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Economic Activity in the Hospital Sector Expands

In August 2025, the economic activity within the hospital sector showed promising signs of recovery. According to the latest report from the Institute for Supply Management (ISM), the Hospital Purchasing Managers' Index (PMI) registered a score of 51.3%, reflecting a slight increase from July's score of 51%. This marks the second consecutive month of growth in the sector, following a brief period of contraction.

The Hospital PMI serves as a critical indicator of economic dynamics specific to the health care subsector, providing insights on factors such as business activity, new orders, employment, and supplier deliveries. Notably, the Business Activity Index has remained in the growth zone for ten consecutive months, highlighting a sustained demand in the hospital sector, particularly for elective procedures that have seen renewed interest as healthcare systems adapt post-pandemic.

Nancy LeMaster, Chair of the ISM Hospital Business Survey Committee, emphasized in her report that the recent numbers are encouraging. She noted that the New Orders Index returned to an expansion phase, suggesting rising demand from hospitals for supplies and services. However, the Employment Index slipped back into contraction territory, indicating that job growth within hospitals may be stunted, potentially due to ongoing freezes and layoffs as hospitals prepare for changing reimbursement landscapes from Medicare and Medicaid.

Despite these concerns, the Supplier Deliveries Index showed signs of contraction, which typically indicates faster delivery times—a positive signal for hospital supply chains that have grappled with delays in recent years. The report mentioned that many supply executives are noticing fewer back orders and product substitutions, which can affect hospital operations.

A noteworthy part of the report was the Case Mix Index, which, although still indicating contraction at 49.5%, marked a marked improvement from the previous month's reading of 46%. This uplift could suggest that although some areas are under pressure, there is a steeper demand for diverse services within hospitals, as they cater to a broader array of patient needs.

Furthermore, the report indicated an increase in the Days Payable Outstanding Index to 54.5%, hinting that hospitals may be taking longer to settle supplier invoices, which could affect financial relationships within the healthcare supply chain. Additionally, the Technology Spend Index, now at 59%, reflects a growing investment in healthcare technology, underscoring the ongoing push for digital transformation in medical facilities.

Tariffs remain a key topic of concern among hospital executives, affecting both pricing structures and supply chain efficiency. As comments within the report indicate, there is rising unease regarding the impact of tariffs on healthcare operations, with manufacturers expressing anxieties about future price increases and their implications on service delivery.

Overall, the report paints a picture of a hospital sector in transition, grappling with headwinds while striving for improvement amid challenging economic conditions. Addressing these disruptions while sustaining upward trends in business activity remains critical for the hospitals as they navigate the complexities of the current healthcare landscape.

The ISM® Hospital PMI® Report, a collaborative effort with the Association for Health Care Resource & Materials Management (AHRMM), emphasizes the importance of accurate, updated data gathered from purchasing and supply executives across the nation. As hospitals confront the unpredictable economic fluctuations and policy changes, such reports become invaluable resources for strategic planning and operational adjustments.

For more insights and detailed analysis, stakeholders are encouraged to continually monitor forthcoming PMI reports to understand the evolving dynamics and trends within the healthcare sector.