Tariffs may force hospitals to ration supplies and cut services

Modern Healthcare – Tuesday, April 8, 2025
By Lauren Dubinsky

Providence expects President Donald Trump’s initial tariffs to increase its costs by $10 million to $25 million per year and healthcare executives are concerned more tariffs could further exacerbate cost increases.

Trump imposed March 4 a 25% tariff on imports from Canada and Mexico and raised tariffs on Chinese goods from 10% to 20%. He followed this with more tariffs last Wednesday, ranging from 10% to 46%, depending on the country. Industry groups are pushing for an exemption for medical devices and supplies, so far without success.

As a result of the tariffs on Canada, Mexico and China, Providence is expecting to spend millions more per year on medical devices and supplies, including surgical instruments, diagnostic tests, intravenous fluids and personal protective equipment, said a Providence spokesperson. It also anticipates the supplies and materials for pending construction projects to incrcease.

The system is looking to see how the additional tariffs could further affect its cost projections.

Providence is not alone — other providers are also feeling the weight of the administration’s tariffs.

A Black Book Research survey of 81 hospital finance and supply chain executives and 28 physicians and ancillary practice administrators found that 83% are quickly adjusting their budgets in anticipation of the rising costs of medical equipment and pharmaceuticals due to tariffs.

The survey, which was conducted from March 6 to April 2, also included medical equipment and pharmaceutical executives, payers, health plan executives and healthcare information technology and digital health leaders. Eighty-eight percent of those executives are expecting at least an 18% spike in medical equipment costs by the end of this year.

Seventy-five percent of providers’ chief financial officers who responded to the survey plan to shift costs to payers and patients in the short term as a result of the rising costs. Staff restructuring or wage freezes are under consideration by 29% of the executives that responded, and 94% are putting information technology modernization projects and clinical technology upgrades on hold.

But not every system can pass the costs along to consumers. Providence will have to absorb them instead of passing them onto patients, said Ali Santore, chief communication and external affairs officer. More than 60% of the system’s patients are covered by Medicare and Medicaid, so there’s no cost shift that nonprofit providers like Providence are able to manage or work through, she said.

Instead, Providence plans to ration supplies, reduce staff and close service lines and programs to reduce its expenses, Santore said.

“This is not the kind of healthcare system that you would imagine America to have,” she said.

The American Hospital Association and the Advanced Medical Technology Association have been advocating for certain exemptions since tariffs first went into place. The administration has exempted pharmaceuticals from reciprocal tariffs, but the hospital trade group is still pushing for medical device exemptions, said Akin Demehin, vice president of quality and patient safety policy at the American Hospital Association, in a statement.

AdvaMed warned tariffs could act as an excise tax and have a negative impact on innovation, cost jobs and increase overall costs to the healthcare system, said Scott Whitaker, president and CEO of the association, in a statement.

He said the organization is continuing to have conversations with the White House to secure exemptions for medical devices.

The American Hospital Association and Premier both said they share the administration’s goal of strengthening domestic supply chains for medical devices. Premier is advocating to use the funds that come from tariffs to expand domestic and nearshore manufacturing, said Soumi Saha, senior vice president of government affairs at Premier, in a statement.

According to the Black Book Research survey, 33% of organizations are prioritizing sourcing from domestic and allied-nation suppliers, but 94% are concerned that regulatory hurdles and timeline risks could delay this.

Only 12% of the respondents said that their organizations can completely shift supply chains by the end of this year without significant disruptions.

Providence is worried about the stability of the supply chain after its experiences during the COVID-19 pandemic and after Hurricane Helene shut down a Baxter International manufacturing plant in North Carolina, which led to an intravenous solution shortage. The latter caused Providence to cancel surgeries, Santore said.

“We are wanting to ensure that vital medical supplies and equipment are exempt because I think we’ve seen in the fragility of the supply chain already,” Santore said.

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