Is pandemic pricing the new normal for ASCs?

Supply and labor shortages related to the COVID-19 pandemic forced ASCs to spend more on both in 2020 and 2021. But with the number of COVID-19 cases and hospitalizations waning, will supply and labor costs drop?

It's unlikely. The demand for personal protective equipment is still high as healthcare organizations stockpile in preparation for the next pandemic, and there is still a shortage of reliable U.S.-based manufacturing of supplies, according to the Medical Group Management Association, an organization with more than 60,000 practice administrator members. As of November 2021, 30 percent of medical practices were still having trouble securing supplies, and a box of nitrile exam gloves that cost $5 before the pandemic was priced at $23 a box.

The overall inflation rate, which hit 7.9 percent in February, is another reason costs are likely to remain high. The cost to produce and ship supplies and drugs has grown in the last two years and doesn't show signs of letting up. Medical practice leaders told MGMA that overall supply costs in some cases more than tripled last year, and regular vendors put them on allocation, forcing them to find more expensive vendors.

"MGMA members should expect price increases to be relatively stable across vendors within a category based upon raw material and shipping costs and local COVID-19 outbreaks. For example, most exam gloves are manufactured in Malaysia, and most wound care products and PPE are made in China's Wuhan province," MGMA told members in its "BestPrice" report.

Labor costs are not likely to decline either. The pandemic accelerated the nursing shortage and bumped wages up for nurses, and many surgery centers gave raises to their staffs to stay competitive. Even centers that were able retain staff without the double-digit wage increases that hospitals and travel nursing agencies provided will continue to face pressure as their employees see the price of household goods and necessities increase.

Gas prices in particular are on the rise, and ASC staff often don't have the option to work from home. Gas prices jumped nearly 50 percent last year, according to the Consumer Price Index, and climbed even higher after Russia invaded Ukraine this year. Food prices are also up 6.3 percent..

ASC owners looking for a reprieve in price pressures as COVID-19 cases dwindle will be disappointed. Many are now looking for new ways to get supplies and acquire talent that won't overburden their budgets. And some practices are strongly considering joining a larger organization or taking on private equity investment to ease the strain on their bottom lines.

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