Providers expect margin squeeze

YARMOUTH, Maine – Amid all the chaos in Washington, D.C., including reorganizations and layoffs at CMS and potential Medicaid spending cuts, the administration’s far-reaching tariffs are of particular concern, say HME providers. 

President Donald Trump implemented a new 10% tariff on all imported goods, no matter where they come from, on April 2, with even higher tariffs for certain countries. 

“If someone were to ask me what keeps me up at night, it’s the tariffs,” said Gayle Devin, CEO of Home Care Delivered, a Richmond, Va.-based provider of disposable medical supplies, including incontinence, urological and wound care supplies. “While many of our products are made in the U.S., some of the raw materials are sourced from China or Mexico. That’s really a concern.” 

The industry at large is watching tariff developments very closely. AAHomecare in March and again in April asked the Trump Administration to exclude home medical equipment and supplies from current and proposed tariffs, and VGM Government Relations recently launched a Tariff Tracker, a centralized hub for all tariff-related information. 

Providers say that manufacturers, for the most part, are being proactive about communicating about the tariffs and addressing any potential cost increases, which is good, they say, because in an industry built largely on a fixed fee-schedule model, they're hard pressed to absorb any financial hits.

“Both of my Canadian vendors sent a letter out that said they are going to swallow the cost on their end so (they remain) competitive in the U.S. marketplace,” said Craig Rae, owner of Penrod Medical Equipment in Salisbury, N.C. “I am concerned about things coming from Asia, especially on bent metal items, because we have no room to move.” 

Prior to the new tariffs, Reliable Medical had been in conversations with manufacturers and had received assurances from some that they don’t intend to impose increases, says David Pietrzak, vice president, supply chain & clinical operations for Franklin, Tenn.-based provider of complex rehab and respiratory solutions. 

“If (manufacturers) get hit with additional tariffs, that may result in additional cost, usually in the form of a surcharge,” he said. “Any increases passed on by manufacturers would create a significant burden to all providers, resulting in potential access issues to clients, which is concerning. But historically, if they impose something on us, we work with them to try and find ways to eliminate or mitigate those surcharges through various supply chain efficiencies.” 

Despite some uncertainty around the full scope and impact of tariffs, providers don’t expect to be immune from their impact. 

“I really do think it will squeeze our margins,” said Bryan Collins, director of sales and marketing at Fairfield, Conn.-based Collins Medical Equipment. “It’s a problem, but everybody is going to be faced with it. You just have to adapt. Maybe we have a blip on the radar, and we get back to normal.” 

• Related: Manufacturers in January were watching closely.