Uncertainty persists for hospitals with tariffs, even with Supreme Court ruling

Hospitals and health systems have struggled to keep pace with President Trump’s tariffs on many imported products.

The Supreme Court struck down the bulk of Trump’s tariffs, but Trump has said he plans to continue to find other ways to impose tariffs. The high court found that such broad taxing authority requires legislation from Congress. And a federal judge ruled this week that companies who paid tariffs are entitled to refunds.

Mark Hendrickson, director of supply chain policy at Premier Inc., says there’s not a great deal of clarity for hospitals and healthcare organizations trying to understand tariff policy.

“There's still a lot of uncertainty,” Hendrickson tells Chief Healthcare Executive®.

Even with the Supreme Court decision, he says, “Now everyone is asking, What about refunds? Who would get a refund? How do you get a refund? And what does that process look like? Is Congress going to get engaged at any point?”

The president can still impose tariffs under his own authority, but they would only last for up to 150 days. Congress would need to approve an extension, and Hendrickson says that’s hardly likely, especially in an election year. The mid-term elections to determine control of Congress take place in November.

“Congress hasn't shown an interest in engaging at a real detailed level in tariffs, and I don't expect that that's going to change,” he says.

It’s possible that the White House look to other legal authorities to impose tariffs, he adds.

Difficulty in planning

Over the past year, hospitals have had to deal with various price hikes on certain products, as they rely on many medical supplies and pharmaceutical ingredients produced from suppliers abroad.

While there have been some cost increases tied to tariffs, they haven’t posed too many significant problems for health systems, says Kyle MacKinnon, senior director, operational excellence at Premier Inc.

Many hospitals have been able to look to other suppliers or reconfigure their networks to cushion the blow, he says.

But he says the varying nature of the tariffs has posed challenges for hospitals and other healthcare organizations. With policies changing on a fairly regular basis, it hasn’t been easy for health systems to budget and have a clear view of costs for certain products.

“The operational impact, I would say, is the inability to plan consistently,” MacKinnons says. “There were so many unknowns, like from one week to the next or month or to the next, that it made it very difficult for planning a budget, forecasting for capital, capital equipment purchases, or construction and facilities design.

“The instability of the policy made it a difficult challenge to be able to plan, one year, three years,” he adds.

For now, the White House has imposed a temporary 10% tariff, but Trump has said he would like to raise it to 15%. Hendrickson notes that could happen at any time. Under a provision known as Section 122 of the Trade Act of 1974, Trump could impose tariffs of up to 15% for 150 days.

“All of those types of uncertainties just make it difficult to plan,” Hendrickson says. ”Obviously, businesses need to plan, but transparency and consistency makes that planning so much easier.”

Soumi Saha, a healthcare executive and attorney with deep experience on federal health policy, told Chief Healthcare Executive® last month that the rapid swings in policy have been jarring for health systems. The lack of detail in those announcements has also left healthcare leaders perplexed.

“A lot of tariff policy, unfortunately, has come forward from social media posts,” she said.

“Then you have questions such as, are pharmaceuticals included? What about generics? What about this? What about that? And that lack of detail makes it very difficult to understand the true impact,” she said.

Seeking domestic supplies

Hospitals and health systems are looking at obtaining more medical supplies and other necessary equipment from domestic suppliers, or at least manufacturers from countries that are closer to the United States.

But China produces many of the supplies hospitals use every day, including the majority of plastic gloves and non-disposable face masks, according to the American Hospital Association.

Even for health systems looking to find more supplies from domestic suppliers or those close to home, it’s not that easy.

“These supply chains are really, really complex,” MacKinnon says. “All of the inputs might have a different country of origin, or the final assembly might be the United States, but it's got inputs from different countries, and that might be the same for the pharmaceutical supply chain as well, based on key starting materials.”

The Centers for Medicare & Medicaid Services is also seeking public comment on ways to bolster the production of personal protective equipment and medical supplies in America.

But even with the Trump administration trying to spur more production, Hendrickson says there’s no quick remedy to make that happen.

“It's not something you can do overnight, especially if it's not already built, because building those facilities, getting the regulatory approvals, making sure you're compliant with all the local, state, federal regs, can take several years, and in some cases, millions of dollars,” he says.

The government is trying different approaches, from the CMS seeking ideas to the Food and Drug Administration looking to advance policies that emphasize domestic production.

But Hendrickson says that it’ll take a comprehensive approach to produce more medical supplies in the U.S.

“It really needs to be a holistic strategy,” he says. “A one-off here or one-off there is only going to get so far. You really have to have everybody talking to each other, and have everybody working together to move the needle.”