In 2008, hospitals faced a grim reality. The buyer base for non-profit hospital bonds dropped from $9 billion to less than $1 billion. Ratings declined and interest rates skyrocketed, making the cost of borrowing higher than it had been in nearly 20 years.

The situation was exacerbated when overall economic trends triggered layoffs to increase unemployment to 9.5 percent, a 26-year low, and losses of employer-based insurance that drove patients into strained Medicaid programs or into the ranks of the uninsured.

Coupled with the increase in bad debt and declining charitable contributions, many feared hospitals would curb spending, with the biggest declines coming in capital equipment expenditures, including facility and infrastructure. In fact, the American Hospital Association reported that 56 percent of hospitals would postpone facility projects, 45 percent would delay clinical technology or equipment purchases and 39 percent would delay spending on IT upgrades.

Seven months later, the capital purchases of more than 2,200 hospitals in the Premier healthcare alliance show that although there were dramatic declines in discreet areas, the overall economic outlook may be rosier than expected.

In particular, analysis of Premier data on contract spend and supplier data shows spending on IT infrastructure and digital image technology that could be used in an electronic health record increased by 2 percent in the first quarter compared to average spending in the third and fourth quarters of 2008.

The increase was likely spurred by the American Reinvestment and Recovery Act, which provides $36 billion in funds to incentivize the use of health information technology.

For clinical equipment and upgrades, again the picture was not completely sour. Specialty beds (up 10 percent), and OR lights and booms (up 13 percent) all saw upticks in spending.

In areas where there were drop offs, some categories experienced a less dramatic decline than was anticipated.OR integration systems saw gentle declines over prior quarters, falling just 6 percent, or 3 percent less than projected. Spending on HVAC systems also didn’t decline as dramatically as expected, falling 22 percent, 3 percent less than projected.

In the area of total building environment systems, spending dropped by 13 percent, a full 12 percent less than expected, perhaps in reaction to state and federal interest in encouraging use of renewable resources.

Capital spending areas that were hardest hit included more expensive and/or less clinically necessary items. In facilities, roofing installations that can cost close to $1 million or more saw the most dramatic spending declines in the first quarter (-51 percent). Also hard hit were the “nice to have” items like furniture (-23 percent) and TVs (-33 percent). Overall, categories hardest hit in the first quarter were imaging equipment, which decreased by 41 percent; OB data management, which dropped an average of 52 percent; and anesthesia equipment, which dropped 64 percent.

In looking at overall trends, it appears that critical clinical and inexpensive projects that were already approved by the hospital continued to move forward even in the most challenging times.

Moving forward, like the economy as a whole, which is experiencing modest improvement, it appears that the January-March 2009 timeframe may have been the “bottom” in terms of decreased hospital spending. There are already indications that the April-June 2009 quarter will show improvements in financial performance.

In fact, more than half of the capital spending categories that declined more dramatically than projections in January-March will show far less severe declines from April-June.

Although recovery is slow and hospitals continue to have some capital freezes in place, our numbers indicate that increases can be found.

Mike Alkire is president of Premier Purchasing Partners, a division of the Premier healthcare alliance.