Hospitals begin to grapple with tariff fallout

• Ultimately, experts warn, supply disruptions and price hikes could drive up the price of patient care.

"Tariffs have the potential to add a layer of complication to [hospitals'] ability to get all of those medical goods, the drugs and the devices that they need to deliver care," said Akin Demehin, the American Hospital Association's vice president of quality and patient safety policy.

State of play: So far, there have been no widespread shortages or price spikes.

• What most concerns the providers is a reliance on medical gear from China. Enteral syringes used to deliver drugs or nutrition through feeding tubes have no alternative sources and are subject to a 245% tariff, according to group purchasing organization Premier.
• "With the consumables — the gowns, the gloves, masks ... hospitals go through an enormous volume of those every year. Certainly there is some risk there," said Kyle MacKinnon, senior director of operational excellence at Premier.

The pandemic spawned more domestic manufacturing of medical gear — and an anticipated reduction in dependence on overseas suppliers. But many of the startups have since disappeared, the New York Times reported, leaving the health system once again vulnerable to supply shocks amid threats like measles outbreaks and avian flu.

Between the lines: The situation could be further complicated by tariffs on pharmaceuticals that could weigh particularly hard on imported generics.

• Cancer and cardiovascular medications, as well as immunosuppressives and antibiotics, are of great concern to hospitals, per a letter the American Hospital Association sent earlier this year to Trump. MD Anderson Cancer Center in Houston instituted a hiring freeze due to uncertainty, in part, from the tariffs' impact on drug prices.
• Medical devices are also facing a high level of exposure with roughly 70% of U.S. marketed medical devices manufactured exclusively outside the U.S., Premier wrote.
• The American Hospital Association on Wednesday pointed to data that found 82% of health care experts expect tariff-related expenses to raise hospital costs by at least 15% over the next six months.
• 94% of health care administrators expected to put off equipment upgrades, in response.

Reality check: Many hospitals may still be insulated from the worst effects because of long-term purchasing contracts.

• Universal Health Services CFO Steve Filton said during an earnings call that three-quarters of the company's supply chain had fixed contracted prices, Fierce Healthcare reported.
• The company had begun to see "fees or stipends" on invoices with vendors with fixed contracted prices but had been ignoring them. "At the moment, it feels like there's not a great deal of pressure," he said.
• But a dramatic reduction in goods from a major trading partner will eventually hit multiple players needing to replenish inventories, experts predict.

What to watch: Hospitals are among trade groups lobbying for tariff exemptions for critical medical supplies, including drugs. One question is whether pharmaceutical manufacturers can limit their exposure by "reshoring" more intellectual property in order to pay more U.S. taxes, Leerink Partners wrote in an investor note on Wednesday.

• As supplies that have been stockpiled by hospitals begin to run low or as contracted prices expire, the true costs will begin to be felt.
• "We especially worry about the potential impacts to vulnerable and to rural health care providers who already are operating on thin margins, and for whom changes in the cost of those kinds of goods could have a disproportionate impact," Demehin said.