Blog Post Updated 04/18/2025
Original Publish Date 01/22/2024

Challenging is an understatement. For healthcare supply chain management and sourcing operations, challenging doesn’t aptly describe the environment they’ve been forced to manage over the past five years. When the unprecedented complications from COVID started to subside, the disruptions didn’t vanish. Significant port congestion, geopolitical issues and extreme weather conditions throughout the world, drastically impacted international freight and delivery times. Now in 2025, tariffs have become the complicating factor. 

At the time of this writing, the U.S. had imposed a tariff of up to 245% on goods produced in China. The Chinese reciprocated with a 125% tariff on U.S. products. Outside of China, a 10% levy was applied to products produced in most other countries throughout the world. Unfortunately, many healthcare executives believe that if the current tariff policy remains in place, it will lead to an escalation of healthcare costs, disrupt supply chains and create affordability challenges for patients.

The Impact of Tariffs in Healthcare

From pharmaceuticals to medical devices and supplies, products from China are part of nearly every healthcare organization's supply chain. But, establishing alternative sources isn’t an easy process. A Black Book Market Research report disclosed that historically, healthcare organizations previously reliant on China experienced disruptions lasting over six months in 76% of cases following prior tariff enactments. With the severity of current tariffs, and their widespread application, it’s likely that disruptions will be greater than those previously experienced.  

Not surprisingly, diversification away from reliance on China is the preferred option. 97% of the survey respondents recommended actively diversifying supply chains away from China to avoid tariff-related issues. Unfortunately, it’s a process that could take several months to years.

What is Causing Healthcare Supply Chain Problems?

Tariffs are likely to create supply chain issues, but many of the challenges that impacted healthcare over the past few years continue to persist. These encompass a range of issues, from shortages of critical products and the pressures of inflation to concerns about the availability and cost of labor.

• Labor costs -  the competitive labor environment combined with a shortage of available qualified staff have driven up labor costs
• Labor shortages - early retirements, workers choosing to leave the profession and schools struggling to expand capacity to meet the demand for care, especially in nursing, makes it challenging to meet manpower targets
• Supply costs - inflation is running significantly higher than the Fed's benchmark 2% rate, impacting many items healthcare facilities purchase for their operation
• Interest rates - in an effort to curb inflation, the Federal Reserve increased interest rates to their highest level since 2007. This has increased debt costs and led to a reduction in capital investments.

Labor Costs

Labor costs are continuing their upward trend. The growth in total hospital employee compensation far outpaces inflation and currently represents approximately 60% of a hospital's total budget. The increases are driven by a combination of the competitive labor market, as well as hospitals' reliance on more expensive contract labor to meet staffing demands. Although contract labor helped to fill some of the gaps created by staffing shortages, it had a bigger impact on costs, increasing by 258% over the last three years, with nursing being the area that saw the greatest increase.

Labor Shortages

COVID-19 worsened an already tenuous healthcare labor market. Since February 2020, hospital employment has decreased by nearly 94,000, with the average nurse turnover rate jumping to nearly 26% in 2022. Fortunately, in 2024, the numbers improved. In acute care hospitals, turnover decreased by 2.4% to an average of 18.3%. Unfortunately, since 2020, the average hospital has turned over 107.1% of its workforce.

Supply Costs

Supply costs, which according to McKinsey, account for 30% to 40% of a typical health system’s cost base, exceeded inflation growth by nearly 30%. Based on data from the American Hospital Association, supply expenses per patient rose by 18.5% and expenses for emergency services supplies, including ventilators, respirators, and other critical equipment, increased by almost 33%. 

Product Shortages

Unfortunately, supply chain shortages continue to persist. For example, in the first quarter of 2025, there were 270 active drug shortages. But healthcare professionals are concerned that tariffs will cause that number to increase. In addition, there were shortages of other medical devices and supplies. Further, inadequate supplies of essential raw materials, such as resins, precious metals, and gasses, are contributing to certain product shortages.

Steps to Minimize Supply Chain Challenges

While some supply chain challenges in healthcare also affect other industries, variations exist that require unique mitigation strategies. For example, Mike Rip, Director of the Master of Science in Healthcare Management at Michigan State University stated, “Healthcare is not based on supply and demand. It can’t be ‘stocked’ like it’s a traditional product. So, a hospital’s supply chain is very different from a business or company’s supply chain.”

In fact, healthcare systems comprise numerous interconnected points of care. Changes in one area can affect the need for supplies in other parts. Yet the complexities of these interdependent areas exceed those in other industries. An increase in the number of patients in Labor and Delivery creates supply chain challenges different than an e-commerce company faces when promoting a new product. For example, when there are more patients in Labor and Delivery, it also affects pediatrics and neonatal care. The demand for patient wristbands extends beyond the maternity area, incorporating both pediatrics and neonatal. In addition, the type of product is different because adult wristbands won’t work for infants and preemies. Ultimately, ensuring the proper amount of supplies requires forecasting these interconnected events. 

Pool and Coordinate Resources

When fewer locations hold inventory, the amount of inventory necessary to meet demand decreases. This is true for multi-location health systems and even departments within a hospital which can significantly exacerbate shortages. Centralizing pools inventory and evens out the higher and lower demand locations. 

Be Careful with Product Substitutions

Standardization efforts can lower costs and reduce supply chain inflation, but they can fail if done without input from clinicians. If the care team uses unfamiliar or suboptimal products, it may raise error risks or negative outcomes. Such concerns might cause resistance or rejection of substitute items, limiting cost savings and straining relationships that affect future opportunities for cost savings. 

Alternatively, health systems that make no attempt to manage clinicians’ supply choices will perpetuate a cycle of highly variable, costly care. Striking the balance between costs and quality outcomes is key.

Further, if you are looking at a new product to mitigate costs, test before converting to a new item. Even products that seem like viable substitutes don’t always perform as necessary. For example, thermal labels enable numerous workflows within healthcare settings including admissions, labs, pharmacy and more. They are often applied in hot and cold temperatures. A label material without the proper application temperature will likely detach from the specimen or medication vials they are applied to, impacting processes in the lab and pharmacy. Also, a key element for accurate barcode scanning is label material opacity. A label without the proper opacity can cause a barcode to misread or not read at all.

Lastly, like many supplies, label costs have increased with certain materials in short supply. Some health systems turned to sources in China to reduce costs, but with the current tariff policy, those costs have risen substantially.  

These issues can cause a myriad of problems including extra steps for the clinical staff and patient safety challenges, so it’s important to do your research before switching from a proven product. 

The Impact of Process Improvements

In a tight labor market with wages trending upwards, standardizing certain product categories can result in process enhancements that boost productivity, maximizing the value of the patient care team. For example, consider the IV line and medication labels used throughout a hospital. These often have varying input formats leading nurses to interpret them differently. A common problem area is how to note date and time inputs. By standardizing these elements throughout the system, nurses’ tasks become smoother while compliance improves and patient safety is elevated. 

United Ad Label

Healthcare labels, though often overlooked, play a pivotal role in smooth operations. However, shortages and disruptions in label supplies can hinder care delivery. United Ad Label specializes in providing a reliable source for a diverse range of labels critical to healthcare facilities. Partnering with United Ad Label can prevent the possibility of label shortages that could disrupt patient care.

Editors Note: This post was updated in April, 2025 with new data and information on the impact of tariffs.