are undergoing major expansions or doing complete rebuilds.
We’re also seeing some billion dollar-plus rebuilding projects beginning in Texas. As far as what types of hospitals are being built, we’re seeing growth in children’s hospitals and cancer centers. Those are two key segments where the growth is not just in physical facilities, but also in capital equipment purchasing.
What about spending trends in other regions of the country?