NEWS RELEASE
Novation Releases the July 2009 Budget Impact Projections Report
Study Provides Health Care Providers with Valuable Insights to Prepare for Eventual Economic Recovery
IRVING, TX; August 24, 2009 — Novation, the supply contracting company of VHA Inc., University HealthSystem Consortium (UHC) and Provista, LLC, has released its July 2009 Budget Impact Projections Report. The report, published each January and July, captures data from the U.S. Bureau of Labor Statistics’ Producer Price Index (PPI) and Consumer Price Index (CPI), suppliers and raw materials resources. Alliance members use the price projection information to assist in their supply-related budgeting processes and to more effectively manage supply costs.
At this time, the global markets are not expected to recover in late 2009 or early 2010, which may keep price increases minimal. However, many are expected to begin to rise as the global economy rebounds. Novation 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.
“Novation is committed to providing alliance members with innovative contracting solutions and competitive pricing that drive down supply costs as the economic situation starts to turn,” said Jody Hatcher, president of Novation. “The Budget Impact Projections Report is a valuable tool that contains information about key raw materials that are influencing prices as well as provides contract price projections on a product segment basis.”
Among the chief findings:
- Hospital services, including inpatient and outpatient services, all 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-month period. Imaging equipment has declined since July 2008, while laboratory instruments and equipment experienced modest price increases.
- The inflation rate of pharmaceuticals dropped slightly to 6.0 percent compared to 6.7 percent the previous year.
- Freight trucking and water transportation costs both dropped dramatically due to the recession and lower oil prices, but are expected to increase once the economy begins to recover.
Raw materials:
- 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, which is a 19.2 decrease over eight years. Estimates are that demand will drop to 11.0 million tons in 2009, a 14.7 percent decrease in just one year.
- Steel prices should rise in 2010 after their 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 to 4 percent in 2009.
Novation uses all available resources to create pioneering contracting services and approaches to drive down health care supply costs. The Budget Impact Projections Report is one example of cutting-edge reports Novation provides members to help manage their budgets. Other reports issued by Novation include, the Drug Price Forecast, which offers Novation’s best estimate of the change in the cost of pharmaceuticals likely to be purchased by acute care facilities and the National Economic Impact Report, which surveys economic trends and impact on hospitals.
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About Novation
Founded in 1998, Novation is the leading health care supply contracting company for more than 25,000 members of VHA Inc. and the University HealthSystem Consortium (UHC), two national health care alliances, and 5,500 members of Provista, LLC, representing 28,000 sites. Novation provides alliance members contract and price management and spend management services. Based in Irving, Texas, Novation develops and manages competitive contracts with more than 600 suppliers. VHA, UHC and Provista members used Novation contracts to purchased nearly $37.8 billion in 2009.
Media Contact
Kathryn Goldstein
Director, Public Relations
Novation
(972) 581-5529
kgoldste@novationco.com
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