A deteriorating outlook for hospital spending will pinch medical device makers financially this year, but cardiology and diagnostics could offer limited bright spots for investors.

Medical technology stocks outperformed the overall market in 2008, but they were not immune to overall market pain. The Standard and Poor’s Health Care Equipment Index fell 31 percent, as the S&P 500 sank 41 percent.

The weakening economy is causing patients to put off procedures, such as knee replacements, atrial fibrillation ablation and bariatric surgery, and analysts expect significant declines in hospital spending on capital equipment — everything from CT scanners to beds and endoscopes.

“The economy and what impact it will have on procedures is what we are all focused on,” said David Heupel, a portfolio manager at Thrivent Financial for Lutherans, which oversees $60 billion and owns shares of Minneapolis, Minn.-based Medtronic Inc. and Deerfield, Ill.-based Baxter International Inc.

“I think there will be a slowdown in any procedures deemed discretionary, what people can put off. That said, I don’t think it will be cataclysmic,” Heupel said.

Hip and knee procedures in particular are destined for a slowdown, many analysts say. Orthopedic device maker Stryker Corp. in December  cut its 2008 sales and earnings forecasts, citing a “significant and rapid contraction” in hospital spending.