Money Back Opportunities for Louisiana Health Care Providers

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A recent Louisiana Supreme Court ruling may mean refunds for health care providers in Louisiana for many treatment items, e.g. gloves, masks, etc.

In April, the Louisiana Supreme Court denied writs that were sought as a result of a Louisiana First Circuit Court of Appeal ruling. This ruling addressed the Louisiana Department of Revenue's denial of a refund claim. The plaintiffs (Medical Diagnostic Services, Inc. and Baton Rouge General Medical Center) claimed refunds for taxes paid from January, 1991 through December, 1992.

As a result of this decision, hospitals are now entitled to a substantial tax refund for state sales and use taxes paid on various healthcare items which were actually exempt. In light of this ruling, providers should file for a refund on any open years for taxes paid on the exempt items. See our collection of the many items that were deemed exempt, including such items as latex and other disposable gloveslab coats,masks, and shoe covers.

To learn more about the ruling, visit this review.

 

Avian Flu Impact on the Price of Disposable Gloves

Between January 1, 2011 and March 2, 2011 there were 679 cases of Influenza A (H1N1) recorded in Malaysia. Three of the cases resulted in death. In addition to the cases reported by the Malaysian Ministry of Health, Egypt, Indonesia, Cambodia, South Korea, and Hong Kong have also reported new cases of the H5N1 virus (avian flu).

According to researchers at MIT, a newly discovered mutation of the H1N1 virus appears to allow easier transmission among humans. Although this does not guarantee that a pandemic will occur, it does make it a more likely threat.

When the H1N1 pandemic peaked back in 2009, there was a severe impact on disposable glove sales. Given that disposable gloves are the first line of defense against such attacks, 2009 saw world-wide sales increase by over 22 billion pieces (approximately an 18% increase year-over-year). Of that total, roughly half could be directly attributable to the H1N1 virus. The upward spike in orders caused a three to four month backlog from the glove manufacturers. With the backlog of glove orders came higher glove prices. Should there be a marked increase in A (H1N1) cases in the coming months, the probability is high of another surge in demand for disposable gloves.

The Wintering Period - What Is It and What Does It Mean for Latex Glove Sales?

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The wintering period may sound like the time of year that the snow birds, aka retirees from the northern United States, travel south for the winter months to escape the many inconveniences that snow can cause. The context referred to here does not relate to snow at all, but to the coldest months in places where rubber is grown. So what does the wintering period have to do with the price of latex gloves in the United States and the rest of the world?

The wintering period is an annual event that falls between February and May. During this period, which lasts approximately 4 to 6 weeks, the leaves of the rubber tree die and fall off, and new leaves are formed. Both the metabolism of the tree and latex production are substantially affected. Accordingly, rubber production is normally low during the rainy season. During the wintering period, rubber production shrinks 45 % to 60% from the peak.

These seasonal variations are important factors influencing the latex glove market. Latex glove distributors tend to restock inventories in anticipation of even higher latex prices during the wintering period. Typically, after the wintering period ends, there is a marked increase in the supply of latex.

There are, of course, many factors that affect supply and demand in the disposable latex glove market. Seasonality of the harvest, as mentioned above, is just one factor. Tsunamis, earthquakes, blight (notably the South American Leaf Blight), price speculation, pandemics, adverse weather/growing conditions, competition for farm land from other grains, etc. are exogenous factors that guide supply and demand and which ultimately determine disposable glove prices. The vast majority of natural rubber (NR) goes towards the production of tires and tire manufacturers tend to get the raw materials before glove manufacturers as there is limited supply. Therefore, it is hard to predict the price effect on latex gloves.

The three largest rubber producing countries are Thailand, Indonesia, and Malaysia, which account for roughly 72% of the world's NR exports. Generally speaking, the major areas affected by wintering lie in a tropical belt between 20 degrees N and 10 degrees S.

It mostly affects supply, but supply, in turn, impacts demand. Since the factories always seem to run at full capacity, any glitch causes suppliers to rush out and buy as much inventory as they can in order to avoid being stocked-out.

In summary, supply of NR decreases annually during the wintering period, so glove manufacturers try to account for this. But any unanticipated increase in demand will reduce inventory levels and will likely lead to price hikes in the end product, latex gloves.

Commodity Prices of Natural Rubber, Synthetic Rubber, and Vinyl

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Although inflation pressures ease as commodity prices retreat, they show signs of becoming a longer-term presence in China as Chinese workers and others in emerging markets win higher wages and become enthusiastic domestic consumers. For years, U.S. consumers purchased cheap imported goods—partly because the Chinese currency was kept undervalued. This led to large U.S. trade deficits.

Most economists agree the U.S. should consume fewer goods from abroad and ship out more American-made goods. The upward drift in the price of imported goods will make this happen.

