Nursing homes face soaring costs without healthcare carveout for new tariffs

Tariffs declared by the US that had been set to start for two nations overnight would push costs up for many healthcare items, further degrading margins and increasing financial pressure on American nursing homes.

Skilled nursing insiders and advocates in Washington were working furiously Monday to understand the extent of the impacts, if any carveouts could be made for healthcare-related products, and when they might be made whole for immediate losses.

Companies that import products or ingredients — including many pharmaceutical ingredients — from Canada and China will be affected immediately. A tariff on Mexico, a key exporter of medical devices to the US, was postponed for a month Monday, following ongoing border control negotiations. At deadline Monday, a deal also appeared to in the works for a delay on the Canadian tariff.

Either could still go into effect later this year.

While many companies pass increased costs on to consumers, skilled nursing providers are largely blocked from doing so since their key payers — Medicaid and Medicare — offer rates set by the federal government months ago. 

“Tariffs are a tax on the American consumer, hard stop,” said Brian Perry, vice president of government affairs at Direct Supply, one of the top companies delivering products to the skilled nursing and senior care markets.

“[I]n senior care, where often the bill is ultimately paid by Medicare or Medicaid, the increased costs eventually roll back to the government (over a long period of time),” Perry wrote on LinkedIn Sunday. “So short term, already-stretched providers are caught holding the bag while they hold on for dear life to keep the lights on. They don’t get to raise prices and send the bill to the government for immediate payment.”

Perry posted shortly after the White House announced its plans to proceed with 25% tariffs on goods coming from Canada and Mexico and a 10% tariff on Chinese goods. Only the penalty on Mexico had been paused as of Monday afternoon.

There appeared to be no exemptions included in the tariff action, which an executive order said was being issued under the International Emergency Economic Powers Act because of the threat “posed by illegal aliens and drugs, including deadly fentanyl.”

Almost immediately, players across the healthcare supply chain began to caution the White House on unintended consequences.

Linda Couch, senior vice president of policy for LeadingAge, said in a statement Monday it was “too early to assess the impact” while noting higher costs would likely be passed on to those in aging services.

“We are closely watching the situation, and also exploring whether exemptions may be granted, and if so, how many,” she said. “Prices on some goods — including food and lumber for instance — may rise.”

Anything that can potentially lead to increasing costs is “not good” for the US healthcare system or skilled nursing facilities working under fixed government reimbursement rates, said Imamu Tomlinson, MD, CEO of the physician-led multispecialty healthcare group Vituity.

“If tariffs lead to rising costs, that could increase the cost of certain medical equipment and supplies. Some of their [nursing homes’] essential products — patient lifts, oxygen systems, hospital beds, wound dressings and pharmaceuticals — are imported and that would force companies in this space to quickly pivot,” Tomlinson told McKnight’s Long-Term Care News. “SNFs and those companies that provide post-acute care may struggle to stay financially viable, unless they cut staff or services­­ — which could ultimately impact patient care.”

Pressing prescription problems

China is a major supplier of active pharmaceutical ingredients to the US, and some generic drugs are manufactured overseas entirely. That could present a serious risk for seniors in nursing homes. Many of them take more than five medications daily, and Medicare has encouraged prescribers to favor generics in recent years.

“The proposed tariffs, once enacted and implemented, could have an impact downstream on medication costs for pharmacies, patients, plans and facilities,” Chad Worz, PharmD, chief executive of the American Society of Consultant Pharmacists told McKnight’s.

ASCP was working to help its members anticipate which drugs might become more expensive or other scenarios. But Worz said the tariffs’ also underscore how reliant the US has become on foreign drug ingredients.

“For many years, ASCP has worked to address concerns related to foreign-made API (active pharmaceutical ingredients) and the lack of our agencies to conduct quality inspections. We hope that as the Trump Administration examines the pharmaceutical supply chain, it pursues protecting it by incentivizing production in the United States and ensuring safety and quality inspections and compliance with US law by facilities who export API to US companies,” he added.

The Healthcare Distribution Alliance, an organization representing healthcare distributors, said in a statement that tariffs on pharmaceuticals would strain the pharmaceutical supply chain and affect American patients “through increased medical product costs or manufacturers leaving the market.” HDA also made a plea for medication exemptions.

Device shortages ahead?

A quick resolution with Mexico would be critical for healthcare providers and their suppliers, some observers said.

STAT on Sunday reported that Mexico is the top source of medical devices used in the US. The Tijuana area, for instance, is a significant hub for manufacturers of nebulizers, oxygen sensors, catheters and disposable surgical tools, according to Co-Production International, which helps companies set up facilities there.

“We have shared with the Administration our concerns about the potential impact tariffs could have on the medical technology supply chain that American patients depend on for their care,” AdvaMed, the Medtech Association, said Monday, while calling for an exemption on medical equipment. “In light of that risk, an exemption was provided for most medical devices during President Trump’s first term with respect to the tariffs on China, and we are advocating for a similar approach this time.”

AdvaMed President and CEO Scott Whitaker predicted companies would spend less on research and development, pass on prices to payers and patients and consider layoffs. 

Vizient reported last week that it projects supply chain costs will rise by about 2% through June 2026, without even taking into account the tariffs finalized this weekend. An additional tariff on gloves, needles, syringes and certain face masks made in China has been finalized but pushed to 2026, further complicating pricing for healthcare.

Impacts on prescription drugs and equipment may take longer to be felt because of more spread-out demand and complex supply chain dynamics. But skilled nursing and other residential care providers might see an almost immediate influence on food prices as their suppliers are forced to pay the tariffs. 

According to the USDA Economic Research Service, Mexico supplied 63% of US vegetable imports and 47% of US fruit and nut imports in 2023. 

A spokesman for Sysco said Monday that the company, a major food supplier for nursing homes, has “robust contingency plans in place to respond quickly to changing situations.”

“We are confident that our planning, scale and scope will allow us to be responsive to customer needs and to continue providing a diverse assortment of products at a price that meets their business needs,” the company said.

For information about how the tariffs could affect senior living and home care providers, see the McKnight’s Business Daily.