A recent report projects the top supply cost and contract costs healthcare providers are expected to face this year.
The report, prepared by VHA Inc., University HealthSystem Consortium (UHC), Provista, LLC, and Novation (Budget Impact Projections Report, January 2009), is designed to give healthcare providers information to more effectively manage supply costs. The report is based on data from a number of resources, including the companies that prepared the report, suppliers, raw materials profiders, the U.S. Bureau of Labor Statistics’ Producer Price Index, and the Consumer Price Index.
Following are key report findings:
- Hospital services, including inpatient and outpatient services, all encountered increasing inflation in 2008, but at a much lower rate compared with the previous year. Costs in all three areas fell around 5 percent.
- The inflation rate of pharmaceuticals rose 7.7 percent in 2008, compared with 4.2 percent the previous year.
- Water transportation costs increased 18.9 percent in the past year.
- Paper products increased significantly in 2008 compared with previous years, while plastic products saw an inflation rate of only 1.6 percent.
In the area of raw materials, the data show:
- Overall food prices may increase 3.5 percent to 4.5 percent in 2009 and early 2010.
- Oil consumption will continue to decline in 2009. Gasoline prices are projected to average $1.87 per gallon in 2009 and $2.18 per gallon in 2010.
- Latex prices decreased 33 percent in 2008 and are 18 percent lower than prices three years ago.
- Prices for plastic resins decreased 17 percent in the last quarter of 2008 and were 5.6 percent lower than prices one year earlier.
- Steel prices continue to drop, due to falling oil prices and low demand due to the weak economy.
- Nickel, aluminum, and copper prices decreased more than 40 percent in 2008.