August 2020 Hospital ISM Report On Business shows hospital growth

Sept. 10, 2020

Economic activity in the hospital subsector grew in August for the third consecutive month, say the nation’s hospital supply executives in the latest Hospital ISM Report On Business released by the  Institute for Supply Management (ISM).  

The report was issued by Nancy LeMaster, MBA, Chair of the Institute for Supply Management (ISM) Hospital Business Survey Committee. “The Hospital PMI” registered 63.8 percent, down 5.1 percentage points from the July reading of 68.9 percent. 

This was the third month of growth following two months of decline. Each of the subindexes (Business Activity, New Orders, Employment and Supplier Deliveries) that directly factor into the Hospital PMI continued to show growth, but at slower rates than in July. Survey Committee panelists’ comments indicated that the varying degrees of COVID-19 across the country are impacting levels of elective procedures performed, which affects overall growth and revenues. 

The Case Mix Index decreased to 54.5 percent, down 7 percentage points compared to the July reading of 61.5. The Case Mix Index change is consistent with slower growth in surgical cases. The Days Payable Outstanding Index was unchanged at 55 percent. The Technology Spend Index registered 53 percent, an increase of 3.5 percentage points from the July reading of 49.5 percent.  

Although the growth rate in August was slower than in July, there was no consensus among Survey Committee members as to the cause. Some attributed the slowdown, directly or indirectly, to the coronavirus (COVID-19) pandemic, while one respondent cited normal seasonal variation. 

However, participants agreed that sourcing and procuring personal protective equipment (PPE) remains a struggle. One respondent commented, ‘Medical supplies, particularly PPE, are still in short supply, with an unprecedented level of distributor allocations. My facility needs to purchase certain PPE outside of normal distribution channels, at higher-than-contract cost, to remain operational,’ ” says LeMaster.  

The four sub-indexes unique to the Hospital PMI include:

  1. Days Payable Outstanding: This index measures how fast hospitals are paying their bills.
  2. Technology Spend, which measures investment in such technologies as electronic health record (EHR) systems and MRI machines.
  3. Touchless Orders: This index gauges hospitals’ use of data standards and automation.
  4. Case Mix: The higher a hospital’s case mix, the sicker its patients, which means the facility will consume more supplies and perform more complex surgeries.

The Hospital PMI is designed for three layers of consumers including:

  1. supply chain practitioners and clinical leadership
  2. policymakers and investment professionals
  3. health care executives 

The information compiled in this report is for the month of August 2020. The data presented herein is obtained from a survey of hospital supply executives based on information they have collected within their respective organizations. 

The Hospital ISM Report On Business is based on data compiled from hospital purchasing and supply executives nationwide. Survey responses reflect the change, if any, in the current month compared to the previous month. For each of the indicators measured (Business Activity, New Orders, Employment, Supplier Deliveries, Inventories, Prices, Prices: Pharmaceuticals, Prices: Supplies, Backlog of Orders, New Export Orders, Imports, Inventory Sentiment, Case Mix, Days Payable Outstanding, Technology Spend, and Touchless Orders), this report shows the percentage reporting each response and the diffusion index. Responses represent raw data and are never changed.  

The Hospital PMI is a composite index computed from the following, equally weighted indexes: Business Activity, New Orders, Employment and Supplier Deliveries. Diffusion indexes have the properties of leading indicators and are convenient summary measures showing the prevailing direction of change and the scope of change. A Hospital PMI index reading above 50 percent indicates that the hospital sub-sector is generally expanding; below 50 percent indicates that it is generally declining. For the sub-indexes, except Supplier Deliveries, an index reading above 50 percent indicates that the sub-index is generally expanding; below 50 percent indicates that it is generally contracting. A Supplier Deliveries Index above 50 percent indicates slower deliveries and below 50 percent indicates faster deliveries.  

ISM has the release