This article was written by our expert who is surveying the industry and constantly updating the business plan for a retirement home.
Medical supply costs are a crucial, recurring expense for any retirement home, and they directly affect margins and care quality.
Below you’ll find precise, current benchmarks (October 2025), practical purchasing tactics, and clear projections to help you budget and negotiate with confidence.
If you want to dig deeper and learn more, you can download our business plan for a retirement home. Also, before launching, get all the profit, revenue, and cost breakdowns you need for complete clarity with our retirement home financial forecast.
The numbers below summarize what a new retirement home operator should expect to spend, save, and negotiate around medical supplies in 2025.
Use the table as a checklist to set monthly budgets, purchasing policies, and compliance stock levels before opening.
| Topic | Key 2025 Benchmark or Practice | What to Budget/Do |
|---|---|---|
| Average monthly cost per resident | Typical range of $150–$350 USD depending on acuity, size, and location | Model base case at $250/resident; stress-test at $325 |
| Biggest budget shares | Incontinence 30–35%; Pharmaceuticals 25–30%; Mobility aids 15–20%; Wound & hygiene 10–15%; First aid 8–10% | Track each as a separate GL subaccount with monthly variance |
| GPO impact | 8–20% savings vs. spot-buy; better fill rates during disruptions | Join a senior-living GPO before first purchase order |
| Recent price pressure | 4–10% increases on select pharmaceuticals, diabetic supplies, syringes, gloves (tariff and demand driven) | Lock 12–24-month pricing on volatile SKUs |
| Consumable usage | Incontinence: 60–80 units/month/resident; PPE: 150–300 units; routine wound & skincare ongoing | Maintain 30–45 days on-hand for A-items |
| Generic vs. brand | Generics are typically 30–60% cheaper with comparable quality for standard consumables | Default to generics; set exceptions list for clinical needs |
| Coverage mix | Insurance/government typically cover 60–75%; facility pays 25–40% | Verify per-resident plan coverage before admission |
| Compliance stock | Minimums for high-risk items; audited documentation; emergency preparedness stock | Keep policy & logs aligned with state and accreditation standards |
| Annual cost trend | Average increases 4–8% since 2022; similar outlook next 3 years | Inflate your supply budget 6% in forecasts |
| Common suppliers | Medline, McKesson, Cardinal Health; 1–3 year agreements | Negotiate rebates, fixed-price riders, and service-level guarantees |
| Inventory discipline | Real-time tracking, cycle counts, PAR levels, ABC analysis, and central purchasing | Target shrink/waste <2% of monthly supply spend |
| Benchmarking | Costs vary by region and acuity; urban centers trend higher | Quarterly benchmark vs. peers to find 5–10% savings |
What is the average monthly medical supply cost per resident?
Expect $150–$350 per resident per month in a typical retirement home.
Most operators land near $250 when acuity is moderate and purchasing is structured; higher-acuity wings and urban regions skew toward $300–$325. Medical supplies usually represent 10–15% of total operating expenses in senior living settings.
Set your base budget at $250/resident/month, then add a 10–20% contingency for case-mix shifts and seasonal spikes.
Track this KPI monthly and tie variance to usage (units per resident day) rather than price only.
You’ll find detailed market assumptions and calculators in our retirement home business plan, updated quarterly.
Which supply categories take the largest share of the budget?
In most retirement homes, five categories drive the majority of spend.
Incontinence items lead at roughly one-third of budget, followed by pharmaceuticals, mobility aids, wound & hygiene, and first-aid/emergency kits. Treat each as its own cost center for better control.
| Category | Typical Share of Monthly Spend | Operator Note |
|---|---|---|
| Incontinence (diapers, pads, creams) | 30–35% | Set PAR levels; watch per-resident usage drift |
| Pharmaceuticals (routine & OTC) | 25–30% | Audit formulary quarterly; generics first |
| Mobility aids (DME, rentals) | 15–20% | Use rental vs. buy TCO analysis |
| Wound care & hygiene consumables | 10–15% | Standardize SKUs to reduce waste |
| First-aid/emergency kits | 8–10% | Rotate stock for expiries; document |
| Diagnostics (strips, lancets, BP cuffs) | 5–8% | Bundle under GPO contracts |
| PPE (gloves, masks) | 3–6% | Buy by case; watch tariff pass-through |
How do bulk purchasing and GPOs change pricing and supply stability?
Joining a healthcare GPO typically cuts 8–20% off comparable spot pricing.
Beyond price, you gain priority allocation during shortages, standardized SKUs, rebate programs, and simpler vendor management. These benefits reduce administrative time and variance in per-resident cost.
Enroll before your first large order so baseline contracts cover A-items (incontinence, PPE, wound care, diabetic supplies).
Negotiate service-level agreements for delivery windows and back-order substitution rules.
This is one of the strategies explained in our retirement home business plan.
What recent price increases matter most in 2025, and why?
Expect 4–10% price pressure on select pharmaceuticals, diabetic supplies, syringes, and gloves.
Key drivers include higher demand for chronic-care products, tariffs on imported medical consumables, and persistent labor costs across the healthcare supply chain. These factors elevate both unit price and freight surcharges.
Mitigate by locking multi-year pricing on volatile SKUs and using substitution protocols for therapeutically equivalent items where clinically appropriate.
Track tariff developments and add a small “tariff buffer” line in your budget.
We cover this exact topic in the retirement home business plan.
Which consumables need constant restocking, and how much do residents use?
Several high-velocity consumables must be replenished continuously in a retirement home.
