A report by healthcare group purchasing organization Novation says healthcare prices will likely rise in late 2009 or early 2010 as the global economy recovers from the recession.
Novation, the supply contracting company of VHA, Inc., the University HealthSystem Consortium and Provista, LLC, compiled its bi-annual Budget Impact Projections report at the end of the summer. It captures data from the U.S. Bureau of Labor Statistics' Producer Price Index and Consumer Price Index, suppliers and raw materials resources.
Healthcare organizations use price projection information to assist in supply-related budgeting processes and more effectively manage supply costs.
Novation officials say their contracts are expected to increase only 1.3 percent in 2010 – lower than overall market prices, which the report indicates will increase 2.8 percent.
Among the chief findings in the report:
- Hospital services, including inpatient and outpatient services, encountered increasing inflation, but at a lower rate compared to the previous year.
- Medical-surgical equipment and supplies saw modest increases during the past 12 months. Imaging equipment has declined since July 2008, while laboratory instruments and equipment experienced modest price increases.
- The inflation rate of pharmaceuticals dropped slightly to 6 percent, compared to 6.7 percent the previous year.
- Freight trucking and water transportation costs dropped dramatically due to the recession and lower oil prices, but are expected to increase once the economy begins to recover.
The report also addresses the impact of raw material costs on healthcare prices:
- After climbing for most of the year, crude oil hovered around $70 per barrel through most of the summer. Higher projected crude oil prices next year are expected to boost the average price of regular gasoline to $2.69 per gallon in 2010.
- Over the past 12 months, latex prices have decreased significantly by 45.6 percent and are 11.6 percent lower over the past three months as a result of their direct link to the price of crude oil and falling demand.
- Weak demand for resins should keep prices stable through the end of the year. Prices are 13.1 percent lower than 12 months ago.
- Demand for uncoated freesheet (copy paper) has declined from a record high in 2000 of 15.6 million tons to 12.6 million tons in 2008, a 19.2 percent decrease over eight years. Estimates are that demand will drop to 11 million tons in 2009, a 14.7 percent decrease in just one year.
- Steel prices should rise in 2010 after massive declines during the recession.
- Aluminum, nickel and copper prices are expected to level out and remain stable through the end of 2009 and early 2010 due to low demand.
- Cotton prices have increased 17 percent over the last three months, but are 15.2 percent lower than they were 12 months ago.
- Overall food prices may increase 3 percent to 4 percent in 2009.