Recent tariffs announced by the Trump administration have the potential to significantly increase input costs for healthcare organizations. While it is unclear whether the reciprocal tariffs will be levied against all targeted countries’ exports to the U.S. or when levies will be applied to imported pharmaceuticals, supply and device manufacturers aren’t waiting for additional clarity. They are taking the possibility seriously and implementing action plans to preserve their margins.
Healthcare organizations would be wise to follow suit. Organizations that act decisively will be better positioned to collaborate with their supply chain partners, understand the impact, and execute an action plan to protect margins and patients’ access to care. This article offers seven tactics healthcare organizations can use to help mitigate increased input costs.
Background on the Trump Administration’s Tariffs
On April 2, President Donald Trump issued an executive order imposing a 10% universal tariff on all imported goods and additional reciprocal tariffs on countries with which the U.S. has large trade deficits. The previously imposed tariffs on Canada and Mexico remain in effect and are unaffected by the April 2 order. Pharmaceuticals were excluded from this round of tariffs, but Trump has announced his intention to levy separate tariffs on drugs manufactured outside of the U.S. in the near future. Currently, the 10% universal tariff that began on April 5 remains in effect, while reciprocal tariffs on all countries—except for China, for which they have been increased–were delayed for 90 days (until early July).1
Anticipated Impact of Tariffs on Healthcare Costs
The potential impact of tariffs on input costs and margins cannot be understated. Specific to healthcare, an estimated 75% of available U.S.-marketed medical devices are manufactured outside of the country.2 Other commodities are impacted as well, as illustrated in the table below.3
Overall Price Effects From All 2025 Tariffs Through April 2:
Selected Commodities | |
|---|---|
Commodity Input | Projected Price Increase |
| Metals | 12% |
| Textiles | 10% |
| Electric Equipment | 10% |
| Machines | 6.5% |
| Plastics | 6% |
| Computers | 5% |
Data Source: The Budget Lab at Yale
In a recent survey conducted by Black Book Market Research, 82% of healthcare executives expected costs for hospitals and health systems to increase by 15% in the next six months due to increased import expenses.4 Understanding the impact on prices for input categories or items within a category will be a complex undertaking. Like during the pandemic, certain commodities will be impacted more than others, e.g., those manufactured in China, such as blood pressure cuffs and sterile drapes. Given the evolving nature of policymaking, it will be important to follow events closely and monitor any changes.
7 Tactics to Respond to Tariffs
With the 90-day delay and uncertainty surrounding the future of tariffs, some organizations may be inclined to take a “wait and see” approach. However, the risk of inaction outweighs the risk of overreaction, considering the potential for both margin degradation and service disruption as a result of supply shortages. Taking action to improve margins now can help position your organization for continued success regardless of what comes next.
In responding to the impact of tariffs, organizations should focus on what they can control: challenging price increases, reducing waste, and exploring all opportunities for improvement. While doing so will require additional investments of time and resources, the response playbook is similar to the one used during the pandemic. Below are seven steps healthcare organizations can take to help protect their margins.
- Question the Invoice: Current inventories should delay price increases for several weeks once tariffs go into effect, and manufacturers will pursue their own efficiency improvement opportunities to mitigate or offset increases in raw materials. However, what can’t be mitigated will be passed down the value chain. Price protections in current contracts will serve as some deterrent, but it will be limited where demand exceeds supply at pre-tariff cost levels.Healthcare organizations should carefully review any price increases or added surcharges to make sure they are unavoidable and compliant with group purchasing organization (GPO) terms or the provisions of individual contracts. Unfortunately, during COVID, it was not uncommon for some suppliers to attempt to pad margins under the guise of pandemic-related supply chain issues. In addition, if organizations agree to additional surcharges to help suppliers navigate a transitional period (similar to COVID), they should be sure to limit the time period for which they are in effect. Once a surcharge is agreed to, it typically doesn’t come off automatically at the date agreed upon.
- Collaborate With Supply Chain Partners: Healthcare organizations should work with their GPOs, regional affiliates, state associations, and consulting advisors to identify commodity categories (or specific items) at risk of cost increases and delivery interruption. From there, organizations can seek alternative sources for the items at risk and negotiate favorable agreements.Manufacturers and distributors are also important collaborators. Healthcare organizations should pursue vendor programs that identify efficiencies within the manufacturer’s operation and order fulfillment logistics that can further offset the additional costs of tariffs.
- Prepare for Disruption: Suppliers are scrambling to identify solutions that lessen the impact of tariffs. The resources required to respond effectively grow exponentially with the uncertainties surrounding the current tariff policies. Healthcare organizations must respond in kind and organize an effort to plan, prepare, and respond to increased costs and potential for supply chain disruption.This effort should include a task force led by finance in collaboration with supply chain and operations to identify and mobilize preparedness for both immediate action and worst-case scenarios. Efforts must address evaluating and pursuing alternative suppliers and products where appropriate, as well as overall efficiency efforts to absorb additional costs. The task force should also evaluate additional safety stock, especially for sole-source items. Staying current on tariff policy, forecasts, and impacts is crucial to mitigate disruption in an environment of ongoing uncertainty.
- Plan for Pharmaceutical Tariffs: Trump has suggested that tariffs on pharmaceuticals are not a matter of if, but when. While it is unclear how the administration will implement tariffs on drugs, healthcare organizations should start planning now. First, the collaborative analysis described above should include drugs at risk of disruption so that organizations can proactively identify alternative sources. For compounds at general risk of shortage, such as generics, healthcare organizations should work to create access to buffer stocks. Working with GPOs and other providers can help avoid unintended consequences, such as accidentally creating shortages.
- Manage Utilization: Beyond price management, healthcare organizations should work to reduce unnecessary utilization of supplies and medical devices through process improvement. Credible benchmarking data can help engage providers and clinicians in data-driven discussions and identify opportunities to improve operational efficiency and patient care. Organizations should also pursue opportunities to align incentives with suppliers to facilitate collaboration on identifying and implementing efficiencies.
- Look Beyond the Supply Chain: While the impact of tariffs will largely be felt in the supply chain, the urgency created by higher input costs can inspire the discipline necessary to capture savings in other categories, including contract labor, purchased services, and employee benefits. A case study highlighting one organization’s successes reducing costs in these areas is available here.
- Consider Revenue Opportunities: Even aggressive cost management may not be enough to offset price increases and margin erosion resulting from tariffs. While relationships between plans and providers remain fraught, organizations should consider renegotiating managed care contracts to include a tariff surcharge. Providers pursuing this strategy will need to bring hard data to the table to justify the request, so they should dedicate resources (internal or external) to calculate projected and actual cost increases to support the ask.
How Forvis Mazars Can Help
Our team at Forvis Mazars brings a wide range of knowledge and experience related to federal policies and their impact on healthcare organizations, as well as innovative cost management strategies to help organizations maintain financial discipline through economic uncertainty. If you have questions about the impact of tariffs or would like assistance navigating escalating costs, please reach out to a professional on our team.
- 1“Wall Street’s Euphoria Sends U.S. Stocks to Historic Gains After Trump Pauses Most of His Tariffs,” apnews.com, April 9, 2025.
- 2“Impact of Trump Tariffs on U.S. Medical Device Market,” medicaldevice-network.com, November 22, 2024.
- 3“Where We Stand: The Fiscal, Economic, and Distributional Effects of All U.S. Tariffs Enacted in 2025 Through April 2,” budgetlab.yale.edu, April 2, 2025.
- 4“Trump Tariffs Will Escalate Costs and Disrupt the Medical Supply Chain, Industry Execs Warn,” fiercehealthcare.com, February 3, 2025.