Hospitals continue to see capital expenditure budgets increase while financial and supply chain executives are placing a greater focus on healthcare information technology (HIT) and patient safety, according to a survey published in the Premier healthcare alliance’s March 2011 Economic Outlook analysis.
Seventy-two percent of survey respondents, the majority of which were chief financial officers, supply chain executives and pharmacy directors, indicated that capital budgets for 2011 remained flat or increased compared to 2010. Overall, 46 percent of respondents suggested an increase in spending, up from 42 percent in September 2010. Twenty-eight percent of respondents suggested a decrease in capital budget expenditures, down from 32 percent in September.
Survey results also suggest that the focus of financial and supply chain executives has extended beyond costs. When asked which areas will likely have the greatest impact on their organization's supply chain over the next year, more than 42 percent suggested HIT, patient safety and infection prevention initiatives, and comparative effectiveness research.
“The potential impact of health reform is causing healthcare executives who have traditionally focused on price points to now consider the impact of patient safety and technology on the supply chain,” said Premier Purchasing Partners President Mike Alkire.
When asked in which areas they expect to make the largest capital investments or expansions over the next 12 months, 34 percent chose HIT and telecommunications while 29 percent selected infrastructure, to include construction.
According to the March Economic Outlook, annual market inflation rates will increase on average between 1.5 percent and 5.6 percent across categories such as cardiovascular services, facilities, imaging and nursing.
According to the analysis, there have been dramatic upticks in pricing for raw materials that are foundational to many healthcare products, including oil (up 28 percent in the last 12 months) and cotton (up 138 percent in the last 12 months). The increases are largely due to political instability and increased demand for raw materials from emerging nations.
“This is the current reality of the globalization trend,” Alkire said. “When we source from all over the globe, we’re at the mercy of everything from foreign demand to economic development swings to weather trends, all of which we in the U.S. have almost no control over.”
The issue of globalization can also affect the quality of patient care. For example, today more than 90 percent of all nutritional supplements, face masks, exam gloves, enzymes and amino acids are manufactured overseas. Even basic items are produced outside the United States. For example, China manufactures two-thirds of the world’s aspirin and 70 percent of its penicillin, and is poised to become the sole supplier within a few years.
“In the case of a global pandemic, we are concerned that the U.S. would not get the amount of supplies needed to support our demand,” Alkire said. “But we need to question whether the healthcare industry is actually promoting this type of behavior. We continually see suppliers dictating demand, rather than the other way around, and we have done little to change this dynamic."
One solution to curb this trend is sourcing to specification, which involves working with clinicians, documenting the product attributes that are medically necessary, and then working with manufacturers to create a product that only includes those features. The goal is to inject rationality into the marketplace by making better, more informed purchasing decisions that put the product’s end-user in the driver’s seat, factor in the cost of safety, and carefully consider the need for a diverse network of supply alternatives.