Unsure how to proceed amid tariff uncertainty? Here are no-regrets actions you can take now.
Economic uncertainty is no stranger to healthcare. Since 2020, the healthcare supply chain has faced a global pandemic, natural disasters, port strikes and other unexpected events.
As healthcare looks to another period of uncertainty — namely the impact of potential tariffs — it’s important to remain vigilant, keep informed and be purposeful about next steps.
Where we are right now, what we know — and what we don’t
Through a series of executive actions, President Donald Trump announced the America First Trade Policy and a range of potential tariffs and other efforts related to trade and tariffs, such as a reciprocal tariff plan. Collectively, these efforts may affect multiple countries. To elaborate on these actions, President Trump cites reasons including trade imbalances, national security concerns and unfair trade practices. Here's a summary of the formally announced tariffs since President Trump took office and respective effective dates, as of now, for each:
| Country | Percentage | Products | Effective date |
|---|---|---|---|
| China | 10% | All products | Feb. 4 |
| Canada | 25% | All products | Paused until March 4 |
| Mexico | 25% | All products | Paused until March 4 |
| All countries | 25% | Steel/derivatives | March 12 |
| All countries | 25% | Aluminum/derivatives | March 12 |
Note: Percentages listed above are in addition to existing tariffs or modifying existing tariffs. Limited exceptions may also exist. The Harmonized Tariff Schedule of the United States (HTS) sets out the tariff rates and statistical categories for all merchandise imported into the United States.
On Feb. 20, the U.S. Trade Representative issued a notice requesting comments by March 11 to assist in reviewing and identifying unfair trade practices and initiating all necessary actions to investigate harm from non-reciprocal trade agreements. However, despite this and various news reports suggesting that additional tariffs will be announced in April, specifics around potential tariffs remain to be seen.
The number of actions, the speed at which they’re being announced, media activity and the subsequent ambiguity have created concern among supply chain leaders. For example, if additional future tariffs do take effect, when will it be, will there be exemptions, and which products, countries and manufacturing processes will be impacted? Will manufacturers pass additional expenses to their customers, or will they absorb some of the cost — and to what extent? How could all these factors impact hospitals’ ability to continue to deliver high-quality care on thin margins, and how can those effects be mitigated?
The future may be unclear, but the past has provided lessons that can offer some clarity and guidance.
No-regrets actions to take now
No-regrets moves that healthcare leaders can make now to remain informed and prepared in the months ahead include:
- Review hospital budget assumptions to support proactive planning. Consider scenario modeling to gain insight into how current and potential tariffs may impact supply expenses and financials. Outline available strategies that could be deployed to mitigate those impacts should they materialize.
- Create leadership alignment. Establish top-down messaging and decision-making structures that allow for transparent communication and guidance for expense management and engagement of physician and clinical stakeholders. For health systems or hospitals that plan to make decisions based on trade policy, consider how to accurately track these developments and communicate changes or status updates through an established communication plan. Any time there is a supply chain disruption — whether due to a natural disaster or otherwise — hospitals must have the flexibility to make real-time, informed decisions. Having an established structure to do so saves time, reduces confusion and allows for faster implantation of updates or changes to existing processes.
- Ensure resiliency measures are in place. Establish a list of critical supplies, gain clarity on your inventory, ensure you understand current utilization and ensure cross-references for those supplies are identified. These resiliency best practices will help hospitals implement measures or shift to lower-cost options in scenarios where tariffs could cause disruption to supply.
- Audit existing local agreements for contract risk. Review contracts for language that may allow suppliers to raise prices due to tariffs or circumstances that might include tariffs. Often, national Group Purchasing Organization (GPO) contracts have additional provisions included within their language that local contracts may not. It may be worthwhile to consider where these national agreements could add protection.
- Identify savings initiatives that could offset price increases. Proactively identify ways to manage expenses. Determine where to standardize to more cost-effective products or reduce waste through physician and clinician engagement. For example, would it make sense to continue to use a premium product for all patients or reserve it for those who would have incremental clinical benefit? Some hospitals also are considering pausing the adoption of new technology to avoid additional costs. Additionally, double-check charge capture and revenue cycle adjustments and ensure there is accurate coding and billing for high-cost items.
Actions that may make sense down the road
It’s simply too early to tell if the following strategies make sense to implement now given how little we know about the evolving landscape. It’s prudent to consider how these strategies could reshape a health system or supply chain budget if implemented without thoughtful deliberation.
- Bulk buys and/or future buys. Protective purchasing often leads to supply shortages, even when a shortage may not have occurred otherwise, and over-purchasing of the wrong supplies may lead to excess inventory and risk of expiration. Avoid putting the cart before the horse and wait for more clarity on which tariffs will proceed before panic-buying products that may never be impacted.
- Multi-source strategies. Healthcare leaders learned during the pandemic that diversifying their supplier base was an unexpected necessity. Understanding where suppliers are located and where their products are sourced helps hospitals anticipate risks. However, given that price increases are discretionary, healthcare organizations in existing committed programs with suppliers are less likely to experience price increases than those who aren’t committed, as it would require renegotiating mutually beneficial long-term contracts. In a scenario where alternative suppliers are needed, Vizient contracts could be an additional resource for managing spend beyond committed agreements.
- Prioritizing domestic manufacturers. A common risk-mitigating tactic to reduce supply chain disruptions is to domestically source products and materials; however, domestic manufacturing isn’t immune to natural disasters, labor strikes or other changes outside of tariffs. Shifting to domestic manufacturers — without fully understanding the scope of the organization’s existing supply chain — could significantly impact budgets in the short-term as domestic manufacturing can sometimes be more expensive than global sourcing due to higher labor costs, regulatory requirements and overhead expenses. Additionally, many raw materials, like steel or aluminum, are sourced globally by domestic manufacturers, which can make it challenging for them to supply products that use these materials.
While there are still so many unknowns, healthcare leaders can be proactive in their approach to managing their supply chain. Understanding where products are sourced and scenario modeling accordingly can help bring clarity and enable leaders to proceed with confidence.
Learn more about Vizient’s supply assurance programs and resources.