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Report: Healthcare supply prices rising

Prices for products used by healthcare providers will rise 3.1 percent on the national market in the next six months, according to a new report by the healthcare supply contracting company Novation.

The Irving, Texas-based company released its August 2010 Budget Impact Projections report last week. Healthcare providers that are members of VHA, the University HealthSystem Consortium (UHC) and Provista use the report, issued twice a year, to more effectively manage supply costs.

Healthcare costs will rise to $2.5 trillion this year, consuming more than 17.6 percent of the national economy, the report predicts.

“Price management is essential, as healthcare organizations face reduced reimbursements and are looking to save even more on supplies so they don’t have make the difficult choice of cutting supplies or cutting staff,” said Jody Hatcher, president and CEO of Novation.

The report reveals that the cost of hospital services, including inpatient and outpatient services, rose 8.3 percent in the past 12-month period, while the cost of inpatient services increased 9.1 percent over the past year.

Supply costs for hospitals that increased over the past year included the cost of gasoline, which rose 3.8 percent, and the price of intermediate finished goods (less food and energy costs), which increased 5.4 percent.

Medical-surgical instrument costs rose 0.4 percent since July 2009, while freight trucking costs rose 2.1 percent after declining 8.4 percent over the previous 12-month period. Deep sea freight transportation costs increased by 16 percent from July 2009 to June 2010 after large price declines the year before.

All of these supply-related costs have a profound impact on hospital budgets.

There was some positive news: The report noted that imaging equipment prices have declined the past two years and the cost of surgical supplies remained relatively flat from July 2009 to June 2010.

Notable raw materials findings – which also impact hospital supply costs – include the steady rise of cotton prices since early 2009. Cotton jumped 44.6 percent over the last 12 months, although in early June cotton futures began dropping.

Because oil prices should remain steady, the report predicts the price of latex may continue to decline or remain steady. The steel market has also seen significant declines the past two months and price decreases are expected to continue during the next few months.

Food prices were down 0.9 percent over the past three months and up 1.6 percent over the past 12 months, while plastic resin prices have increased 3.3 percent over the past three months and risen 14.7 percent during the past 12-month period.

The Novation report features data from suppliers, raw materials resources, the U.S. Bureau of Labor Statistics’ Producer Price Index (PPI) and the Consumer Price Index (CPI).