President Donald Trump imposed and then temporarily paused a variety of tariffs against other countries over the last few weeks. The action includes a 145% tariff on Chinese imports announced April 10, according to Bloomberg.
“The prospect of 104% tariffs against China is deepening traders’ concerns about the path ahead for U.S. inflation,” wrote Matt Grossman in The Wall Street Journal. “Trades in derivatives markets now reflect expected inflation of nearly 3.5% over the next 12 months. That’s a brisk rise from [April 7] and up from forward inflation expectations of about 2.4% at the start of the year.”
Mr. Trump also said April 8 he’s planning additional tariffs on pharmaceuticals made internationally “very shortly,” according to The Journal, in an attempt to drive more pharmaceutical companies to produce their products in the U.S. Hospitals may see a spike in already high drug and supply expenses as a result.
“Tariffs are basically a tax, and ultimately we all as consumers will be paying it. What it amounts to is more inflationary pressures and puts pressure on our supply chain,” said Jeffrey Cohen, MD, executive vice president and chief clinical operating officer at Harford HealthCare, in an episode of the “Becker’s Healthcare Podcast.” “We are continually looking at how to minimize that, how to look for places that will avoid those tariffs, or, if not avoid them, minimize them. That’s a huge focus at this point. In addition to that, we have rising costs for all types of medications, pharmaceuticals that are separate even from the inflationary pressures of the tariffs.”
Drug expenses rocketed during the last inflationary period following the pandemic and were up 9% year over year in February, according to Kaufman Hall’s “National Hospital Flash Report” released April 8. Compared to 2022 year to date, drug expenses per calendar day grew 15%.
What are hospital leaders doing differently in the face of more inflation?
Some are hitting the breaks on mergers and acquisitions, and other big spending projects. M&A deals dropped significantly in the first quarter, which had just five deals compared to 20 last year, according to Kaufman Hall. Four of the five deals included financially struggling hospitals with few other options to keep their doors open.
“Hospital and health system merger and acquisition activity in Q1 2025 reflected the overall market volatility and economic uncertainty surrounding tariffs and potential policy changes from the new administration, affecting healthcare with a chill on decision-making,” according to the Kaufman Hall report. “This low level of activity reflected broader malaise in M&A markets across industries, both globally and in the U.S.”
During periods of high inflation after the pandemic, hospitals and health systems cut spending where they could, identified savings and tightened budgets. Some hospitals had workforce reductions while others cut services. Further inflation could squeeze hospitals even more.
“There’s a rising cost of care delivery, including inflation in medical supplies, labor expenses and now tariffs, which is straining healthcare organization budgets,” said Zafar Chaudhry, MD, senior vice president and chief digital, AI and information officer at Seattle Children’s. “We’re also seeing reimbursement challenges from payers, including potential cuts and increased denials that will add to financial difficulty. We are mid-sized, but we have to be good financial stewards moving forward.”
Chicago-based CommonSpirit Health’s CFO Daniel Morissette also recently told Becker’s he’s focused on addressing payer denials, downgrades and underpayments as inflation increases. The system is working to improve quality and patient satisfaction, but that’s not enough.
“The gap between revenue growth and expense increases is unsustainable,” he said on an episode of the “Becker’s Healthcare Podcast.” “Given that we operate in 24 different states, some markets are even more challenging due to higher inflation rates. In certain states, inflation has been so severe that it’s difficult to see a viable path forward without increases in peer-patient reimbursement rates.”
CommonSpirit is standardizing contract language and designing more administratively efficient processes for payers to combat denials and downgrades to services. The system is also leveraging its 2,200 sites of care by conducting system-level negotiations, to mixed results.
“At the end of the day, it’s an uphill battle,” said Mr. Morrisette. “We’re doing everything we can to make our case to payers, emphasizing the value we bring, but it’s a difficult environment with no immediate resolution in sight.”
Challenging and uncertain times require strong leadership committed to the organization’s mission. Dr. Cohen espoused the importance of leading from the font and inspiring others to follow.
“Optimism is really important, even in challenging times, but acknowledging those difficult times that’s really important as well,” he said. “It doesn’t help to blindly say everything’s fine when people know it’s not. And we have to be honest [and transparent].”
