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Economic Growth in the Hospital Sector: April 2025 Overview

The latest Hospital ISM® Report On Business®, released on May 7, 2025, reveals a significant growth trend in the U.S. hospital subsector, marking the 20th consecutive month of economic expansion. Hospital supply executives indicate a optimism regarding operational activities following a challenging previous four-month period during which two months saw contractions. This consistent growth is particularly notable given that there were previous 35 months of expansion before the recent slump.

The Hospital PMI® (Purchasing Managers' Index) for April recorded a robust 55 percent, up 4 points from March's reading of 51 percent. This marks the sixth month that the Business Activity Index has remained in expansion territory — a positive sign for healthcare providers nationwide.

Key Indicators and Trends

Several indices within the report highlighted encouraging trends:

• - Business Activity Index: This index has remained in expansion territory for six consecutive months, reflecting sustained operational growth.
• - New Orders Index: Also demonstrating expansion for the sixth month in a row, indicating that hospitals are experiencing increased demand for services.
• - Employment Index: After two months of contraction, the Employment Index returned to a growth position in April.
• - Supplier Deliveries Index: This also returned to expansion, suggesting that while delivery performance has slowed, it has positively impacted inventory management.

Conversely, the Case Mix Index showed a contraction, registering at 49.5 percent, which indicates decreased complexity in patient cases. Additionally, the Days Payable Outstanding Index remained below the neutral 50 percent mark, suggesting challenges in managing payable days from suppliers, albeit with a slight improvement.

Insights From Healthcare Executives

Nancy LeMaster, Chair of the ISM® Hospital Business Survey Committee, commented on the mixed experiences reported by survey participants. Some executives noted an uptick in elective surgical cases across certain systems which contributed to reduced inventory levels, supplementing efforts to decrease stock. In contrast, others reported rising patient volumes attributed to seasonal illnesses, necessitating adjustments in staffing and resources.

Concerns have also been raised regarding potential tariff impacts entering the second quarter of 2025. Executives anticipate that the costs of IT-related materials may surge, thereby stressing the need for careful financial planning, as many hospitals lack the flexibility to increase prices to safeguard profit margins. To navigate these price pressures, some organizations have opted to purchase bulk supplies ahead of anticipated tariff price hikes, while others have explored shifting substantial procurement efforts toward U.S. manufacturers.

These strategic pivots underscore the challenges providers face in maintaining compliance with both operational demands and economic fluctuations. Additionally, many executives highlight the difficulty in sourcing critical items from distributors, frequently leading to substitutions and other operational hurdles that complicate supply chain management.

Historical Context

Historically, the Hospital PMI® has shown resilience, with the index ranging from a low of 51.0 to a high of 58.6 within the past year. This historical context frames the current situation within a broader narrative of recovery and adaptation in the healthcare supply chain.

Gathering insights directly from those at the operational front, the ISM® emphasis on the voices of hospital supply executives illustrates the ever-evolving landscape of healthcare delivery in the United States. As hospitals continue to navigate these complexities, the ongoing monitoring of the Hospital PMI® could prove indispensable in guiding decisions and anticipating shifts in healthcare delivery.