In January and July each year, Novation publishes a Budget Impact Projections report for Novation products and services. The July 2009 edition of the Budget Impact Projections report includes Producer Price Index (PPI) and Consumer Price Index (CPI) data from the U.S. Bureau of Labor Statistics. A brief summary of key raw materials influencing prices also is provided.

Consumer Price Index and Producer Price Index Changes: The CPI and PPI are indexes that measure the average change over time in the prices of goods and services. The CPI measures price change from the purchaser’s perspective, while the PPI measures price change from the perspective of the seller. The CPI and PPI data have been incorporated into the Budget Impact Projections report to provide additional resources to member healthcare organizations for budgeting purposes.

Key Elements Influencing Prices: This section includes market details on the raw materials and resources that have an impact on supply chain costs. Raw materials covered include oil, gas, resins, latex, metals, paper, cotton and food.

Price Change Tables: These product category-specific tables summarize price change forecasts for the national market and Novation-specific contracts from January 2010 through December 2010.

Note that the Novation market price projections are forecasts, not predictions. Forecasts are point-in-time estimates of price changes and are subject to changes in market conditions. Facilities may obtain additional price benefits and/or price protection through tier pricing or commitment. With the volatility of commodity prices and the varying U.S. economy, prudent budget estimators may wish to consider an inflationary factor above individual contract estimates for the next fiscal year.

Consumer Price Index information comes from the CPI Detailed Report, which is published by the U.S. Department of Labor, Bureau of Labor Statistics. The Consumer Price Index is a measure of the average change over time in the prices paid by urban consumers for a market basket of consumer goods and services. The CPI figures provided should be used as an economic indicator and as a measure of inflation. Novation uses this publication to summarize price changes that occurred in the consumer market from the 12-month periods of July 2007 through June 2008 and July 2008 through June 2009.

The CPI for all urban consumers represents about 87 percent of the total U.S. population. It is based on the expenditures of almost all residents of urban or metropolitan areas, including professionals, the self-employed, the poor, the unemployed and retired persons as well as urban wage earners and clerical workers.

The U.S. Consumer Price Index – Urban decreased 1.4 percent in the most recent 12-month period compared to a high 5 percent increase in the previous 12-month period. However, the CPI-U has increased 0.9 percent in the last month and 1.4 percent over the past three months. Hospital services, including inpatient and outpatient services, all encountered increasing inflation, but at a lower rate compared to the previous year. All three fell around 6.5 percent to 7 percent. From July 2007 through June 2008, gasoline increased 33 percent, but has fallen 35 percent since July 2008.

Producer Price Index information comes from the PPI Detailed Report, which is published by the U.S. Department of Labor, Bureau of Labor Statistics. The PPI is an index that measures the average change over time in the selling prices received by domestic producers of goods and services. The PPI measures price change from the perspective of the seller. PPI data show price increases or decreases at various stages of processing and may serve as a barometer for price changes to come. For example, an increase in the cost of crude goods can translate into higher prices for intermediate (or component) materials and finished goods. Novation uses this publication to summarize price changes that occurred in the producer market from the 12-month periods of July 2007 through June 2008 and July 2008 through June 2009.