Report On Business® Roundup: February Hospital PMI®
The Hospital ISM® Report On Business® for February revealed a composite PMI® reading that increased 2.5 percentage points compared to the previous month, buoyed by strong growth in business activity and new orders, with prices moderating somewhat.
The conditions during the month — at least those to which the data provides a window — aren’t typically summarized this way: “I keep looking for a ray of sunshine, and there aren’t that many out there right now,” which is how Nancy LeMaster, MBA, Chair of the Institute for Supply Management® Hospital Business Survey Committee, put it during a conference call of reporters on Friday.
The Hospital PMI® registered 56 percent, boosted by heavy patient traffic thanks to respiratory cases as a delayed start to flu season was finally felt in many areas of the country. However, uncertainties from dynamics far beyond hospital walls, which were a focus of this space a month ago, only intensified in February.
More patient traffic and anxieties for #healthcare facilities: Respiratory cases fueled volumes amid concerns about #tariffs and federal cuts. Those details and more in the Hospital @ISM® Report On Business® for February; the PMI® was 56%. https://t.co/woVFdWixcI #ISMPMI #economy
— Dan Zeiger (@ZeigerDan) March 7, 2025
As was discussed after the release of the Services PMI® data on Wednesday, efforts by the Department of Government Efficiency (DOGE) to slash funding and head counts at such federal agencies as the U.S. Agency for International Development (USAID), National Institutes of Health (NIH) and Department of Veterans Affairs would be felt acutely in that sector. Perhaps no industry would be more impacted than Health Care & Social Assistance.
NIH research grants, for example, cover the “direct” costs of researchers’ salaries and laboratory supplies, as well as such “indirect” costs as use of a hospital or other facility. Those research funding cuts were blocked by a federal judge on Thursday, but LeMaster said that won’t ease anxieties. The specter of Medicare and Medicaid cuts also remains.
“So much is up in the air that it makes planning really difficult,” she said. “Hospitals are trying to go through scenarios, but when you have increases in supply costs thanks to tariffs and then potential cuts to multiple reimbursement services, you think about how you downsize.”
She continues, “If you aren’t bringing in as much revenue because those sources have been reduced or eliminated, it’s all about cutting costs.”
While President Donald Trump continues his whiplash on tariffs on products from Canada and Mexico, he hasn’t wavered on those from China. Pharmaceuticals are most at risk, LeMaster said, because a significant share still comes from overseas, with a single source.
“We know from COVID-19 of our vulnerabilities for masks gloves and gowns, and that hasn't really changed much,” she said. “Shortly after we started recovering from COVID, not all but several of the domestic manufacturers stopped producing those products, and everybody went back to focusing on lowest cost. So, we didn’t change our ways much.”
It would be easy to point to the Employment Index dropping 6.5 percentage points in February to land in contraction territory as the first casualty of the federal cuts. But LeMaster said it’s too soon to identify a cause.
The federal jobs report on Friday indicated 151,000 positions were added in the U.S. in February, short of expectations. According to the U.S. Bureau of Labor Statistics, 52,000 jobs were added in health care, in line with the average gain of 54,00 over the last 12 months. (Some of the jobs counted in the federal jobs report are outside the ambulatory, inpatient and nursing home-type facilities covered by the Hospital ISM® Report On Business®.)
“I’m sure things were somewhat challenging with the high patient volumes and the lower employment number,” LeMaster said. “It's too soon to say if that’s a trend related to concerns about tariffs and declines in reimbursement, or if it was just an anomaly of the month, relative to January.”
Hospital #ISMPMI survey respondent: “The last month brought multiple weather events. Some locations were closed or delayed opening. Norovirus and other viruses have resulted in busy emergency departments and urgent care facilities.” https://t.co/MYwlLdj6Ym #economy #healthcare
— Institute for Supply Management (@ism) March 7, 2025
In other February data:
- The Backlog of Orders Index (which measures patients, not products) increased 10.5 percentage points into strong expansion territory, another sign of robust demand.
- The prices indexes — Prices, Prices: Supplies and Prices: Pharmaceuticals — decreased a combined 13.5 percentage points in February, though all three remained in expansion (or “increasing”) territory.
- The Technology Spend Index went into contraction territory for the first time since August 2023, with a reading of 49 percent that is 8.5 percentage points lower than January’s figure. That could be a product of hospitals’ hesitancy to invest amid economic uncertainty.
- The Days Payable Outstanding Index continued its recent yo-yo session, moving between expansion and contraction for the fourth time in five months. In February, it increased 3 percentage points to 51 percent, indicating facilities are taking longer to pay suppliers.
In case you missed the Report On Business® Roundup on the release of the February Manufacturing PMI®, you can read it here. The Roundup on the release of the Services PMI® can be read here. For the most up-to-date content on the three indexes in the ISM® Report On Business® family, use #ISMPMI on X, formerly known as Twitter.
(Photo credit: Getty Images/Grandbrothers)