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Hospital Budgets React to Perfect Storm Created by Global Markets

Karen Minich-Pourshadi, for HealthLeaders Media, March 14, 2011

Nothing catches the attention of a finance editor like seeing the grocery bill go up by 20%. That's what happened to me last week when I was purchasing my usual salad fixings. Posted above the romaine lettuce was a sign explaining that due to extreme weather in various countries, crops have been killed and some grocery items are in short supply (which means you'll pay dearly for the ones produce suppliers  can get for you).

The price increase did give me pause: "Should I buy the lettuce or skip it this week?" I decided it was a necessity and purchased it anyway. However, my trip to the local market got me thinking of the global one and how some recent world events (such as strange weather, major earthquakes, and governmental unrest) may be adding costs to hospital and health system budgets.

So, I decided to check in with a financial leader in America's heartland. Adam Paul is CFO and vice president of fiscal services at Catholic Health Initiatives' St. Mary's Healthcare Center. With annual net revenues of $50 million, this 60-bed acute-care hospital is the sole community hospital in Pierre, SD.

Paul, who has been in healthcare finance for nearly 18 years and has spent the last four with CHI, says he is paying attention to the global economy, but so far he hasn't felt the full effect of the inflated prices—something he attributes to being part of a larger health system with a centralized supply chain.

"We only spend $700,000 [annually] on food, so even when we have inflation with food prices, it represents a small enough portion of our budget that the changes aren't enough to keep me up at night. However the oil and energy costs can definitely have a bigger impact on our bottom line," he says.

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