The Ripple Effect of Tariffs on Healthcare Supply Chains

Global trade shifts and potential new tariffs are raising critical questions for healthcare supply chain professionals. Created by the Power Supply Advisory Group, this resource is your trusted guide to understanding how these changes could impact pricing, contracts, and supplier strategies. From assessing vendor transparency to navigating cost challenges, it’s designed to help you stay informed, proactive, and in control. Whether you’re evaluating price increases or strengthening supplier relationships, this resource equips you with the insights and strategies needed to navigate these changes with confidence.

Key Issues & Implications

1. Evolving Tariff Policies & Uncertainty

• Discussions around tariffs on goods from Mexico, Canada, and China have raised concerns about unpredictable cost shifts.

• The potential 25% tariff increase on certain imports could shift sourcing decisions and impact cost structures.

• The unpredictability of future tariff adjustments makes it difficult for healthcare organizations to plan ahead.

  
  

2. Cost Pressures on Healthcare Organizations

• Hospital margins remain tight, often less than 1%, making even small price increases a challenge.

• Many procedures already operate at a loss, so additional cost pressures could strain financial sustainability.

• If reimbursement policies remain unchanged while costs rise, healthcare providers may have limited options for offsetting increases.

  
  

3. Transparency & Data Limitations

• A key challenge is access to detailed cost data.

• Some vendors have indicated price increases in anticipation of tariffs, but it’s unclear if these increases accurately reflect the direct impact.

• Third-party data sources provide high-level trends, but more granular insights are needed to make informed decisions.

• There’s limited visibility into country of origin—not just for finished products, but also for the components and raw materials used in manufacturing.

  
  

4. Supplier & Contracting Considerations

• Many vendor contracts include provisions for price increases, often reviewed annually or semi-annually.

• Some vendors have already signaled potential price increases, prompting healthcare organizations to review their purchasing strategies.

• Short-term shipping and freight contracts (30-90 days) could contribute to additional pricing fluctuations, similar to logistics cost volatility.

Industry Responses & Strategies

1. Leveraging Data for Decision-Making

• Healthcare supply chain teams are seeking more transparency from vendors to better understand price adjustments.

• Organizations are pushing for SKU-level cost breakdowns to ensure price increases are justified.

• Discussions with third-party data providers and GPOs are increasing as supply chain teams try to refine their cost-impact analyses.

  
  

2. Contracting & Procurement Strategies

• Reviewing contract terms to determine how tariffs factor into vendor pricing is becoming a priority.

• Exploring supplier diversification to mitigate risk from region-specific tariffs is being considered by some organizations.

• Some supply chain teams are engaging physicians and clinicians to assess cost-effective product alternatives when price increases occur.

  
  

3. The Role of Group Purchasing Organizations (GPOs)

• Many healthcare organizations are looking to GPOs to provide more detailed insights into potential cost increases.

• Some members of the Power Supply Advisory Group suggested that GPO reports on inflation and tariff impacts could be expanded to provide more actionable data.

• Collaboration with GPOs and industry groups may help healthcare organizations anticipate and respond to market shifts more effectively.

Actionable Recommendations for Supply Chain Professionals

1. Seek Greater Transparency: Work with vendors to obtain clear, SKU-level cost breakdowns to verify price changes.

   
   

2. Engage with GPOs & Data Providers: Request detailed tariff impact reports and advocate for greater visibility in vendor negotiations.

   
   

3. Diversify Supplier Networks: Explore sourcing options from multiple regions to reduce risk exposure from country-specific tariffs.

   
   

4. Collaborate Internally: Work closely with finance teams, procurement leaders, and clinicians to develop cost-effective purchasing strategies.

Looking Ahead: What to Watch in 2025

• Potential expansions or adjustments to tariff policies that could impact additional product categories.

•  Shifts in Medicare and private insurance reimbursements, which could further affect hospital financial planning.

• Supplier responses to tariffs, including potential shifts in manufacturing locations.

• The role of predictive analytics in forecasting pricing changes before they occur.

With tariffs and trade policies in flux, staying informed, strengthening supplier relationships, and pushing for data transparency will be critical for managing cost impacts. Healthcare supply chain teams that proactively assess contracts, challenge price increases, and collaborate with industry partners will be better positioned to navigate uncertainty.