Hospitals face food price increase

by | Jun 25, 2013

Hospitals and healthcare organizations should brace for a 3 to 4 percent food price increase projected by both the USDA and the American Farm Bureau Federation.

Despite one of the worst droughts on record in the Midwest, food prices remained relatively flat last year. But the impacts of the drought will likely be felt this year since the transition of commodity prices into retail prices typically takes several months to occur.

According to the U.S. Department of Agriculture, prices rose for beef and veal, poultry, fruit and other foods in 2012. However, prices fell for pork, eggs, vegetables and nonalcoholic beverages. Prices remained unchanged for the most part in the remaining food categories.

“For this year, we expect food prices to rise by 3 to 4 percent, which is slightly higher than the average rate of inflation over the past 10 years,” said John Anderson, American Farm Bureau Federation’s deputy chief economist.

“Food is an
input into the delivery of hospital services, just like any other
supply,” said Adam Powell, PhD, president of consulting firm Provider+Payer Syndicate. “Rising food prices increase the cost of treating inpatients and have
the potential to reduce the profitability of hospitals.”

But Chris Mantel thinks any food price increase won’t catch foodservice operators by surprise. “Potential food price increases is not new news to hospital foodservice operators,” said Mantel, associate vice president, food and nutrition services at HealthTrust, a group purchasing organization.

“If a specific protein category experiences a price increase, alternate products with lower price points can be substituted,” he said. Mantel also said that hospitals would be more likely to adjust their product offerings rather than pass along any type of cost increases to patients and employees.

Amanda Hamilton, the director of sourcing operations at group purchasing organization, Novation, said it pays to be creative with choices when certain categories such as beef see spikes in price. “Beef is leading the way with the highest projected increase at about 6 percent, so instead of using prime cuts we’re suggesting making substitutions to alternative cuts or perhaps even cutting back portions around the beef area and using more vegetables instead.”

Hamilton said that hospital foodservice directors are accustomed to swings in prices and can make adjustments with ease. “Foodservice directors are kind of used to this already because the drought affected things like cherries and apples so they have had to make alternative decisions based upon what the market yields,” Hamilton said. “This is just another mountain they have to climb, but they’re up for the challenge.”

From: Healthcare Finance News