Tariffs may force hospitals to ration supplies and cut services
Read Article: Modern Healthcare
Article Summary: New tariffs on goods from Canada, Mexico, and China could cost large health systems like Providence an additional $10M–$25M annually. As medical device and supply costs rise, many hospitals are delaying IT and clinical technology upgrades, restructuring staff, and even shutting down service lines. Nonprofit providers with high Medicare/Medicaid populations, like Providence, may be forced to absorb costs rather than passing them on. Industry groups are pushing for exemptions, but concerns over fragile supply chains persist, especially in light of past disruptions like COVID-19 and natural disasters.
The Risk:
Rising Supply Chain Costs and Budget Constraints: Tariff-driven cost increases of $10M–$25M annually are forcing many systems to reallocate budgets, pause technology investments, and evaluate program viability — putting long-term strategy and growth at risk.
Supply Chain Fragility and Transition Challenges: Hospitals remain exposed to global supply chain disruptions. While there's pressure to nearshore, the shift is slow, costly, and carries risk of service disruption during the transition.
Service Line Cuts and Reduced Access for Vulnerable Populations: Systems with high Medicare/Medicaid payer mixes are unable to offset rising costs, leading to staff reductions, service closures, and resource rationing — potentially impacting quality of care and community trust.
Inflexibility in Cost Recovery Models: Reimbursement models limit providers’ ability to pass through rising costs, particularly for nonprofit and safety-net organizations — straining financial sustainability and operational resilience.