Use the table to size your monthly orders and set PAR levels by unit type.
| Consumable | Average Monthly Usage per Resident | Purchasing Note |
|---|---|---|
| Incontinence products (mix of sizes) | 60–80 units | Case-pack buys; watch size mix shifts |
| Disposable gloves | 120–240 units | Lock price; monitor tariff pass-through |
| Masks (procedure) | 30–60 units | Maintain 30–45 days on-hand |
| Wound dressings & bandages | Per care plan (often daily) | Standardize SKUs by protocol |
| Skin barrier creams & cleansers | 1–2 bottles/tubes | Bundle with incontinence contract |
| Diabetic test strips & lancets | Per order set; common daily use | Forecast from diagnosis mix |
| OTC meds & routine Rx | Per regimen | Formulary review quarterly |
How do generic vs. branded supplies compare on cost and compliance?
Generics usually cost 30–60% less than branded equivalents without sacrificing performance for standard consumables.
For pharmaceuticals, generics are clinically equivalent in most cases, but set an exceptions list for residents with complex regimens or sensitivity to formulation differences. This preserves adherence and avoids downstream nursing time costs.
Adopt a “generics-first” policy with documented clinical overrides and periodic quality checks with nursing leadership.
Audit exceptions every quarter to confirm the clinical rationale remains valid.
Get expert guidance and actionable steps inside our retirement home business plan.
How do regulations and standards affect mandatory stock and costs?
State health authorities and accreditation bodies require minimum inventories and documented readiness.
Your retirement home must maintain emergency supplies, high-risk inventory (e.g., oxygen, critical meds), and detailed logs for audits. These rules raise baseline stock and storage costs.
Create a written policy with item lists, PAR levels, rotation schedules, and temperature/storage controls; review it during internal audits.
Link every requirement to a named SKU and shelf location to pass inspections without delays.
It’s a key part of what we outline in the retirement home business plan.
What portion of costs do insurance or government programs cover?
Across retirement homes, 60–75% of medical supply costs are typically reimbursed by insurance or government programs.
The remaining 25–40% falls to the facility as a direct operating expense, with higher coverage on pharmaceuticals than on general consumables. Verify each resident’s plan specifics during intake.
Map covered vs. non-covered SKUs in your item master to reduce billing leakage and write-offs.
Reconcile monthly with payor remittances and correct coding issues immediately.
This is one of the many elements we break down in the retirement home business plan.
Which inventory practices reduce waste and prevent stock issues?
- Implement real-time inventory tracking with PAR levels and reorder points per SKU.
- Use ABC analysis: daily counts for A-items, weekly for B, monthly for C to keep shrink <2%.
- Centralize purchasing to standardize SKUs and capture GPO pricing and rebates.
- Schedule cycle counts and expiry rotation; tie nurse unit sign-outs to usage.
- Run monthly variance reviews linking usage per resident day to admissions/acuity shifts.
What are typical annual increases, and what is the 3-year outlook?
Plan for 4–8% annual increases in retirement home medical supplies.
Inflation, wage pressure in logistics, tariffs, and specialty-drug demand are the main drivers, and they are unlikely to fully subside in the near term. Build a 6% inflation line into your 36-month forecast.
Use scenario cases: Base 5%, High 8%, and apply higher rates to volatile SKUs (gloves, syringes, diabetic supplies).
Refresh contracts annually and add price-cap riders where suppliers agree.
This is one of the strategies explained in our retirement home business plan.
Who are common suppliers, and how do contracts usually look?
Most retirement homes rely on large distributors with 1–3 year agreements.
Key partners include Medline, McKesson, and Cardinal Health, often via GPOs that layer in rebates and service standards. Contracts should set substitution rules, delivery windows, and pricing protections.
| Supplier Type / Example | Typical Terms & Length | Negotiation Points |
|---|---|---|
| National distributor (Medline) | 1–3 years; tiered rebates; allocation priority | Price caps, fill-rate SLAs, back-order subs |
| National distributor (McKesson) | 1–3 years; formulary support; analytics | Data feeds, pharmacy integration, freight |
| National distributor (Cardinal Health) | 1–3 years; emergency supply provisions | Disaster stockpiles, surge pricing rules |
| Regional suppliers | 12–24 months; niche SKUs | Local delivery windows, min order qty |
| Pharmacy partners | 1–2 years; medication carts & services | Generic utilization, returns, blister pack |
| DME rental providers | 6–12 months; per-device daily rates | Turnaround time, maintenance coverage |
| GPO contracts | Ongoing; program participation | Admin fees, rebate schedules, audits |
What benchmarking data exists, and what are the key lessons?
Benchmarks show meaningful cost differences by region, size, and acuity level in retirement homes.
Urban locations and higher-acuity units spend more per resident, while GPO participation and SKU standardization lower variance. Peer comparisons consistently reveal 5–10% savings opportunities.
Benchmark quarterly against similar facilities and split your dashboard by category (incontinence, PPE, wound care, pharmacy) to spot outliers fast.
Document wins and roll them into next year’s purchasing policy.
You’ll find detailed market insights in our retirement home business plan, updated every quarter.
Conclusion
This article is for informational purposes only and should not be considered financial advice. Readers are encouraged to consult with a qualified professional before making any investment decisions. We accept no liability for any actions taken based on the information provided.
Want to go further?
Explore our in-depth guides on launching, costing, and staffing a retirement home, with step-by-step projections and templates ready to use.
Sources
- BusinessPlan-Templates — Retirement Home Running Costs
- Dunbar Medical — Retirement Home Medical Supplies
- LCS — How Group Purchasing Helps Senior Living
- Entegra — Procurement Advantage in Senior Living
- Healthcare Dive — 2025 Pharmacy & Supply Chain Costs
- OffDeal — Tariff Policy Impact on Assisted Living
- Sortly — Regulatory Compliance in Healthcare
- The Joint Commission — Standards FAQ
- McKnight’s Senior Living — 2025 Outlook
- PwC — Behind the Numbers: Medical Cost Trend
