News
Article
Author(s):
Tariffs will likely result in rising costs and supply chain disruptions that will reshape the economic outlook for the global economy — and your business too.
President Donald J. Trump
© Courtesy of the Library of Congress Prints and Photographs Division
President Donald J. Trump announced global tariffs on April 2. Since then, U.S. and global stocks have dropped at a rapid pace, and every sector of industry, including medical practices and other health care businesses, must plan how they will respond. Tariffs will likely result in rising costs and supply chain disruptions that will reshape the economic outlook for the global economy — and your business too.
"For medical group practices, the implications of tariffs are simple dollars and cents,” said Anders Gilberg, the Senior Vice President, Government Affairs for the Medical Group Management Association. “From basic supplies to life-saving medical devices, physician practices rely on a global supply chain, yet their ability to pass on increased costs is almost non-existent. Practice expense calculations in fee schedules within commercial contracts and government programs such as Medicare and Medicaid are already fixed and won't account for any cost increases resulting from new tariffs or taxes.”
Our March 2025 Medical Economics Insider is full of tips and strategies on how medical practices can deal with rising costs and falling reimbursement through both cost cutting and new revenue generation.
No one knows how long the tariffs will continue, how other countries will react or if Trump will change his mind. But all businesses can do is prepare. Expect costs to rise on protective equipment, supplies, medical devices, and more.
Medical practices, though focused primarily on patient care, feel these pressures acutely when vital supplies become more expensive and harder to secure. Crafting a comprehensive plan to navigate these obstacles is essential for maintaining operational stability. By understanding how to assess current conditions, communicate effectively with stakeholders and explore protective strategies, practices can guard against the worst effects of economic upheaval.
Here are some action items to consider as your health care business grapples with these latest challenges.
Determining where your business stands is the first step in addressing any economic challenge and remains applicable to the current tariff crisis. For many physician small-business owners and practice administrators, that means taking a meticulous look at finances. A clear understanding of your revenue streams, major expenses and cash flow can reveal where external pressures, such as tariffs or supply chain slowdowns, might do the most harm.
An effective approach often begins by identifying top expenses. For medical practices, these typically include staff salaries, rent, insurance, utilities and crucial medical supplies. If you suspect rising costs are on the horizon, whether due to tariffs on imported goods or added logistics fees, try sketching out a range of possible increases. For example, what happens if supply costs go up by 10%? By 20%? Building a forecast for different scenarios can help you see where you have flexibility and where you may need additional support.
Small-business owners also should consider their relationships with suppliers. It’s common for a practice to rely on a handful of vendors for specialized items — everything from exam gloves to electronic components. If any of those vendors rely on imports or face labor disruptions, your practice might suffer. Conducting a basic supply chain “map” can clarify these vulnerabilities, allowing you to spot where alternative sourcing or price negotiations might be necessary.
An open line of communication can serve as an early warning system, highlighting problems before they become crises. If you work directly with your suppliers, ask whether they expect to raise prices or struggle to meet demand. Some suppliers can work with you on flexible payment schedules or lock in more stable pricing if you commit to buying at consistent intervals. Securing those assurances before a crisis sets in can be invaluable when broader market forces shift rapidly.
Equally important is communication within your practice. Staff members have valuable insights into workflow and processes that might be wasting funds, whether it’s inefficient inventory management or redundant administrative tasks. Looping employees into cost-saving initiatives not only helps them understand any new policies but also encourages them to share ideas that can benefit the practice’s bottom line. Maintaining transparency about possible supply issues or shifts in pricing helps unify everyone’s efforts when adjustments become necessary.
One of the most effective ways to manage external economic stress is to diversify your network of suppliers. Just as investors rarely place all their funds in a single stock, medical practices shouldn’t rely on a single source for essential items. If you historically have purchased certain supplies from overseas vendors, consider exploring domestic alternatives—even if that means higher costs in the short run. Should tariffs or shipping delays arise, you will have greater flexibility.
Contracts with current suppliers may also need revision to account for changing economic conditions. Some practices benefit from signing contracts that allow for periodic price adjustments, or at least some recourse if a vendor’s costs spike. Others join group purchasing organizations or form local alliances with similar practices to strengthen negotiating power. By spreading out procurement, you can reduce the risks associated with any single partner or product.
Small businesses, especially medical practices, can be lean operations. Still, there are usually areas where minor cuts or process improvements can translate into meaningful savings. Evaluating inventory management is often a fruitful first step. Practices might keep only a minimal amount of supplies on hand, known as a just-in-time system. However, with supply chain disruptions more frequent, it may be wise to build a small buffer of critical inventory to avoid patient care disruptions when deliveries stall.
Streamlining processes can also produce substantial savings. For example, look at administrative tasks such as billing or patient intake. If any part of these workflows can be automated or handled digitally, you could reduce both labor and paper costs. The money saved can then be funneled into areas most at risk from rising prices.
When inflationary pressures or tariffs drive supply costs higher than you can absorb, a measured approach to adjusting fees might be necessary. For medical practices, the decision to raise prices can be sensitive: patients are directly impacted. If increases become unavoidable, transparent communication goes a long way in maintaining patient trust. Make it clear that the adjustments are focused on sustaining the high level of care they expect.
Even if you manage to navigate the present tariff challenges, the economic landscape is ever-changing and clearly unpredictable. Having a forward-looking plan can save time and money in the long run. Monitor global and national economic trends, particularly those tied to your key suppliers. Regularly evaluate your practice’s financial standing, including whether you maintain sufficient cash reserves or have access to credit lines that could keep operations stable if revenue dips or costs spike suddenly.
It can be helpful to schedule a quarterly or biannual review of your economic action plan. Ask key staff members and partners to offer insights into any changes they’ve noticed in pricing or availability. Have there been supply delays? Has the practice’s patient population shifted in ways that might affect revenue streams? Answering these questions proactively allows you to adapt and update your plan as needed, ensuring it remains relevant.
Navigating economic issues can be complex, especially for those juggling the demands of patient care. Consulting an accountant or financial adviser who specializes in small businesses or medical practices can offer clarity on tax strategies, cash flow management and other areas that may be overlooked. When legal complexities arise, such as adjusting supplier contracts or negotiating large purchases, seeking an attorney’s guidance could prevent missteps that might prove costly.
Beyond direct professional services, small-business owners can tap into local organizations, such as the Small Business Administration, or industry groups that regularly track economic trends and provide timely updates. Staying connected to these communities offers a support network and resources you can draw on when circumstances become challenging.
Tariffs, supply chain uncertainties and rising costs are not transient concerns. They are part of an increasingly interconnected economy that businesses, including medical practices, must contend with. By honestly evaluating your financial position, communicating with both internal staff and external partners, diversifying your supply chain, implementing cost-containment measures and planning for the next potential disruption, you can fortify your operations against instability. Building these strategies into the core of your practice ensures you can continue delivering quality care to patients, regardless of what the broader economic landscape brings.
