Tariff impact and uncertainty is a growing crisis for U.S. healthcare providers, industry collaborative says.
In the vast and complex landscape of the U.S. healthcare system, a new vulnerability has surfaced – one that could disrupt and increase uncertainty in the global supply chain. For years, hospitals and healthcare providers have relied upon a complex and global system of supply chains that deliver essential medical goods to their doors. While Tier 1 suppliers are visible, what lay beyond – where critical processing steps are performed, where subcomponents are manufactured – are equally integral. This lack of visibility increases risk.
Disruptions to these supply chains have grown increasingly concerning, especially as the healthcare industry grapples with its deep dependencies on China, according to the Healthcare Industry Resilience Collaborative (HIRC). “From active pharmaceutical ingredients (APIs) to personal protective equipment and critical medical devices, a significant portion of the U.S. healthcare lifeline runs through Chinese manufacturing facilities,” HIRC said.
Now, with escalating tariffs between the U.S. and China, and possible global tariffs on pharmaceuticals and medical device inputs, HIRC members believe that lifeline is under threat. Uncertainty looms over whether the added costs will apply only to finished goods or also to the subcomponents that cross borders multiple times before becoming a usable product. The potential for cumulative tariffs raises alarm bells – not just about pricing, but about availability itself.
“Healthcare systems across the country are growing more anxious, particularly in the face of rising geopolitical tensions,” HIRC told Repertoire Magazine. “With no clear answers on how tariffs will be implemented, many providers are scrambling to assess their exposure. They’re reaching out to suppliers, requesting country-of-origin data in hopes of mapping the true risk. Yet this information, at best, offers only an indirect estimate.”
Behind the scenes, healthcare trading partners are poring over their contracts, asking difficult questions: Would tariffs trigger force majeure clauses? Can current price guarantees still hold?
The financial stakes are high. Nearly half of U.S. hospitals already operate at a negative or near-zero margin, HIRC noted. The system simply does not have the cushion to absorb significant cost increases.
“And amid this growing pressure, another unknown lingers – how, or if, the Centers for Medicare & Medicaid Services (CMS) will adjust reimbursement rates to reflect these surging supply costs,” HIRC said. “For now, there is little clarity, only a shared urgency among providers to brace for impact in a global system where disruption feels less like an ‘if,’ and more like a ‘when.’”
The tariff situation is changing rapidly, emphasizing the need for close monitoring and enterprise-wide scenario planning. The healthcare industry, both hospitals and suppliers, need to lean in to face these pressures together, HIRC advised.
Suppliers who have committed to understanding their resiliency improvements through the extensive diagnostic offered by the HIRC Resiliency Badging program, are better able to predict, prevent, and recover from disruption. Resiliency will be the key differentiator for companies who can navigate this uncertain economic and policy environment.
Pressure mounting
The level of tariff pressure facing U.S. companies has not been seen since the 1930s. During a recent poll of HIRCs members, nearly half anticipate organizational annual cost increases of $50M or more. Half of respondents believe tariffs are a moderate long-term threat. With limited protective levers to pull, two-thirds of HIRC members are actively seeking to diversify their supplier base.
While the tariff impacts unfold in the marketplace, Allina Health has taken a clear stance on how it will behave with suppliers who intend to pass tariff charges at some point over the coming weeks and months. “We have placed specific safeguards within our Shared Services Team responsible for procure to pay and data management procedures at this time.” said Tom Lubotsky, Vice President, Chief Supply Chain Officer and Chair of HIRC. “Allina Health expects our suppliers to honor their existing pricing agreements that have been negotiated in good faith and will not accept price adjustments from our suppliers related to recent tariff announcement without further due diligence. We will require full visibility to the multi-tier Bill of Material, to include associated price breakdowns, to understand country of origin and duty impact appropriately. We are first and foremost committed to fulfilling our caring mission. We continue to value our partnerships and trust that suppliers will work with us to find mutually beneficial solutions during these uncertain times.”
Providers in the HIRC community are willing to have candid discussion on the impacts of tariffs, but not without transparency and clear rational. Partners of HIRC including Clarium are offering HIRC members tariff impact risk assessments using the power of AI, HIRC reported. “These insights are fully unlocked when the underlying data is available, some of which only the supplier can provide.”
Transparency for the end-to-end supply chain is not only critical to understanding the potential cost implications of tariffs, it’s vital to protecting the lifeline of essential medical goods from any and all disruptive forces. Transparency builds trust, enables proactive planning, and places trading partners in a better position to face challenges together.