The U.S. is currently facing increasing economic headwinds, with economists predicting the costs of goods to rise as a result of President Donald Trump’s tariff plan.
Healthcare experts found that 82% of hospitals expect costs to increase by at least 15% if pharmaceutical tariffs are imposed, and 90% of experts expect procurement disruptions.
Additionally, economists have predicted that the U.S. is headed toward a recession, with interest and inflation rates both on the rise, according to an April 30 report from USA Today.
Seven leaders told Becker’s the steps they are taking to stay financially stable and diversify their supply chains in order to avoid any predicted economic challenges:
Shakeel Ahmed, MD. CEO of St. Louis-based ASC group Atlas Surgical Group: Profit margins in our industry are already razor-thin, and I suspect we may soon reach a point where at least some smaller centers can no longer afford to care for the majority of Medicaid and Medicare patients. Small ASCs routinely operate on an EBITDA of 10% or so. And those would be the worst hit. That would be a true travesty, considering this industry was originally designed to support the healthcare economy by providing low-cost care and shifting elective procedures into a more convenient and cost-effective setting. For now, we’re focusing on being extremely savvy and strategic with supply management and cost containment. In addition, we are also working on being more efficient with turnover times and staffing, and selective in choosing the right surgical services and subspecialties for our ASCs across the board.
Michael Boblitz. CEO at Athens (Ga.) Orthopedic Clinic: Unlike other industries, physician groups are in a challenging environment where Medicare pays less and private payers — historically — pay the same. As a result, expense management is mission critical.
Private orthopedic practices, similar to many health care organizations, have the vast majority of operating costs with labor and supplies. While labor management is a constant focus, the healthcare field remains a “high touch” industry that cannot be easily scaled or replaced with technologies and other efforts.
My new tenure as CEO with Athens Orthopedic Clinic is bringing a laser focus on supply chain via best in class inventory management, financial controls and price control.
We are moving our durable medical equipment onto a new automated platform to significantly reduce shelf life, and eliminate what has historically been a very manual and time-consuming effort to track inventory.
At the same time we are challenging our current [durable medical equipment] vendors to reduce costs per unit by 20%-plus, while also offering the same cost reduction goals to competing DME vendors. In other words, AOC is open for business with any and all that offer the best pricing.
Looking beyond the practice, AOC operates a strong multisite ASC division. Our ASCs already perform a large number of joint replacement cases each year that include high cost implants. Soon we will open a new ASC that focuses only on spine and joint replacement surgery, so we can backfill the existing centers with additional lower acuity orthopedic cases that currently cannot be accommodated due to capacity constraints.
AOC is working quickly to partner with a leading group purchasing organization that will offer significant savings on high-cost implants within our ASCs as well as all supplies that are required to operate our growing practice.
Overall, Athens Orthopedic Clinic has a top priority to drive down supply costs — fast — and will continue to do so regardless of how tariffs play out.
Heather Cobb, RN. Administrator of Momentum Specialty Surgery (Wichita Falls, Texas): Coming from a clinical leadership role at a hospital, into a financial leadership role at a surgery center was an eye opener to the issues everyone faces with insurance companies and the reimbursement rates. Medicaid is already one of many insurances that have low reimbursement rates for ASCs that barely cover the cost of the surgery depending on the coding. Medicaid only reimburses one CPT code for surgery, making it harder for ASCs to accept Medicaid patients unless we can work together with our vendors and the physicians to keep our case cost at a minimum to improve the margins of Medicaid cases. If Medicaid continues down the path of lowering reimbursement rates, then it will prove difficult for ASCs to provide affordable care to their community, possibly shifting those cases to a hospital where the reimbursement could be much higher. With all this in mind when you look at the increase in the cost of supplies and staff, along with lower reimbursement rates, it can become difficult for ASCs to maintain positive margins on the patients they see.
Jeffrey Kachmann, MD. Spine Surgeon at North Texas Brain and Spine Center (Frisco): I’m taking a proactive approach to prepare my practice for a potential economic downturn by focusing on a few key areas:
Diversifying revenue streams: I’m exploring ways to offer services that align with both surgical and non-surgical treatments. For example, incorporating outpatient procedures, physical therapy or pain management services could help stabilize cash flow in the event of reduced surgical volumes.
Building strong relationships with referring physicians: Ensuring a robust referral network is essential. By staying connected with primary care physicians, orthopedists and other specialists.
Operational efficiency: I’m focused on improving the operational efficiency of my practice. This includes streamlining workflows, reducing overhead costs where possible and implementing technology to help with scheduling, billing and patient communications.
Patient communication and education: Open communication with patients about the financial aspects of care is important. I plan to help patients understand the options available to them in terms of payment plans, insurance coverage, and financial assistance programs. A transparent approach helps maintain patient trust, even in uncertain times.
Maintaining high-quality care: Ultimately, the foundation of a successful practice during any economic climate is providing high-quality, compassionate care. Building a reputation for excellent outcomes and patient satisfaction.
Taif Mukhdomi, MD. Interventional Pain Physician at Pain Zero (Columbus, Ohio): As an organization, we review contracts and ordering on a semi-annual to annual basis. Fortunately for us, we have aligned with a few GPOs to stay competitive with pricings. At the end of the day, patient care needs to continue and we do not anticipate curbing any of our services. We certainly anticipate changes in inventory purchases and over the years we’ve found certain prices increase while others decrease — it really comes down to what items have become commoditized while which products are of high quality worth the higher premium.
Peter Passias, MD. Orthopedic Spine Surgeon at NYU Langone Health (New York City): Over the past years, our supply chains have generally improved in line with our recovery globally from the pandemic. In our experience, this has not yet returned to baseline, and certain specific and notable distinctions persist. There have also been individual hurdles related to random natural disasters, such as the recent shortage in IV fluids with recent extreme weather. In preparation for the tariffs this has been considered along with general inflationary related pressures, and projections for diminished reimbursements in certain scenarios. This is generally reflected in our drive for streamlining cost efficiency and OR efficiency to maximize volume. There will certainly be an anticipation of selective utilization of more cost effective alternatives in several cases.
Robert Tatsumi, MD. President of Oregon Spine Care (Tualatin): Microeconomics shows that before a tariff is in place, consumer consumption increases due to the lower cost of goods. Our corporation has been purchasing additional electronics and furniture (consumer surplus) in anticipation of future tariffs. Tariffs create inefficiencies in the market and lead to higher supply costs regardless of where the product is manufactured (deadweight loss). We anticipate reduced consumer spending to adjust for reduced business profits. Our supply chain pressure has remained neutral for the current fiscal year due to flexibility with sourcing various suppliers.
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