Currencies play a key role in the price of commodities. Washington has long pushed China to let the Yuan appreciate and to encourage domestic consumption. The Yuan is up 28% against the dollar in six years. The weaker dollar helps U.S. exporters, but the stronger Yuan and higher costs within China from domestic demand press upward on the costs of goods for U.S. shoppers.

The U.S. decreased the number of oil barrels imported in April to 243 million (roughly 10%), due to increasing oil prices and weak U.S. demand. The quantity of oil imports has moved downward since 2005 with the expectation of this trend continuing. The high price of oil lowers oil consumption while also increasing oil production. These events will lead to fewer imports and lower fuel prices.

The Association of Natural Rubber Producing Countries forecasts 2011 global production of natural rubber to beat its initial estimate by 8%. Along with this increase in supply, natural rubber demand will subside due to auto production setbacks in Japan and decreased demand for automobiles in China. Further, China's fiscal tightening, which will likely continue along with most developing countries, will cause rubber prices to decline as the speculative demand for rubber subsides. There is also a strong possibility of further reserve ratio hikes in China, which hampers economic growth.

On the supply front, natural rubber trees were planted in large scale in both 2006 and 2007. Once planted, it takes approximately 6 to 7 years for rubber trees to begin producing sap. Supply is therefore inelastic in the short–term and will be limited until 2013. It is estimated that newly planted acreage of natural rubber trees totals in excess of 1 million hectares. According to the International Rubber Study Group (IRSG), global natural rubber output is expected to total 10.83 mm tons, (up approximately 5% year-over-year). Although helpful in the short-term, long-term supply will not increase markedly until 2013.

Impacting demand for natural rubber, in 2011 China's auto sales growth is expected to decline year-over-year. First, China cancelled the purchase tax preferential policy and the car subsidy program for rural areas. 70% of the global rubber supply is used for tire production. According to IRSG, although the total global production of tires is expected to increase year-over-year by 7.6% in 2011, it will be down from the 19.8% growth rate experienced in 2010.

Over the past several months, natural rubber prices have soared due to oil price hikes, the weakening U.S. dollar, and excess liquidity. Given that GDP growth is declining in Europe, Japan, China and the United States, the demand for natural rubber will continue to decline in the short run. Also, as the price of latex gloves increases, the substitution effect causes the demand for vinyl and synthetic gloves to increase.

According to the Malaysian Rubber Board, latex prices typically track crude oil prices. Given the current supply and demand environment for oil, crude oil market prices should be between $75 - 85 per barrel. Hence, based upon a moderation in crude oil prices and all of the above factors, we believe that latex prices will moderate or, in the worst case, remain flat for the balance of the year.

Nitrile butadiene rubber (NBR) now constitutes 68% of total synthetic rubber consumption worldwide. By comparison, in 2005 synthetic rubber consumption was 44%. As the demand for NBR has soared, a large percentage of this increase is attributed to the production of NBR (nitrile) gloves. Roughly 60% of the material used to make nitrile gloves is butadiene.

Although natural rubber gloves have been touted as the preferred choice for the medical industry due to better elasticity (which leads to a better fit), cheaper average selling prices, and a stronger demand profile, the demand for nitrile gloves has been rising. However, according to the Malaysian Rubber Export Promotion Council, exports of synthetic gloves to the U.S., the European Union, Japan, Canada, Australia, China and Brazil grew by 58% year-over-year in 2010, compared to a decline of 2.3% year-over-year for latex gloves. High latex prices have made nitrile gloves cheaper, and hence, more attractive. Nitrile glove production techniques have advanced, helping to close the quality gap with latex gloves. Next, there is the continuing concern of latex allergies, as well as the increased marketing efforts of glove resellers in the U.S. promoting nitrile gloves. Given that nitrile prices have historically been more stable than latex prices, glove manufacturers can better protect margins by controlling their inventory costs using NBR.

Supply issues are negatively impacting nitrile glove prices. Essentially, nitrile gloves are derivatives of oil. Raw material cost increases (notably oil), transportation and fuel surcharges have risen dramatically in the past six months. Given the increase in NBR demand, manufacturers have experienced raw material shortages. Japanese manufacturers were also impacted by the recent earthquakes in Japan. We see continuing nitrile glove price increases in the near term.

High oil prices negatively impact petroleum-based vinyl gloves. This year, vinyl costs rose nearly 25%. With the continuing high cost of oil and a shortage of synthetic materials, vinyl glove prices are up on average 10% to 15% a case. Disposable glove consumers have increased their overall demand for vinyl as latex and nitrile glove prices have continued to outpace vinyl glove prices. By trading down to vinyl, this substitution effect puts upward pressure on vinyl prices and will continue to do so in the near term.

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