Economic Activity in Hospital Subsector Grows in February Despite Drop in Some Metrics

Economic activity in the hospital subsector grew in February for the 21st consecutive month, according to the latest Hospital ISM Report on Business from the Institute for Supply Management.

“The Hospital PMI registered 56.9% in February, a 7.2-percentage point decrease from the January reading of 64.1%, indicating a 21st consecutive month of growth. The February reading is the lowest since January 2021 (55.8%) and ends a streak of 10 consecutive months above 60%,” Nancy LeMaster, MBA, chair of the ISM’s hospital business survey committee, said. “The Business Activity Index decreased in February compared to January. The New Orders Index fell into contraction territory for the first time since January 2021. The Employment Index expanded for the first time since June 2021. The Case Mix Index registered 55.5%, an increase of 0.5 percentage point compared to the January reading of 55%. The Days Payable Outstanding Index reading of 56% is up 8.5 percentage points compared to the figure of 47.5% reported in January. The Technology Spend Index registered 53.5%, a one-percentage point decrease from the January reading of 54.5%.

“Hospital business survey committee panelists attributed the significant decline in business activity and new orders to a variety of causes. Some indicated a reduction in COVID-19 cases, while others reported that a lack of staffing and blood shortages were causing them to close beds and put off elective procedures. Also, some panelists indicated declines in new orders were related to the annual reset of patient deductibles and co-pays. Although many cited a continuing struggle to recruit and retain staff, some comments indicated that incentive programs and workers’ growing willingness to enter or return to a hospital environment resulted in improved staffing levels.

“Supply shortages, product substitutions and slow deliveries continued to be major issues for supply chain professionals. The outlook for near-term improvement was pessimistic. Many comments echoed the sentiment expressed by a panelist who wrote, ‘Back orders are horrendous. Half of my orders are back-ordered. We get a few responses from our sales representatives — and when you do get a response, it’s that they can’t help you.’ Respondents also mentioned that days payable outstanding was increasing due to an inability to complete a three-way match of invoices, orders and receipts.”

Hospital PMI History