Mitigating Increased Healthcare Costs due to Trump’s Recent Tariffs: 7 Tactics

TL/DR –

The Trump administration’s tariffs have the potential to significantly increase costs for healthcare organizations, which could impact patient access to care. Specific to healthcare, approximately 75% of available U.S. marketed medical devices are manufactured outside of the country, highlighting the potential for increased input costs. While details about the tariffs are still unclear, healthcare organizations are being advised to prepare by understanding the impacts, developing action plans, questioning price increases, collaborating with supply chain partners, preparing for disruption, planning for pharmaceutical tariffs, managing utilization, looking beyond the supply chain, and considering revenue opportunities.

Potential Input Cost Increase for Healthcare Organizations Due to Trump Tariffs

Trump administration’s recent tariffs may significantly raise input costs for healthcare organizations. Healthcare supply and device manufacturers are already taking measures to prepare for this change. Healthcare organizations are encouraged to do the same, to better coordinate with their supply chain partners, understand the effects, and develop a plan to protect margins and patient access to care.

Understanding the Trump Administration’s Tariffs

On April 2, President Donald Trump issued a 10% universal tariff on all imported goods and additional tariffs on certain countries. The previously imposed tariffs on Canada and Mexico remain in effect. Pharmaceuticals were not included in this round of tariffs, but Trump plans to impose tariffs on drugs manufactured outside the U.S. soon.

Expected Impact of Tariffs on Healthcare Costs

Tariffs have a significant potential impact on input costs and margins. For example, about 75% of U.S.-marketed medical devices are manufactured outside the U.S. In a survey by Black Book Market Research, 82% of healthcare executives expected a 15% increase in hospital and health system costs due to increased import expenses over the next six months. Therefore, it’s crucial to closely monitor tariff policies and their potential implications.

Seven Strategies to Mitigate the Impact of Tariffs

Despite the uncertainties around future tariffs, inaction can be riskier than overreaction considering margin degradation and supply shortages. Below are seven steps healthcare organizations can take to protect their margins.

1. Question the Invoice: Healthcare organizations should scrutinize any price increases or added surcharges to ensure they are unavoidable and in line with group purchasing organization (GPO) or individual contract terms.

2. Collaborate With Supply Chain Partners: Work with GPOs, regional affiliates, state associations, and consultants to identify commodities at risk of cost increases and delivery interruption and negotiate favorable agreements.

3. Prepare for Disruption: Establish a task force to plan and prepare for increased costs and potential supply chain disruption. Staying current on tariff policies, forecasts, and impacts is key.

4. Plan for Pharmaceutical Tariffs: With tariffs on pharmaceuticals imminent, healthcare organizations should identify alternative sources for drugs at risk of disruption and create access to buffer stocks.

5. Manage Utilization: Work to reduce unnecessary utilization of supplies and medical devices through process improvements.

6. Look Beyond the Supply Chain: Also focus on capturing savings in other categories like contract labor, purchased services, and employee benefits. More details on these strategies can be found here.

7. Consider Revenue Opportunities: Consider renegotiating managed care contracts to include a tariff surcharge.

Consulting Services For Navigating Tariffs

Forvis Mazars’ team can offer extensive knowledge on federal policies, their impact on healthcare organizations, and innovative cost management strategies. If you have questions about the impact of tariffs or need help navigating escalating costs, please contact our team.

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