Hospital financial performance has improved since the start of the year, with margins improving for nonprofit hospitals specifically.
This is despite tariff policies at the national level that are causing uncertainty and market volatility, according to Kaufman Hall's latest Flash Report.
The report found the healthcare sector has continued to add jobs during the tumult.
WHAT'S THE IMPACT
President Trump announced reciprocal tariffs in April, applying to almost every country and territory, though some countries would incur higher levels, such as China, Japan and the European Union.
But tariff amounts have changed as Trump negotiates with countries on trade policy.
On April 9, the administration announced that steeper reciprocal tariffs were to come into effect. Later that day, Trump amended his announcement, indicating that he would suspend most of these higher-rated tariffs for 90 days (though not for China), while allowing the 10% baseline tariff to remain in effect.
According to Kaufman Hall, this uncertainty has fueled extreme market volatility, with benchmark rates experiencing historic daily swings of 20 to 48 basis points.
Despite the pause in higher tariffs for most countries, the U.S. and China continued to exchange tariff threats, some exceeding 100%, throughout April. However, in May the two countries reached a temporary agreement to eliminate most of the tariffs that they imposed on each other, effectively drawing a 90-day truce in the trade war. The financial markets soared as a response, with the S&P 500 rallying 3.3% and the Dow Jones Industrial Average jumping 1,100 points since the truce announcement.
Paul Keckley, managing director of the Keckley Report, said in April that the volatility of these tariff policies is making it difficult for hospital executives to pin down the effect they will have on supply chains and budgets. CFOs are also weighing the effect tariffs will have on the economy and inflation.
It's not just the products themselves that are important, but the raw materials for pharmaceuticals, which mainly come from China, according to the American Hospital Association. These active pharmaceutical ingredients, or APIs, are the most important components of any pharmaceutical manufacturer's supply chain, the group said, and about 30% come from China – meaning the tariffs may hamstring manufacturers in their efforts to produce drugs in the U.S.
China is also the source of numerous medical devices – many of them designed for single use, like blood pressure cuffs and stethoscope covers – and disrupting the availability of these instruments could hinder clinicians' ability to perform surgeries and keep patients safe from contagion, the AHA said.
While all this has created confusion in the healthcare sector, data indicates stability and even improvement in some key areas. Citing data from the Bureau of Labor Statistics, Kaufman Hall said healthcare added 51,000 jobs in April, just slightly less than the average of 52,000 over the preceding 12 months. In April, job growth continued in hospitals (+22,000) and ambulatory healthcare services (+21,000).
Median hospital margins increased to 3%, up slightly from March, while hospital margins from January to April were 3.3%, up over the same period last year.
Operating margin dropped 3% year-over-year but improved 6% year to date, compared to the same stretch in 2024.
THE LARGER TREND
In May the AHA expressed concern about drug and other shortages that may occur as a result of tariffs on items such as pharmaceuticals, medical devices and personal protective equipment.
Other low-margin, high-use medical goods come from international sources, the AHA said, such as syringes, needles and blood pressure cuffs.
There are currently no tariffs for prescription drugs, but the White House has indicated it plans to implement one. However, pharmaceutical ingredients come from international sources and are subject to tariffs.
Tariffs on those items, said 2025 AHA Board Chair Tina Freese Decker, could threaten the availability of crucial medications and devices, and could raise costs for hospitals and exacerbate shortages and supply chain disruptions.
"We've already seen the impact of supply chain disruptions in the aftermath of Hurricane Helene," wrote Decker. "To continue providing the care our communities rely on, hospitals and health systems need exemptions to ensure access to essential imports."
Jeff Lagasse is editor of Healthcare Finance News.
Email: jlagasse@himss.org
Healthcare Finance News is a HIMSS Media publication.