Health care requires an endless amount of supplies, from latex gloves to medications. However, full inventories of these products rely on the success of other industries. If a supplier struggles to meet demand, health care may face a similar setback in patient care. However, when business is good, doctors will notice the savings. Recently, procurement prices on plastic-based materials have decreased, meaning medical facilities are taking advantage of the lower costs of supplies.
Why is plastic inexpensive?
The price of oil has plummeted in the past two months. As of August, the cost of crude oil has fallen 4 percent, a six-year low since March 2009, according to The Associated Press. Since June, there has been nearly a $20 price difference, from $61.43 to $43.08. This is the lowest it's been since 2009. Because consumer demand has fallen and drilling has continued, there is a surplus of crude oil, which has led to lower prices for both oil and the products that require the resource. While this isn't good for oil companies, it is beneficial to airlines, shippers and other businesses.
The plastic industry is one of those areas that enjoy the low costs of oil. Plastic is made by combining natural gas, crude oil, salt, coal and cellulose, the Association of Plastics Manufacturers in Europe explained. This mixture produces hydrocarbon gas liquids, which are then used to make the material. Because the cost of oil has decreased, the price of plastic has also gone down.
How does this benefit health care?
The health care sector uses plastic materials in various medical devices, including pacemakers, gloves, syringes, bed pans and catheters. It even uses the product in its cafeteria trays and utensils. With the amount of plastic medical facilities need, the costs add up. Luckily for them, low oil prices lead to more inexpensive plastic products, which means fewer costs for hospitals and doctors' offices, Healthcare Finance News reported.
These facilities have contracts with the suppliers who provide them with their plastic products.Because if the decreased oil prices, supply chain executives have started to renegotiate the price of the materials to reflect the low costs, the source explained. To take advantage of these prices, hospital administration needs to track the progress of the supply chain so they know how individual parts are faring.
"Certainly there are a number of facilities where decreases in oil prices and modification of market prices impact on plastics-based products don't really register as a blip," Anthony Long, principal of Pinnacle Healthcare Consulting, told Healthcare Finance News. "But those who are up to speed and who have more sophisticated systems in place or resources to draw on are reaching out with the drive-down in petroleum prices and ultimately plastics."
While oil prices don't directly affect the health care sector, they do have an impact on the companies that provide hospitals and practices with the products they need. By monitoring the rest of the supply chain, medical professionals can ensure they receive the best materials at the lowest prices.