Tariffs force Minnesota hospitals to brace for high cost of medical equipment, supply challenges

In a 16-hour shift, Mustafa Syed can go through hundreds of gloves.

The health care assistant at Minneapolis safety net hospital HCMC said medical gloves are packed into "every little nook and cranny" of the stabilization room, where he and roughly 60 staff members can treat four of the hospital's critically ill or injured patients at the same time.

Medical supply company Cardinal Health's gloves make up some of HCMC's most-used supplies. However, tariffs biting global trade threaten to disrupt supplies and pump up prices on this essential product that likely comes to life in a decades-old manufacturing plant in Rayong, Thailand.

In this coastal city known for its fruit festival, hand molds dip into vats of goop to create the gloves. They make their way to the United States and land in a distribution facility in the Twin Cities suburb of Mounds View. As weighed bins in hospital supply rooms run low, trucks filled with grey tubs including gloves zoom south to the hospital in daily deliveries.

These gloves likely cost 10% more to get to the United States than just months ago. If the White House's trade talks with Thailand fall apart, an additional 26% duty could further blow up the prices. Ohio-based Cardinal Health has said it laid off workers to mitigate tariffs that are set to cost the company up to $300 million.

Aside from labor, medical supplies make up the the largest expense for hospitals, topping drugs, according to the American Hospital Association. Trade groups have begged President Donald Trump's administration to exempt vital medical supplies and high tech devices from tariffs, as it has done for products such as children's books.

So far, nothing has worked.

Supply chain experts now warn tariffs can be costly for the complex health care system.

Tinglong Dai, a professor at Johns Hopkins University's business school, said "the worst consequence is actually not pricing—the cost increase. The worst consequence is actually shortages."

In other words, after emerging from an acute shortage of medical supplies like gloves spurred by a global pandemic, hospitals could now face new supply chain complications driven by economic policy. Patients could eventually see indirect impacts in the form of lower overall access to care at financially struggling hospitals, observers warn.

Senator Ron Wyden of Oregon said at recent Senate Finance Committee meeting that "people can get really sick and also die" if medical device tariffs are not handled correctly.

Neither Cardinal Health nor the Office of the United States Trade Representative, which reports to Trump, responded to several messages requesting comment.

'It's a battle to keep us stocked.'

In an old HCMC operating room retrofitted as a supply closet, products such as catheters and stockings recently covered a double-decker metal table. The pile roughly represented the amount of supplies that'd go into a total hip replacement surgery.

"I'd say this is pretty low" compared to what's required by the average surgery, said HCMC inventory analyst Jolene Dolfay.

Dolfay's goal is to get the hospital exactly what it needs — no more, no less — because supplies are expensive and can expire, she said.

"As long as they can do the surgery, I did my part," she added.

Medical supplies squeeze into those high-tech bins on the walls of supply rooms embedded into the skeleton of the hospital. The technology, called PAR Excellence, helps keep the stabilization room moving, where Syed stocks lifesaving supplies such as oxygen masks and chest tubes.

"It ends up wasting time if we have to run back and forth, and that can potentially lead to bad outcomes," Syed said.

An order for new supplies generates daily, after the scanners measures the weights of the bins. The local distributor refills the products it can. When it doesn't have a supply, workers head to the hospital's storage room resembling a warehouse filled with emergency-level gear and personal protective equipment.

Nurse Tim Gerlach called Dolfay "the most underappreciated person in the establishment."

"There's just thousands and thousands of items that we use daily," Gerlach said. "It's a battle to keep us stocked."

For now, prices have stayed the same, Dolfay said. HCMC, along with many other large systems, buys supplies through contracts to pre-determine prices. Many manufacturers built up inventory when the Trump administration announced tariffs, locking prices until July or even later, said Michael Needham, a principal at supply chain consulting group efficio.

Smaller hospitals and clinics are most exposed to tariffs, experts said. Dai said, "They don't really have a bargaining power at all."

Needham said the cost for patients depends on the profitability of a hospital. System leaders could be left wondering, he added, "We can only buy so much. What do we cut?"

In an email, the Minnesota Hospital Association said it is working to assess the effect of tariffs on supply costs.

"As elected officials, industry experts and, most importantly, hospital leaders have been making abundantly clear: many hospitals and health systems are struggling financially," the email said. "Even so, they are facing an array of new financial challenges, and anything that further stresses non-profit hospitals and providers will only further threaten the access to care Minnesotans depend on."

Medical suppliers feel the cost

The health care system has numerous financial stakeholders, from medical suppliers and hospital systems to insurers and patients.

For now, big medical supply and device companies say they are the ones paying for tariffs. Scott Whitaker, CEO of medtech trade group AdvaMed, explained to senators at a Senate Finance Committee meeting last week that these companies struggle to adjust to price spikes due to hospitals' contract purchasing. Up to 70% of medtech products made in America are used in America, Whitaker said.

PitchBook analyst Aaron DeGagne said in a recent note that $60 billion worth of devices and components are manufactured overseas and imported to the U.S. annually. Tariffs could cost public medtech firms more than $2 billion, DeGagne said, although the estimate does not take into account a 90-day lower rate on Chinese imports.

Dai said multiple layers in the medical supply chain can cause the final price impact of tariffs to be muted for buyers.

"It is fair to assume a 50% tariff imposed on surgical gloves will not [cause] 50% increase in prices," Dai said.

Tariffs could, however, give suppliers an excuse to raise prices, Dai said.

"In 2021, they used COVID as the excuse to significantly increase prices," Dai said. "Now we have tariffs that actually give them another reason."

Mayo Clinic Health System Chief Financial Officer James Wilson recently said the system needs to be vigilant about tariffs "so that we're not price gouged or taken advantage of." Mayo did not respond to emails requesting a comment.

The fight for exemptions

During a trade spat with China during Trump's first term, the administration surrendered to industry pressure and exempted some medical products from tariffs.

This spring, Trump so far has exempted products such as smartphones, dictionaries and pharmaceuticals, but not medical devices and supplies other than some disinfectants.

AdvaMed's Whitaker told senators, "It's essential that this industry is protected from tariffs for humanitarian reasons, as it historically has been."

"Medtech products are mandatory, not optional," Whitaker added. "They can mean the difference between life and death."

The American Hospital Association has joined in on the calls for exemptions in a letter to Trump, warning tariffs could jeopardize the availability of life-saving supplies.

"Health care workers need gowns, gloves, face masks, respirators and other equipment, much of which is manufactured in China and cannot be easily replaced by domestic manufacturers," the letter read.

During the pandemic, taxpayers paid nearly $100 million for a COVID-19 glove factory in Baltimore that never opened because the company, United Safety Technology, "just figured they were not going to make any money," Dai said.

For now, the calls for exemptions don't seem to be resonating.

The Trump administration's exemption strategy is fluid and based on influence, said efficio's Needham. The pharmaceutical industry, which has received exemptions, is "very, very powerful," he said.

Over time, the administration's position could shift due to the potential impact on patients' lives, Needham explained, as many Trump voters have higher overall health care spending.

 "If Medicaid's cut, West Virginia services are dropped, people don't have access to medical devices: it's the Trump voter [who] gets impacted," Needham said.