Tariffs threaten the bottom line: A bleak outlook for practices

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Tariffs will be bad for physicians. There’s no sugarcoating it.

There will be direct and indirect impacts; let’s explore the bleak landscape.

Your topline revenues are controlled by three basic elements: 1) fee schedules; 2) service line diversification; and 3) production. Because both commercial and non-commercial fee schedules are based on CMS’s Medicare and Medicaid fee schedules, there’s not much that can be done there. Most physicians already have adjusted their service arrays to optimize revenues, leaving fewer diversification options available. And most doctors already have optimized their coding and work schedules. Top line revenue creation is tedious now, and tariffs will have a trickle-down impact, mostly though pressures on fee schedules.

To understand tariffs’ topline impact, we need to look at them in the broader context of what is happening. The tax cuts for the wealthy and large corporations leave no room for Congress to address the ‘kick the can down the road’ saga of the Medicare fee schedule.

The math didn’t work before, and it has gotten worse.Remember, Medicare is growing by an average of 10,000 enrollees per day – every day – for the next few years. Best case, the Medicare fee schedule stays at current levels.In the short term – and likely in the long term – tariffs will increase the bait-and-switch games of Congress in robbing Peter to pay Paul. Medicare and Medicaid will not emerge unscathed.

Tariffs will be felt most by those in low and middle classes, by those in rural areas where jobs will not suddenly reappear from decades-long dormancy, and by those just simply struggling to make ends meet. The number of uninsured and underinsured will rise; preventive care will give way to episodic care; emergency rooms will be full. To keep hospitals from going under, Congress will allocate more of the fixed pot of Federal dollars to keep hospitals afloat.This will not be good for physicians.

Your employees will feel the pressure of tariffs more significantly than you will. Many of them exist on tight budgets already. A 10% increase in their cost of living – that may be best case – will make their ends impossible to meet. What will give? Employees will ask for higher wages. Even loyal employees may jump ship to keep their personal ships from sinking.

Your patients will feel the pressure of more expensive medications, both prescription and non-prescription. I believe many will choose paying their electric bill or buying groceries over filling their scripts. That of course will result in chronic conditions going unmanaged and an unhealthier and more costly to care for society.

It’s very likely you will have to work harder to collect from patients. In an era of high-deductible health plans, most commercially insured patients pay the first $5,000 or $10,000 to doctors and hospitals before insurance kicks in. Those folks will have less ‘disposable income’ for paying you.

Medicare patients on Social Security will face similar pressures. When ‘disposable income’ goes down the disposal because the cost-of-living has gone up, something has to give.

Regardless of one’s position on abortion; making abortions harder to get and putting doctors who do abortions in jail will result in more children born into poverty. This will put pressure on safety net programs and Medicaid at a time when these safety nets are being cut. The number of uninsured and underinsured patients will rise.

Trump has angered China with the tariffs. This puts your practice at risk, as it is very likely China’s data saboteurs will disrupt your practice – and therefore your profitability – by hacking your EHR, the electricity grid, supply chains, and/or your personal/practice accounts. This game of chicken has no winners.

Wow. The tariff cloud has no silver lining.

What can you do? Not much.

Start by thanking your employees by name consistently; employee turnover is costly and disruptive.

If your practice is not buying through a collective that brings group discounts, join one or more. Every dollar saved is a dollar to your bottom line.

Talk to your EHR vendor, and press them on redundancy and other measures to keep your data safe and your practice functioning. Be ready for your practice to run on paper should paperless (e.g., EHR) get compromised. Keep three to four weeks of appointment schedules printed or off-lined. Print templates for documentation of care.

Reach out to your Federal legislators to make sure they understand how tariffs will impact patient care. Reach out to your State legislators to make sure they understand how tariffs will reduce the number of physicians accepting Medicaid. And – this is an important ‘and’ – be honest with your staff about the likely impact of tariffs and ask them to reach out to their Federal and State legislators. Their voices, though financially smaller than yours, will ring louder.

Finally, remember why we are here. We are in healthcare to make a difference in the lives of others. We are here to care. That’s my silver lining, and I hope it is yours.